Overseas crypto exchanges may face 18% GST | Economic Times

Mumbai: Overseas cryptocurrency exchanges that have a customer base in India may have to pay additional tax in the form of goods and services tax (GST), according to experts.The department of indirect taxes is looking into whether these exchanges are required to pay GST in India when they provide certain “data” services that fall under the definition of Indian laws, people aware of the development told ET.Under Indian tax laws, almost every transaction that entails consumption of goods and services by Indians attracts GST.Experts say the tax department would categorise the services provided by these exchanges — allowing Indians to trade on their platform — as an online information database access and retrieval services, or OIDAR service.“The overseas crypto platforms with Indian buyers and sellers would be having a significant exposure towards GST under OIDAR provisions,” said Rahul Garg, managing partner at Asire Consulting LLP. “As the users of such platforms are mostly individuals who would be unregistered under Indian GST laws, the platform would have to take registration under the Indian GST law and discharge 18% GST.”OIDAR rules dictate that any digital or data service provided to Indians or anyone based in India should be taxed.Tax experts say the OIDAR regulations are quite wide in interpretation and services provided by foreign exchanges could come under them, at least to demand GST in the first phase.ET has learnt that almost all cryptocurrency exchanges based outside India do not pay GST on their transactions.“The problem could be two fold for cryptocurrency exchanges that are not based in India but have end customers here,” said Abhishek Jain, tax partner, EY India. “First, determining the tax rate is tough as there is no clarity around whether cryptocurrency is an asset, security or currency. Also, if these exchanges get covered under OIDAR ambit, then they would have to cough up the GST on such transactions facilitated on their platform.”The question is also whether GST is applicable on total transactions or merely on the margins they make, said tax experts.Many Indian investors have moved to trading on foreign exchanges as most Indian banks are refusing to extend services for trading on Indian crypto exchanges.Over the last few years, several crypto exchanges have moved to Singapore or Dubai in a bid to safeguard against some Indian laws. They, however, continue to offer services to Indians.In India, regulators are still to come up with guidelines for cryptocurrency.On June 24, ET had reported that even smaller banks that had let cryptocurrency exchanges and traders open accounts are now getting cold feet and pulling out despite the RBI’s recent clarification that its old circular banning payments related to cryptocurrencies is no longer valid.Larger banks have continued to stay away from lending or allowing customers to use their platform to trade in cryptocurrencies.Even for Indian exchanges, there is still no clarity on the applicability of GST, such as, what should be the tax rate. Most exchanges pay 18% GST. The question, however, is on what amount should the tax be paid, tax experts said.Whether GST should be levied on the margins or commissions they charge, or whether it should be on the top line or transaction value, is also unclear. Despite no clarity from the tax department on the issue, most Indian exchanges pay 18% GST on their margins or commissions they charge.ET had reported on June 22 that even the newly introduced 2% equalisation levy could come to haunt the exchanges that are not registered in India.