Transactions involving Indian exchanges and those outside India, especially involving procurement of crypto assets that are traded in India, could come under the taxman’s lens.
The tax department is scrutinising how exchanges that allow trading in India manage their cryptocurrency float, and whether there is any element or any transaction where Goods and Services Tax (GST) could apply, people aware of the development said.
Currently, several exchanges operate in India but only a handful mainly the large ones tend to have actual cryptocurrencies on their books to be bought or sold by Indian traders and investors. Some of the large exchanges also have holding entities outside India that primarily hold a large chunk of crypto assets.
These are then “transferred” to the Indian entity, before any Indian could buy it. Some other exchanges tend to match trades between buyer and seller. In many cases, either the buyer or the seller is also based outside India but the trade happens through the exchange.
In some cases there are also transactions between two exchanges that are recorded as “transfer,” say insiders.
The tax department is scrutinising whether these transactions involving exchanges could also attract additional GST.
This comes about two months after the Directorate General of GST Intelligence (DGGI), the investigation arm of the indirect tax department, had conducted searches and raids on several crypto exchanges and asked them to cough up GST on their transaction fees or margins.