Technology start-up industry representative IndiaTech has told Finance Minister Nirmala Sitharaman that it is critical for the Union Budget to clearly lay down taxation clarity around crypto assets by formally naming them in tax laws besides the method of taxation and their disclosures.
The budget document should also name and classify cryptocurrencies to be defined as digital assets and not currencies and grant them recognition as digital assets, the industry body has suggested.
The letter, parts of which has been reviewed by Business Standard, lists nine recommendations to regulate crypto companies in the country.
IndiaTech said that crypto assets should draw from direct tax definitions in the budget and GST should be levied only on the platform fees of the exchanges. “Ideally, 18 per cent on the platform commission. GST should be levied on the brokerage or exchange fees (like it happens in stock markets) and not on the transaction value.”
The letter comes on the backdrop of larger tax demands being slapped on crypto companies by the GST department in the past one week. While WazirX has coughed up Rs 49 crore of unpaid taxes, sources say crypto unicorn CoinSwitch Kuber may be facing a higher ask as the platform engages in buying and selling of crypto assets.
The letter also recommended that appropriate FEMA Regulations and assigned HS Codes should be applied for the treatment of such cryptos purchased from persons outside India and Indian start-up exchanges may be given the status of Authorised Dealers. It also said that that FDI in crypto companies should be capped at 74 per cent, similar to the banking sector.
“Additionally, for individuals holding crypto assets at the end of the Financial Year, similar disclosure requirements as recently introduced by the Ministry of Corporate affairs for companies holding crypto assets may be introduced by means of an equivalent provision similar to Schedule AL in the Income Tax Return to enable all individuals filing returns to mandatorily disclose such crypto asset holdings,” the letter stated.
“There also exists a possibility that some of crypto assets may possibly be owned by certain individuals/organisations through past mining. These should ideally be treated as self- generated assets in which case cost of acquisition may be computed appropriately,” it added.