The Indian government is in talks of levying an 18% tax on cryptocurrency trading. The knowledge allegedly comes from people with a direct knowledge of the matter.
The news, as reported by Bloomberg, states that cryptocurrencies could be taxed pending their declaration as intangible goods. Even as they are on par with software with respect to their classifications, the source added that their use in illegal activities would have to be regulated using other laws.
The proposal is currently under consideration by the Central Board of Indirect Taxes and Customs and will be submitted to the GST Council after its finalization for approval.
Cryptocurrency exchanges and traders are operating in a legal grey area, with the Reserve Bank of India banning banks from dealing with entities trading in cryptos. They also sent a deadline of 3 months from the initial release of its circular in April for all crypto exchange platforms to shut down. However, crypto exchanges have moved the Supreme Court against this.
Details of the proposal were also revealed by the source. There is a list of points in the proposal which seem to provide a basic framework for accepting cryptocurrencies.
The proposal states that purchase or sale of cryptocurrencies is considered as a supply of goods, and hence subject to the Goods and Services Tax reform recently conducted by the country. It was also mentioned that the value of a cryptocurrency may be determine based on the transaction value in rupees or freely convertible foreign currency. It was also clarified that transactions beyond Indian territory will be liable for integrated GST. They would be considered an import or export of goods.
The outcome of the verdict in the Supreme Court will also decide whether regulation will be implemented or not, as various government agencies are divided over whether cryptocurrencies should be regulated or not.
An 18% tax on cryptos would mean a lot of money in the government’s coffers. The taxation on cryptos would have to be done by treating them as goods and services, as changing their status to a currency or a security would require a change in the law.
This comes hot on the heels of Indian crypto exchange market going up even as the ban holds. Many exchanges started offering crypto-to-crypto trading pairs to offer added liquidity between cryptos, a move they admitted was hastened by the ban.
For all purposes, it is very visible that the Indian trading market is as of yet untapped. Even at a monthly business of about INR 200 crore, or $29 million, the market still exhibits potential for growth inhibited by a reckless blanket ban. A healthy regulatory framework could make way for the Indian market to be one of the biggest in the world.
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