Indian Bitcoin Exchanges seeks clarity over levy of GST
As reported by Economic Times, an Indian business daily, seven of India’s leading bitcoin exchanges, including Zebpay, Unocoin, CoinSecure, and BtcxIndia are planning to approach the Advance Authority of Ruling (AAR) which is a judicial body providing clarity on taxation inquiry for companies and associations in India.
Indian Bitcoin exchanges are planning to reach out to authorities to get clarity over the applicability of goods and service tax (GST) on buying and selling bitcoins in India. If such taxation is applicable, the exchanges could end up paying over USD $1 billion in taxes.
Indian Bitcoin exchanges are concerned about the applicability of goods and service tax (GST) on their operations and are seeking answers to the questions like, are Bitcoin exchanges required to pay GST? If they are, what would be the rate? Will GST be levied on the revenues or operating margins?
As reported by Economic Times, an Indian business daily, seven of India’s leading bitcoin exchanges, including Zebpay, Unocoin, CoinSecure, and BtcxIndia are planning to approach the Advance Authority of Ruling (AAR) which is a judicial body providing clarity on taxation inquiry for companies and associations in India. In 2017, Indian government levied a singular indirect tax on all goods and services for the entire country. These exchanges are seeking a clear answer on whether they are required to pay goods and services tax, and if such taxation is applicable, they could end up paying over USD $1 billion in taxes.
Indian exchanges are trying to figure out if GST is applicable on their margins earned or their total revenue. The issue of taxing cryptocurrencies has gained attention in India following the income tax department slapping tax notices on almost five hundred thousand high net worth individuals transacting in bitcoin, asking them to pay capital gains taxes on their bitcoin investments and trades.
Indian regulatory authorities are working to bring clear guidelines in either regulation or taxation of cryptocurrencies like bitcoin in the country. According to the report, an official familiar with the matter, said,
“At least one Bitcoin exchange has filed an application with the [West Indian state] Maharashtra AAR for future tax liability. The tax department is currently researching the concept of Bitcoins, which is a very complex subject.”
In case bitcoin is recognized as a currency, then the exchanges will be exempted from paying any taxes, however, this is a highly unlikely situation. While, considering bitcoin as a good, under the new GST regime the exchanges will be required to pay 18% tax slab. On the other hand, if, the digital currency is accepted as a service, bitcoin exchanges will be accountable to pay 12% in taxes.
After reviewing exchanges’ balance sheets, a tax official stated, “The combined revenue of top seven players would be around INR 40,000 crore (approx. USD $6.3 billion] and they operate at about 20% margins.” If this is believed to be true, India’s Income Tax (IT) department could gain up to INR 7,200 crores, approx. USD $1.13 billion in taxes at an 18% tax rate for goods, if exchanges’ revenues are taxed.
Reportedly, some exchanges have not paid any sales or value added taxes (VAT) till date and even haven’t revealed their balance sheets to authorities, while the reports submitted by others are dubious. The tax official said,
“When we compared the annual results and explanations submitted to the sales tax and VAT authorities, they were diametrically opposite.”
The status of Cryptocurrency remains unclear in India as lately, Indian government likened cryptocurrency investments to Ponzi schemes and regulatory authorities refuse to accept Bitcoin as legal tender.
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