In India, an investigation has been launched by the indirect tax department on all bitcoin exchanges operating in the country. The purpose of this investigation is to fully ascertain just how much tax should be expected from them.
Just earlier in the week, some bitcoin exchanges were investigated by the income tax department. It could just be that this investigation by the income tax department is what triggered the proposed investigation by the indirect tax department.
What sources say
It was reported that the whole investigation started about a month ago. Top executives and top promoters of some bitcoin exchanges were questioned by the indirect tax department. They were asked to outline their business model and how much indirect tax should be levied on them based on their revenue for the past year.
One senior executive from a top bitcoin Exchange said:
“While the indirect tax department has been calling senior executives since mid-November, the direct tax officials started reaching out to us two weeks back.”
The Real Issue
What the tax department says may not be the real problem because bitcoin has been around for close to a decade now. No wonder taxes have not been imposed so far.
But considering what Patrik Jain, National leader of Indirect tax, said we just might know why this investigation is of utmost importance to them.
He said that,
“ Bitcoin may not qualify as currency or money as it is not a legal tender for Indian indirect tax laws….Therefore, VAT or GST implications may arise. In case it is sold to overseas customers from India, it may qualify as export.”
They just want to know the real underlying value of bitcoin so as to determine how the tax rate can be defined.
The recent rise in price of bitcoin has no doubt affected this decision in one way or another.