Indian cryptocurrency platforms have reached out to the country’s apex bank, the Reserve Bank of India (RBI) seeking clarity around their legal status which would have a bearing on how they will be taxed domestically. This, according to a report by The Economic Times, May 4, 2020.
Although the Supreme Court of India recently quashed the RBI’s two-year-old diktat that put a blanket ban on financial institutions from dealing in cryptocurrencies, things are far from being crystal-clear from a regulatory point of view.
In the latest development, Indian cryptocurrency exchanges have written to the RBI asking for clarity on their status. The exchanges took this route as money lenders in the country continue to deny banking services to them on account of a lack of clarity from the RBI.
In addition, the digital currency exchanges have asked for clarity regarding their categorization for tax purposes. Specifically, the exchanges have asked whether they’ll be put under the umbrella of a commodity, currency, goods, or service as the type of categorization will have a major bearing in their tax treatment under the newly introduced Goods and Services Tax (GST) framework.
Praveenkumar Vijaykumar, Chairman and CEO of a crypto firm named Belfrics Global, said:
“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. 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.”
Ambiguity with regard to the tax treatment of cryptocurrencies including Bitcoin (BTC) is not a particularly new issue in India.
The country’s indirect tax department has initiated several investigations to determine whether BTC could be brought under the framework of the GST. Other than the indirect tax department, the country’s sales tax department and VAT authorities had also launched an investigation on the taxable nature of Bitcoin a few years ago.
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Author: Aisshwarya Tiwari
Indian Cryptocurrency Exchanges Seek Regulatory Clarity from RBI |
Cryptocurrency exchanges in India have approached the Reserve Bank of India (RBI) to verify their status, as financial institutions have refused to provide them with the necessary financial services, due to lack of clarity from regulators.
According to a report by Economic Times today, Indian crypto exchanges have written to the country’s apex bank to be cleared on whether they are being classified as a commodity, currency, goods, or as a service.
The exchanges are seeking to know how they are being classified so that it would provide an understanding of whether they fall under the Goods and Services Tax (GST) framework, in order to prevent any future misunderstanding with the tax body.
“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 and CEO of Belfrics Global said.
Before this time, there has been a misunderstanding on whether cryptocurrencies should be classified as goods or services, which would automatically place cryptocurrencies, including Bitcoin, Ether, among others under the GST’s jurisdiction.
Several investigations, especially from the Indirect Tax Department and the VAT authorities, have been conducted in the past to ascertain the amount of levy cryptocurrency-related businesses should pay for every transaction involving cryptocurrencies.
This has brought issues between both parties, as exchanges believe that if they are taxed based on their overall transaction, they will not break even.
These back and forth issues have prompted cryptocurrency exchanges to acquire legal backing, to stop these authorities from continually prying into their affairs.
As per the report, despite the March 4 ruling by the Supreme Court in favor of digital currencies trading in the country, banks have refused to provide financial services to cryptocurrency exchanges.
The banks, when approached by exchanges, stated that they had not gotten the necessary approval from the RBI to date, to work with cryptocurrency-related businesses.
However, since the Supreme court ruling, crypto-related activities in the country have triggered remarkable initiatives in the country, including Binance’s launch of a $50 million investment fund in blockchain projects.
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Author: Published 21 hours ago on May 4, 2020
Cryptocurrency exchanges approach RBI seeking clarity on status and taxability
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