IndiaTech, an industry association representing internet startup consumers, wrote to Finance Minister Nirmala Sytharaman seeking clarification on crypto taxation in Union Budget 2022_23, reported ET.
IndiaTech is a group of leading cryptocurrency exchanges. Some of these exchanges have been under scrutiny for trying to evade goods and services taxes. This industry group includes CoinSwitch Kuber WazirX, CoinDCX, and CoinDCX.
IndiaTech reviewed parts of the letter and appealed to government to amend existing tax laws to incorporate crypto assets. It also sought clarification on taxation and disclosures.
This is against the background of Cryptocurrency Bill 2021 which has been delayed to mid-2022. It was due to be introduced during the winter session.
According to the ET report, Ramesh Kailasam (president and chief executive at IndiaTech) stated that the budget should have coherent rules regarding direct taxation. The GST Council should also detail the taxation.
Kailasam stated, “Basically, we shouldn’t wait for a bill alone. The Budget should start the process.”
The Directorate General of Goods and Services Tax Intelligence is currently investigating multiple crypto-firms for tax evasion.
Industry representatives claimed that crypto platforms have not paid the correct amount of GST due to confusion about the tax applicable to different business models. They also claim they are not clear about the “applicable provisions” under the country’s indirect tax laws.
Forum members also called on the finance minister not to treat cryptocurrencies as currencies but as digital assets. There is currently no way to know how cryptocurrencies will be taxed in India. This is mainly due to confusion over whether they should treated as securities, currencies, or another type of asset.
The income tax on the returns of different assets can range from 10% to 35%. The way cryptocurrencies are classified could affect the GST rates.
Some business models used by cryptocurrency selling platforms are under greater scrutiny. Platforms such as CoinSwitch Kuber and Unocoin act as brokers or aggregators and allow users to buy and sell crypto, making them profitable.
IndiaTech recommends that a flat 18% GST is levied on only the platform commission of exchanges (brokerage fees per trade or exchange fees per trade), and not on the total amount, as in the case of ecommerce transactions.
The letter states that for direct taxation, the industry group has recommended that provisions be made to recognize and treat it income from capital gains, or gains from business or profession depending on the type of business and timeframes of the holding.
Others include a requirement that crypto assets be disclosed to individuals at the end of each financial year. This is similar to the disclosure requirements implemented by the Ministry of Corporate affairs to companies with crypto assets.