Crypto exchanges in India are still seeking regulatory clarity and tax status from the Reserve Bank of India following a Supreme Court ruling in favor of the crypto industry earlier this year. India’s Supreme Court reversed the ban placed by the central bank on financial institutions offering crypto-related banking services. It is two months after lifting the ban, crypto exchanges and firms are now seeking clarification regarding the nature of their operations.
The call for clarity
Several crypto exchanges in India today have written to the Reserve Bank of India (RBI) to seek clarification regarding their status as banks continue denying banking services to them because of a lack of clarity from the regulator. They have sent a collective letter to the central bank on the absence of proper tax regulation. They argue that the lack of clarity on taxation has allowed banks to keep denying services to exchanges conducting crypto-related businesses. Furthermore, the crypto exchanges want clarification concerning whether they are being classified as services, goods, currency, or commodities as this is set to impact the way they get taxed under GST (Goods and Services Tax) framework. According to these crypto exchanges, it is significant to know their taxation requirements to understand if they would be categorized under India’s Goods and Services Tax.
In March this year, the Supreme Court overturned the ban on cryptocurrency usage; thus, opening the door for the crypto industry in the country. However, crypto companies are now seeking clarity on their legal status and taxability from the central bank, which has been procrastinating and burying its head in the sand ever since it lost the court battle.
According to Praveenkumar Vijayakumar, the CEO, and chairman of crypto exchange Belfrics Global: “If the digital assets are not exempted from GST, the digital currency exchanges in India are going to have a standoff with the tax authority. In the wake of the recent Supreme Court ruling, we have also approached the RBI for clarity on this, as if we pay GST on the whole transaction, then most platforms would not be able to survive.”
In the past, the Indirect Tax Department had launched investigations into exchanges operating crypto businesses in the country to determine the GST rate, which could be levied on them.
Crypto exchanges have opposed the central bank’s decision prohibiting local banks from offering banking services to these firms.
Sidharth Sogani, the CEO of security research company Credbaco Global said that the central bank should give a directive for local banks to resume banking relationships with cryptocurrency exchanges. He stated since the Supreme Court reversed the central bank’s ban, the central bank must remind domestic banks to resume business with crypto-based companies.
How the new crypto law in India could play out
Despite overturning the ban and the matter considered closed, the legal status of cryptocurrencies in the country still remains far from settled. India is a good example of countries across the globe, which are struggling to develop proper guidelines for crypto assets. National leaders are getting it increasingly difficult to ignore cryptocurrency adoption and now come into a realization that if they remain silent, then courts will step in. Efforts to ban cryptocurrencies in the country is next to possible. Regulatory authorities will have no choice but to accept the crypto legitimacy as an asset class.
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Nicholas Otieno is a content writer with a focus on technology. He is passionate about helping people to accomplish their needs.