IndiaTech, an industry association that represents consumer internet startups, has written to Finance Minister Nirmala Sitharaman, requesting clarification on crypto tax rules in the Union Budget 2022-23.
IndiaTech is a group of major cryptocurrency exchanges, some of which have recently been investigated for allegedly evading goods and services tax. CoinSwitch Kuber, WazirX, and CoinDCX are among the members of this industry group.
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IndiaTech has written to the government, requesting that existing tax laws be modified to include crypto assets, as well as clarification on the method of taxation and disclosures. This comes in the wake of the much-delayed Cryptocurrency Bill 2021, which was supposed to be introduced during the recently concluded winter session of the legislature but has now been pushed back to the middle of 2022.
“The budget should ideally offer coherent rules on direct taxation and the GST Council should detail the applicability of taxation, else there will be confusion,” Ramesh Kailasam, president and chief executive of IndiaTech commented.
“Basically, the line of thinking is that we shouldn’t be waiting for a bill alone and the Budget should begin the process,” Kailasam continued. Multiple crypto firms are being investigated for tax evasion by the Directorate General of Goods and Services Tax Intelligence, a law enforcement agency under the Union Ministry of Finance.
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Industry insiders claim that crypto platforms have failed to pay the correct amount of GST, owing to a lack of clarity about the tax rates that apply to various business models. They also claim to be unsure about the country’s indirect tax laws’ “applicable provisions.”
In addition, the forum urged the finance minister to recognise cryptocurrencies as digital assets rather than currencies. There is currently no clarity on how cryptocurrencies are taxed in India, owing to disagreement over whether they should be treated as currencies, securities, or another type of asset.
Returns on various assets are taxed at rates ranging from 10% to 35%. GST rates may also be affected by how cryptocurrencies are classified.
Certain business models used by cryptocurrency exchanges are attracting increased regulatory scrutiny. Platforms like Unocoin and CoinSwitch Kuber, act as a broker or aggregator, buying and selling cryptocurrency for users and profiting from the trades.
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IndiaTech recommends levying a flat 18 percent GST on exchange platform commissions (brokerage or exchange fees per trade) rather than the entire amount, as is the case with e-commerce transactions.
According to the letter, the industry body has recommended enabling provisions to recognise and treat it as income from capital gains or gains from business and profession, depending on the holder’s type of business and the timelines and nature of holding.
Other recommendations include a requirement for individuals holding crypto assets to disclose their holdings at the end of the financial year, similar to the Ministry of Corporate Affairs’ disclosure requirements for companies holding crypto assets, mandatory Know Your Customer (KYC) norms, Indian ownership requirements for crypto exchanges, and granting authorised dealers status to exchanges importing crypto.
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