The cryptocurrency exchanges in India, which had witnessed a renewed wave of interest and enthusiasm after the Supreme Court’s landmark ruling against the RBI, have written to the central bank of India for seeking clarity on the tax front.
Following the abolishing of RBI’s ruling that dramatically reduced the scope of cryptocurrency exchanges in India and the collapse of the country’s leading banks, the cryptocurrency trading boom was imminent.
In fact, Nischal Shetty of WazirX, India’s largest cryptocurrency exchange acquired by Binance, took to Twitter last month to share his thoughts on how Facebook’s investment in Jio would eventually benefit the Indian crypto industry. Yes, for the cryptocurrency exchanges in India, the year started on a positive note.
However, it’s far from being plain sailing so far. The cryptocurrency businesses in India are still unable to gain a foothold as unclear directions continue to limit their banking interactions with indecisive tax reforms.
Thus, as per today’s report by ET, the exchanges have now formally drafted a letter to the RBI with the hope to gain some transparency. They want to know why they are still being denied banking services despite the overruling of the ban order and the reason for lack of willingness to offer guidance and instructions from the regulator.
As lenders, the cryptocurrency exchanges in India want better clarity on the classification of their business. Their categorization under commodities, goods, and services or currencies will ultimately decide how they will be taxed under the new GST system.
Praveenkumar Vijayakumar, who is the CEO and chairman of a digital assets platform called Belfrics Global, said that if the digital currencies are exempted from GST, it will eventually lead to a deadlock situation between the tax officials and the cryptocurrency exchanges in India.
The RBI must understand that if it expects us to pay GST on the entire transaction, then most of us wouldn’t be able to survive. Thus, we need to know now if Bitcoin and other cryptocurrencies are taxed under GST so that we can have some clarity on where our businesses are headed, Vijayakumar added assertively.
And while the cryptocurrency exchanges in India continue to await decisions on taxability with bated breath, the need for a legal framework only grows bigger as the decisions will have far-reaching consequences on multiple stakeholders and varied perspectives that drive the Indian crypto market today.
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Cryptocurrency Exchanges In India Seek Legal Status Clarifications From RBI As Scrutiny Continues
Months after India’s Supreme Court lifted a 2-year-old directive against cryptocurrency usage in the country, the Reserve Bank of India (RBI) is still not cooperating with digital asset businesses. Several exchanges have requested clarifications from the bank regarding their status as the scrutiny from lenders continues.
A local report from today indicated that digital asset exchanges are still unclear regarding their stance. Therefore, many platforms have written to the RBI seeking clarification on their status. Lenders keep denying them banking services claiming that the regulator, the RBI, has not provided the necessary instructions.
Cryptocurrency exchanges have also requested detailed information on their legal categorization. Establishing if they function as a commodity, currency, goods, or service will ultimately decide how they are taxed under the Good and Services Tax (GST).
“If digital assets are not exempted from GST, the digital currency exchanges in India are going to have a standoff with the tax authority. In early 2019, the tax department had reached out to several cryptocurrency platforms in this regard.
In the wake of the recent Supreme Court ruling, we have also approached the RBI for clarity on this, as if we pay GST on the whole transaction, then most platforms would not be able to survive.” – said Praveenkumar Vijayakumar, chairman, and CEO of a local cryptocurrency platform Belfrics Global.
Indian authorities have investigated digital asset platforms and investors in the past to determine if they fall under the GST. Until this day, however, it’s still unclear the exact method of taxation for cryptocurrency-related operations.
Two years ago, the Reserve Bank of India (RBI) issued a directive that practically banned cryptocurrency usage and operations in the country. All financial entities regulated by the bank had to seize working with individuals or businesses engaged with digital assets.
In March this year, though, the nation’s Supreme Court quashed the directive and even referred to it as “unconstitutional.” The RBI, however, quickly decided to file a review petition against the decision. Today’s report supports the claim that the bank still has issues with anything related to digital assets.
It’s worth noting that following the ban removal, some of the world’s leading cryptocurrency exchanges began investing in the large Indian market. Kraken, a veteran U.S.-based platform, announced plans to relocate resources in the region. Shortly after, Binance, and a local exchange WazirX, launched a “Blockchain for India” fund to invest in blockchain startups.
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Indian Crypto Exchanges Seek Tax Clarification from Regulator
The Indian crypto exchanges have approached the Reserve bank of India for clarity on digital currency taxation in the country.
Local daily Economic Times reported on Monday that the exchange platforms in the country have written a collective letter to the central bank seeking the clarifications.
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They are also seeking clarification on the classification on the status of the digital currencies in the country – if they fall under commodity, currency, goods, or a service. This classification will determine if they fall under the country’s Goods and Services Tax (GST) or any other tax framework.
Earlier this year, the Indian Supreme Court lifted the ban on the banks to provide services to the cryptocurrency exchanges and startups.
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The banking ban was imposed by RBI in 2018, however, the digital currencies were still legally traded in the country – mostly in peer-to-peer exchanges or crypto-to-crypto pairs – as there was no ban on them.
The report also revealed that the banks are still hostile towards providing services to the Indian exchanges due to the lack of any clarification by the regulator.
Notably, the central bank did not issue any updated circular to the banks clarifying its position on cryptocurrencies after the verdict of the apex court.
“If the digital assets are not exempted from GST, the digital currency exchanges in India are going to have a standoff with the tax authority,” Praveenkumar Vijayakumar, Chairman & CEO Belfrics Global, told the local publication.
“In early 2019, the tax department had reached out to several cryptocurrency platforms in this regard. In the wake of the recent Supreme Court ruling, we have also approached the RBI for clarity on this, as if we pay GST on the whole transaction, then most platforms would not be able to survive.”
Author: Arnab Shome