Indian Bitcoin Exchanges Might Be Forced to Pay Over $1 billion Taxes

post image

Indian crypto exchanges might not be having a good time right now. The Indian indirect tax department keeps searching for ways of how to make crypto exchanges pay GST – goods and services tax (or value-added tax). The race has been going on since December 2017, when the department started an investigation to find out whether such taxes can be imposed on Indian crypto platforms.

Moreover, bitcoins are at gunpoint too. The country’s VAT authorities as well as the sales tax department last year commenced another probe concerning the leading digital coin. It will depend on bitcoin whether the top-seven Indian exchanges will have to enrich the tax department by $1 billion or not.

Billions at Stake

The destiny of Indian exchanges – regarding the amounts they will have to pay to the government – is in the hands of the authorities themselves. The size of GST will depend on how they will determine bitcoins – like currency, commodities or services. Exchanges will be lucky if bitcoin will be deemed by the government as currency as there will be no taxes imposed (at least GST) .

But if the Indian government considers bitcoin as goods or services, the tax will be 18% or 12% respectively. However, there is another tricky issue. The partner at law company Khaitan & Co Abhishek A Rastogi tried to explain it in the commentary to the Economic Times:

"The question for many Bitcoin players is whether GST is applicable on the total revenue or on the margins they earn.”

This is important due to the fact that it’s in government’s hands to clarify whether these crypto platforms vend commodities or services, or they are just trading exchanges, which get massive returns.

The authorities’ official, who desired to remain anonymous, told the Indian newspaper that in total the most prominent seven Indian exchanges, including BtcxIndia, Unocoin, CoinSecure, and Zebpay, gain about ₹40,000 crore, which equals to $6.3 billion. The official, who also has access to the balance sheets of digital coins exchanges, added that at the same time their margins make up 20% out of that multi-billion revenue.

The official also emphasized that in the majority of cases, every time there is a purchase or vending order on such exchanges, these bitcoin players charge vast differences in the space of approximately Rs 1lakh, which is equal to $1,500]. In this situation, the potential taxes for the top exchanges will make up Rs 7,200 crore ($1.13 billion) in total, sure, if the imposed GST 18%.

Indian Exchanges to Fight Back

Having understood that something “fishy” for them is going on, India’s top-seven bitcoin exchanges decided to reach out the Advance Authority of Ruling (AAR) to pierce the fog. Such information was provided to ET by two people who are firmly familiar with the situation. It is essential to add that AAR in India is a quasi-judicial body. AAR can determine whether the tax rates are appropriate or not.

According to ET sources’ information, at least one of these exchanges has applied with the AAR. The application is concerned about the potential tax responsibility. Meanwhile, it is known that the tax department is currently exploring the case because bitcoin is entirely a complicated phenomenon.

The situation is indeed extraordinary as once the AAR decide on the business pattern for these Indian bitcoin platforms it will create the model for the rest of them on the territory of the country. And that is not possible without defining what mainly bitcoin is – currency, services or commodities.

"The option of proceeding with advance rulings under GST should be exercised to enable clarity on future tax treatment, more so in cases where existing tax positions are untested," MS Mani, the partner at Deloitte India said.

According to the information, provided to ET by the bitcoiners, the exchanges, Indian ones, in particular, gain their income through transaction fees, commissions as well as price-arbitrage potentials. Moreover, some exchanges conduct trades on other cryptocurrencies as well, and the Indian government hasn’t put an eye on altcoins.

One of the people, who are acknowledged with the matter, said that Bitcoin players presented to VAT and sales tax authorities completely different data concerning their revenues. So it may take a lot of time for the Indian government to regulate the functioning of bitcoin in the country finally.

Quick Look At All Crypto News And Events For November 2020
Were you too engrossed in trading left and right that you’d completely spaced on getting your monthly update of the latest events in the crypto world? Well,...
Bitcoin Era Success Story: Teen Hits Jackpot With Crypto Trading
17-Year Old Hits The Jackpot With Cryptocurrency Trading Venture The news media has been swept up in a tornado with the latest news of a 17-year-old boy...
Keep Up With October Crypto Events Checking Out This Quick Roundup
Top Crypto Market News Of October You Should Catch Up With Do you think the world is turning more crypto-crazed day by day? There’s no limit to your investments...
A Collection Of Fresh Crypto News For Those Who Missed Out
The Major Roundup On The Latest Crypto News In The World The last month has been full of events and brought even more pressure on local business pretty...
What Everyone Should Know About Tokenization
Blockchain tokenization is a means of digital representation of a right and can be done with the help of a ledger. This can be a right to asset ownership...
What To Expect From A Cryptocurrency Market In 2020
Crypto market has always been a good target for speculation, shady schemes, and "bad guys". It's also very controversial, especially for financial markets...
Ethereum Foundation Confirms Upcoming ‘Istanbul’ Upgrade
On November 7th, Péter Szilágyi announced the date of the foundations impending upgrade, known as ‘Istanbul’. This upgrade will be the eighth hard fork...
Bitcoin’s Volatility? In 2017 BTC Was More Stable Than In Its Early Days
Despite some 30% crashes in 2017, bitcoin managed to increase by total 1,400% last year, conquering the world’s financial stage. Banks are becoming more...
Stablecoin - Everything You Need to Know
What Is A Stablecoin? You must have heard of cryptocurrency which has been the recent talk of the town. Well, stablecoins are a form of cryptocurrency....
Influence of Recent Cryptocurrency Boom: Does It Still Hurt?
Crypto Exchange Gate.io Agrees With Reports Showing 51% Attack On Ethereum Classic Bitcoin is a decentralized digital currency (also known as cryptocurrency)....
What is a Security Token?
Security tokens became very popular, but do you really know what is STO?STO is Security Token Offering, which is identical to an ICO. In this, there are...
Canada Reports Blockchain To Be Amongst Its Highest Paying Industries
A report recently published by the Canadian Digital Chamber of Commerce proves that the money involved in the blockchain industry of the nation is at the...
Cryptocurrency Exchange Security Levels
The growing interest in cryptocurrencies has led to the emergence of a wide selection of both digital money and the sites where you can exchange one cryptocurrency...
Belarusbank Considers Setting Up Crypto Exchange
Last year March Belarus introduced a decree by which it legalized cryptos and some activities related to them. This made Belarus a frontrunner in the race...
Gold Pulls Bitcoin Investors From BTC, Says Van Eck Associates CEO
In 2017-2018 bitcoin bit gold as bait for investors. However, the situation is expected to change in 2019 as investors already hope more for the gold than...