IndiaTech, the country’s tech industry association, has urged Finance Minister Smt. Nirmala Sitharaman to provide clarity on the various taxes imposed on crypto assets. The body has forwarded a letter to Sitharaman on the subject.
In the letter, IndiaTech asked the government to revise existing tax rules to accommodate crypto assets, as well as to define the process of taxation and disclosures. This comes at a time when officials from the Ministry of Finance have been meeting with representatives from various industries in preparation for the upcoming Union Budget 2022. Moreover, the much-delayed Cryptocurrency Bill 2021, which was supposed to be tabled at the just-finished winter session of parliament but has now been pushed back to mid-2022.
Ramesh Kailasam, President and Chief Executive of IndiaTech said, “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.” IndiaTech is a consortium of major cryptocurrency exchanges, some of which have lately been probed for allegedly evading goods and services tax (GST). CoinSwitch Kuber, CoinDCX, and WazirX, are among the members of this industry body.
The forum also recommended the finance minister acknowledge cryptocurrencies as digital assets rather than currencies. Currently, there is little certainty about how cryptocurrencies would be taxed in India, owing to uncertainty about whether they should be classified as currencies, securities, or another form of asset. The income tax on returns from various investments ranges from 10 percent to 35 percent. GST rates could also be adjusted by how cryptocurrencies are classified.
There are three types of crypto trading: INR transactions, crypto to crypto trading, foreign currency transactions. There has been a large gap in how GST is calculated on cryptocurrency by exchanges and tax agencies. Certain business strategies adopted by cryptocurrency selling platforms are drawing increased regulatory scrutiny.
Platforms like Unocoin and CoinSwitch Kuber, for example, function as brokers or aggregators, buying and selling crypto to users and charging commissions from the trades. IndiaTech has proposed that a flat 18 percent GST be imposed only on the platform commissions of the exchanges (brokerage or exchange fees per trade), rather than the full amount, as is the case with e-commerce transactions.
According to the letter, for direct taxation, the industry body has recommended enabling laws to recognize and classify it as income from capital gains or income from business and profession, depending on the type of business of the holder & the duration as well as the form of holding.
In May of last year, IndiaTech presented a White Paper with the finance ministry, suggesting a five-point roadmap to increase transparency in crypto-assets and trading.