According to a recent report on Bloomberg, the government of India is mulling over a new Goods and Services Tax of 18 percent on all crypto trades. This is despite the recent ban by the Reserve Bank of India on all banks from dealing with digital exchanges or crypto. The decision by the Reserve bank of India has however been challenged in court. This has put the entire crypto sector in India in limbo.
The person that leaked this information, who has chosen to remain anonymous, said that the proposal is currently under discussion by the Central Board of Indirect Taxes and Custom. Once it has been finalized, it will be put before the Goods and Services Tax Council.
This proposal outlines that purchases and sales of crypto should be taxed since they are technically a supply of goods. The value of each crypto transaction is based on the value of rupees or its equivalent in a convertible foreign currency. Those transactions that involve parties outside India would be liable to an integrated GST or IGST. Thus, they would be classified as an import or export of goods.
Meanwhile, any crypto transaction that is made for reasons like transfer, storage, supply, and accounting would be deemed as a service. Besides that, crypto mining would also be considered a service. Under this proposal, any digital exchange or wallet in India will have to pay GST. Any foreign exchange that deals with Indian citizens would also need to pay IGST.
When the Changes Might Happen
The sources added that no concrete decision has been reached, but the government could start levying the new tax as soon as July 1st. However, this new tax might still need to wait until the government has decided how and if it will regulate crypto at all.
Regulation of Crypto in India
The Indian authorities have been cracking down on crypto quite hard. In February of this year, about 100,000 traders and investors were issued with notices. This is after the authorities discovered that over $3.5 billion in crypto transactions may have taken place in the previous 17 months.
The enforcement agencies in India have even proposed banning crypto in India entirely. They do not want the Indian money system to be associated with it in any way. The Enforcement Directorate and the Central Board of Direct Taxes recommended the trade to be banned in the nation.
This ban has been proposed because crypto can be used for money laundering. Thereafter, the funds could be used to finance terror since tracing them is impossible. The concerns were raised in a meeting of a committee tasked to regulate crypto. The committee has representatives from the Reserve Bank of India, Ministry of Economic Affairs, and representatives from ED and CBDT.
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