Crypto Platforms Lack Clarity on Tax Provisions: Industry Interpretation Issues

Cryptocurrency platforms that are facing increased scrutiny from tax authorities for Goods and Services Tax (GST) evasion are unclear about “applicable provisions” under the country’s indirect tax regime amid regulatory uncertainty, industry executives told ET.

After the Goods and Services Department, which slapped a Rs. 40 crore GST demand on crypto exchange WazirX last month, the Directorate General of Goods and Services Tax Intelligence (DGGI) – under the ministry of finance – is scrutinizing multiple crypto firms including Buy coin and Uno coin.

Industry said crypto platforms have failed to pay the precise GST amount due to confusion over the tax applicable on different business models adopted by them.

Exchanges like WazirX and CoinDCX that facilitate peer-to-peer deals and charge a commission on each transaction, count this as their main source of revenue. Others such as Uno coin and Coin Switch Kuber also act as broker or aggregator and buy and sell cryptocurrency to users, in turn making profits on these trades, a model that is stoking greater regulatory scrutiny, executives said.

“They (DGGI) are looking at the different models and asking us for an explanation on how we account for transactions and they’re collecting the GST that was missed,” said Sathvik Vishwanath, confounder of Uno coin, who said there were “some business model categorization issues because of which it was unclear how much tax the (crypto) exchanges need to pay”.

Vishwanath said the tax authorities were yet to communicate the final tax amount and penalty to the platform, which it was prepared to pay.

DGGI did not reply to ET’s email queries until press time. Coin Switch Kuber declined to comment.

ET earlier reported that GST at 18% rate was applied to WazirX after regulators said it had failed to pay the indirect tax on commissions earned in its native token WRX.

The department, which was investigating WazirX for allegedly evading Rs. 40.5 crore in tax, later recovered Rs. 49.2 crore form the company – the GST owed plus interest and penalties, the December 31 report said.

Experts are of the view that until crypto is legalized in India it will be the taxman’s prerogative to interpret the guidelines.

“They (GST authorities) are coming up with their own explanation,” said Ramesh Kailasam, president and CEO of India Tech, an industry lobby for technology startups. “Not everything is named in law and how to be taxed but we presume that certain goods are treated in a particular way,” he added S-ET

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