Cryptocurrency exchanges in India have approached the Reserve Bank of India (RBI) to verify their status, as financial institutions have refused to provide them with the necessary financial services, due to lack of clarity from regulators.
According to a report by Economic Times today, Indian crypto exchanges have written to the country’s apex bank to be cleared on whether they are being classified as a commodity, currency, goods, or as a service.
The exchanges are seeking to know how they are being classified so that it would provide an understanding of whether they fall under the Goods and Services Tax (GST) framework, in order to prevent any future misunderstanding with the tax body.
“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,” Praveenkumar Vijayakumar, Chairman and CEO of Belfrics Global said.
India’s Crypto Saga
Before this time, there has been a misunderstanding on whether cryptocurrencies should be classified as goods or services, which would automatically place cryptocurrencies, including Bitcoin, Ether, among others under the GST’s jurisdiction.
Several investigations, especially from the Indirect Tax Department and the VAT authorities, have been conducted in the past to ascertain the amount of levy cryptocurrency-related businesses should pay for every transaction involving cryptocurrencies.
This has brought issues between both parties, as exchanges believe that if they are taxed based on their overall transaction, they will not break even.
These back and forth issues have prompted cryptocurrency exchanges to acquire legal backing, to stop these authorities from continually prying into their affairs.
As per the report, despite the March 4 ruling by the Supreme Court in favor of digital currencies trading in the country, banks have refused to provide financial services to cryptocurrency exchanges.
The banks, when approached by exchanges, stated that they had not gotten the necessary approval from the RBI to date, to work with cryptocurrency-related businesses.
However, since the Supreme court ruling, crypto-related activities in the country have triggered remarkable initiatives in the country, including Binance’s launch of a $50 million investment fund in blockchain projects.
