GST on cryptocurrency? Overseas exchanges may face 18% tax – Business Today

Can cryptocurrencies invite a Goods and Service Tax (GST) charge? The department of indirect taxes is exploring whether overseas exchanges that have a customer base in India are required to pay GST when they provide certain data services as per Indian law. According to Indian tax laws, almost all transactions that involve Indians consuming goods and services invite a GST charge. And these charges could mount up to 18 per cent for overseas exchanges.

The government could categorise services provided by overseas exchanges that allows Indians to trade on their platforms as online information database access and retrieval (OIDAR) services, as mentioned in a report in The Economic Times. OIDAR rules state that any digital or data service provided to Indians or people based in India should be taxed.

Rahul Garg, managing partner at Asire Consulting LLP told the daily that overseas exchanges could have significant exposure to GST. These platforms might have to register under GST and discharge as much as 18 per cent tax.

So far almost all cryptocurrency exchanges based outside of India do not pay GST.

Additionally, it might not be so simplistic to determine the GST rate for cryptocurrencies. There is no clarity on whether cryptocurrency is an asset, security or currency, said EY India tax partner Abhishek Jain. Experts also pointed out that it also must be determined whether GST will be applicable on all transactions or only on the margins.

Most Indian exchanges pay 18 per cent GST on margins or the commission they charge.

Many Indian investors have moved to trading on foreign exchanges as banks have turned their backs to extending services for cryptocurrency trading. In a bid to save themselves from Indian laws, several Indian exchanges have moved to Singapore or Dubai. 

Also read: Bitcoin craze! Indians invested $40 bn in crypto last year