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India’s cryptocurrency exchanges seek GST guidance

India’s tax authorities are paying closer attention to cryptocurrency traders. However, some platforms say that the GST rules on cryptocurrencies, such as Bitcoin, are unclear. They’re asking regulators for clarity on their precise GST obligations.   

For instance, one crypto platform executive told the Times of India that “ambiguity around the taxation of crypto assets and that lack of clarity on filing procedures” was leading to accidental noncompliance. 

Developing a framework for taxing cryptocurrency business is further complicated because of the various business models. For instance, some exchanges facilitate peer-to-peer transactions. Other platforms buy and sell cryptocurrencies directly.  Each revenue model potentially has different GST implications. 

Penalties for GST noncompliance in India

India’s tax authorities recently penalised crypto exchange WazirX for not evading GST. The company denies intentional tax evasion. Rather, it says there “was an ambiguity in the interpretation of one of the components which led to a different calculation of GST paid.”

Cryptocurrency clarity is key 

As with any new technology, regulators are still working to catch up to the practical realities of cryptocurrencies. We can expect that tax frameworks will evolve over time.

However, as we can clearly see, ambiguous regulations do not exempt businesses from their tax obligations. Failing to properly account for VAT/GST is likely to result in severe penalties. Businesses should therefore urgently assess their VAT/GST policies to avoid future fines, interest and even criminal charges.

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