Executive summary
Crypto platforms serving Indian users face two separate Indian taxes that are routinely conflated. One is GST on what you charge. The other is withholding under the income-tax code on what your users transact. A notice under one says nothing about your position under the other.
- GST (18%) applies to the platform's own fee income. The expanded OIDAR definition, in force since October 2023, is understood to cover services connected with virtual digital assets.
- The fee-versus-full-value question is where the money is. Expect the gaming precedent to be used against a fee-only position.
- Section 194S requires 1% TDS on consideration for VDA transfers, and is directed at payments to residents — a separate exposure from GST, on a separate base.
- Section 115BBH taxes VDA gains at a flat 30% in the user's hands, with no set-off of losses. It shapes user behaviour and the questions you will be asked, even though the charge is not yours.
- Reporting is tightening: statement-filing obligations with daily penalties, and automatic exchange of crypto account information from 2027.
GST: fee income or full trade value
This is the argument that decides the size of any demand, and it is worth stating your position early rather than after a notice lands.
An exchange's case is that the taxable supply is the service it actually renders — order matching, custody, execution, withdrawal handling — so the value of that supply is the commission, spread or fee it earns. The assets moving between two users are not the platform's supply; they are the subject matter of the users' own transaction.
If a DGGI enquiry or summons arrives
Enquiries into offshore exchanges typically begin with an information request rather than a formal demand, which is the point at which the outcome is most influenceable.
- Identify what it actually is. A Section 70 summons, an information request and a show cause notice carry different deadlines and different consequences. Treat the classification as the first task, not an afterthought.
- Do not rely on having no Indian entity. Absence of an Indian presence does not limit the demand, and non-engagement tends to produce an ex-parte outcome that is considerably harder to unwind.
- Assemble the evidence base early — India-attributable user revenue by period, the fee structure applied, your classification of users, and any GSTINs captured.
- Keep the GST and income-tax threads separate. Answering a GST enquiry with TDS material, or the reverse, creates confusion that is difficult to correct later.
Income tax: Section 194S and Section 115BBH
Clearly outside GST, and increasingly the question clients ask first. This section is scoped to what a platform needs to understand, not a substitute for direct-tax advice.
| GST (OIDAR) | Section 194S | Section 115BBH | |
|---|---|---|---|
| What it taxes | Your service fee | Consideration for a VDA transfer | Gains on VDA transfer |
| Rate | 18% | 1% withheld at source | 30% flat, plus surcharge and cess |
| Whose liability | The platform | The payer, or the facilitating exchange | The user |
| Threshold | None | ₹50,000 / ₹10,000 a year by payer type | None |
Reporting obligations are tightening
The direction of travel matters more than any single rule, because it changes what the department can see without asking you.
- Transaction statements. Crypto platforms and their intermediaries face statement-filing obligations, with a daily penalty for non-furnishing and a fixed penalty for inaccurate or uncorrected filings.
- Automatic exchange of information. India has committed to the OECD's crypto-asset reporting framework, under which crypto account information begins to be exchanged with foreign tax authorities from 2027.
- Payment-trail visibility. Authorities have sought transaction data from banks and payment intermediaries, which means India-attributable flows can be reconstructed without the platform's cooperation.
Three regulators, three separate obligations
Crypto platforms routinely assume that satisfying one Indian authority settles the others. It does not, and conflating them is a common source of avoidable trouble.
| Authority | What it governs | What registration with it does not do |
|---|---|---|
| GST / DGGI | Indirect tax on the platform's own service — registration, 18% on fee income, monthly returns | Does not satisfy anti-money-laundering obligations, and does not address withholding |
| FIU-IND | Anti-money-laundering registration and reporting for virtual digital asset service providers | Does not register you for GST, and carries no tax consequence of its own |
| Income tax | Withholding under Section 194S, the charge on users' gains, and transaction reporting | Does not resolve a GST demand, and is assessed on a different base |
Checklist
A short, practical sequence for a platform with Indian users.
- Quantify India-attributable fee income by period — this is the GST base, and the first thing any enquiry will ask for
- Document why your fee is the taxable value, using terms of service, custody language and fee disclosure as contemporaneous evidence
- Assess Section 194S separately, focusing on settlement flows and payments to Indian residents
- Capture GSTINs from business users so reverse charge applies correctly where it should
- Model exposure before deciding whether to disclose — use the penalty calculator
Common questions
Does India's OIDAR GST apply to an offshore crypto exchange?
In the department's view, generally yes, on the fee you charge. The OIDAR definition was widened from October 2023 and is understood to reach services connected with virtual digital assets, so an offshore platform serving Indian users sits inside the net rather than outside it. The live dispute is not usually whether GST applies but what it applies to: the platform's own commission and fees, or something broader. There is no registration threshold, so the obligation does not wait for a revenue level to be crossed. Where your Indian user is a GST-registered business supplying its GSTIN, reverse charge shifts the liability to them; retail users do not.
Is GST charged on the trade value or only on our fee?
This is the central argument in most exchange disputes and it is worth separating from the gaming cases. An exchange's position is that the taxable supply is the service it provides — matching, custody, execution — so the value is the commission, spread or withdrawal fee it earns, not the notional value of assets changing hands between users. Demands have been framed far more broadly. The Supreme Court's reasoning in the online gaming matter, which upheld tax on the full stake value and treated operators as suppliers rather than intermediaries, is routinely cited against platforms, so an exchange needs to meet that reasoning directly rather than assume it is distinguishable.
How is TDS under Section 194S different from GST?
They are separate taxes answering separate questions, and a notice under one tells you nothing about the other. GST is an indirect tax on the supply of your service, charged at 18% on the fee. Section 194S sits in the income-tax code and requires 1% to be deducted at source on consideration for the transfer of a virtual digital asset, with the familiar ₹50,000 and ₹10,000 annual thresholds depending on the payer. Section 194S is directed at payments made to a resident, and where consideration is itself in VDA the exchange facilitating the transaction can carry the deduction duty — which is exactly why offshore platforms with Indian sellers need it assessed separately.