It is reported that the Indian government is considering a 28% Goods and Services Tax (GST) on all cryptocurrency transactions. “Currently, the tax is levied only on a portion of the services provided by cryptocurrency exchanges. Taxing the entire transaction at the higher rate of 28% could cause markets to free fall,” warned one tax expert.
The Council is considering a 28% value-added tax on cryptocurrency transactions
The Goods and Services Tax (GST) Board of India will soon decide whether to expand the scope of applicable transactions and charge 28% GST on all cryptocurrency-related services and activities, CNBC TV18 reported Monday.
The GST Council is the highest decision-making body chaired by the nation’s finance minister. The council has appointed its legal committee to form an opinion on the GST issue related to cryptocurrencies. Sources told the publication:
There are various aspects of cryptocurrencies – transactions involving cryptocurrencies, using cryptocurrencies to make purchases, receiving cryptocurrencies as payments. All of these aspects are under study and will be discussed in the legislative committee.
“The tax proposals will be analyzed by the legal committee, which will recommend its views to the GST Council for consideration,” the publication quoted one person familiar with the matter as saying.
Sources explained that crypto exchanges in India are currently classified as “intermediary services” and are subject to an 18% GST tax. “They would have to be classified separately,” the sources noted, adding:
each transaction would be taxed at 28% GST if the GST Board decides to do so.
Currently, the GST rate for online games (without stakes) is 18%. However, online games involving betting or gambling are taxed at 28% GST.
A number of MPs have demanded that cryptocurrency transactions be treated as gambling. One person familiar with the issue explained, “Several MPs have demanded that the GST on cryptocurrencies be raised to 28%, as on gambling and lotteries. Since parliament is the highest body, their demands will also be considered by the legislative committee.”
Commenting on the Indian government’s expansion of the type of transactions subject to the GST, Saket Patavari, executive director of the tax advisory firm Nexdigm, opined:
Currently, only a portion of the services provided by crypto exchanges are taxed. If the entire transaction were to be taxed at the higher rate of 28%, it could cause markets to free fall.
Currently in India, cryptocurrency income is taxed at 30%. Moreover, as of July 1, cryptocurrency transactions will be subject to a 1% withholding tax (TDS).
Meanwhile, the Indian government is working on the country’s crypto policy. Finance ministry officials are consulting with the International Monetary Fund (IMF) and the World Bank on the regulation of cryptocurrencies.
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