IndiaTech Requests Finance Minister To Clarify Crypto Taxation And Shares Suggestions

by Bhaswati Guha Majumder - Jan 8, 2022 02:21 PM +05:30 IST
IndiaTech Requests Finance Minister To Clarify Crypto Taxation And Shares SuggestionsCryptocurrency
Snapshot
  • There is currently no clarity on how cryptocurrencies are taxed in India, owing to disagreement over whether they should be classified as currencies, securities or another form of asset.

In a recent development in the crypto sector in India, IndiaTech, a trade group that represents consumer internet firms, has written to Finance Minister Nirmala Sitharaman, requesting clarification on cryptocurrency taxation in the Union Budget 2022-23.

All of the major cryptocurrency exchanges, including CoinSwitch Kuber, WazirX, and CoinDCX, are represented by the industry body.

IndiaTech has requested that the government amend existing tax rules to incorporate crypto assets, as well as clarification on the mechanism of taxes and disclosures, in a letter that has been partially reviewed by Economic Times.

The letter comes in the wake of the much-delayed Cryptocurrency Bill 2021, which was supposed to be introduced at the parliament's recently finished winter session.

Rameesh 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. Basically, the line of thinking is that we shouldn't be waiting for a bill alone and the Budget should begin the process.”

While explaining this move, he told Outlook Money that ideally, announcements from the Finance Ministry on taxation and the GST Council on GST will help to clear the air for both crypto exchanges and investors.

Multiple crypto businesses, including Buyucoin and Unocoin, are being investigated for tax evasion by the Directorate-General of Goods and Services Tax Intelligence, a law enforcement department under the Union Ministry of Finance.

WazirX, a cryptocurrency exchange, was hit with a Rs 40-crore demand by the GST department in December 2021.

As reported, 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 rules' relevant provisions.

According to the ET report, IndiaTech has requested 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 classified as currencies, securities or another form of asset.

Returns on various assets are taxed at rates ranging from 10 to 35 per cent. GST rates may also be changed by how cryptocurrencies are classified, the report noted.

It was also reported that some business models used by cryptocurrency selling platforms are drawing increased regulatory scrutiny. Platforms like Unocoin and CoinSwitch Kuber, for example, function as a broker or aggregator, buying and selling cryptocurrencies for customers and profiting from the trades.

The industry body, IndiaTech, recommends levying a flat 18 per cent GST on exchange platform commissions — brokerage or exchange fees per trade — rather than the total amount, as is the case with e-commerce transactions.

Additionally, in terms of direct taxation, it has advocated enabling rules to recognise and treat it as income from capital gains or profits from business and profession, depending on the holder's business, as well as the duration and form of holding.

According to the latest report, other suggestions include a requirement for people holding crypto assets to disclose their holdings at the end of the financial year, equivalent to the Ministry of Corporate Affairs' disclosure rules for organisations holding crypto assets.

IndiaTech has also proposed making Know Your Customer (KYC) standards mandatory, Indian ownership requirements for crypto exchanges and granting authorised dealers status to exchanges importing crypto.

Crypto Market And Future

Meanwhile, reports showed that the price of Bitcoin has dropped to $43,030 from a peak of nearly $47,700 on 1 January 2021. It was found that the prices of other major crypto tokens such as Ethereum, Solana, Cardano, Binance Coin and others have been on a free slide since the start of the New Year.

Darshan Bathija, CEO & CO-founder, Vauld, said: “The current price drop of BTC can be attributed to the uncertainty all markets are facing, with the spread of the Omicron variant. We can expect two very contrasting things simultaneously — many investors will view this as an opportunity to buy the dip, while many will also try to cut their losses, leading to a sellers’ frenzy.”

In this case, it should be understood that the negative price fluctuation in crypto markets is nothing new, so committed crypto enthusiasts will remain unsurprised.

However, Raoul Pal, the CEO of Real Vision and a former Goldman Sachs hedge fund manager, earlier predicted in a podcast that the global crypto market capitalisation might expand 100 times by the end of the decade.

So if existing crypto network adoption patterns continue on their current path, Pal claimed that the figure might rise to about $250 trillion from $2-2.1 trillion as of today.

If what is predicted comes true, Bitcoin will become the asset class with the quickest rate of increase in the shortest amount of time. Other asset types, such as shares, bonds and real estate, have market capitalizations ranging from $250 to 350 trillion dollars. In addition, Pal backed up his claim by saying that if the number of cryptocurrency users reaches 3.5 billion by 2030, the market cap will be over $250 trillion.

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