By
Mayowa Adebajo
May 7th, 2024
The crypto ecosystem in India has levied a series of taxes with one of the most prominent being income tax which is currently pegged at 30%.
The Indian government is mulling the idea to impose a 28% Goods and Services Tax (GST) on cryptocurrency transactions being carried out in the country. According to a report from CNBC-TV18, the new proposal is coming from the Goods and Services Tax (GST) Council and it stems from the fact the council now wants to see digital currencies as lotteries, casinos, racecourses, and betting, all ventures considered as high-risk assets.
While the current negotiations are from the law committee established by the council, the matter will now be up for consideration by a fitment committee before binding approval will be granted by the GST Council.
“The proposal is to levy 28 percent GST on services and all activities related to cryptocurrencies soon. The law committee’s view will be tabled before the fitment committee, and it is then for the fitment committee to suggest a rate, which is likely to be 28 percent, and post this, the proposal will be taken to the GST Council for a formal nod,” sources close to the matter told CNBC.
The approval is on track to be reviewed by the GST Council as early as their next meeting of which the date is yet to be decided. While crypto is still evolving, it is growing as a medium of payment, and as an investment asset considering its potential to grow in value over time. With respect to the proposed tax hike, all these aspects are bound to be considered by the law committee.
The move to tax cryptocurrencies has been a very volatile one in India and the current rate that is charged is pegged at 18%. Should the new rate come into effect, it will place more burden on digital currency owners in India, and may likely stall the overall growth of the industry across the board.
Indian Government’s Multifaceted Crypto Tax Rules
The crypto ecosystem in India has levied a series of taxes with one of the most prominent being income tax which is currently pegged at 30%. This income tax law came into effect on April 1.
The push by the Indian government to tax crypto earnings is like a concession arrived at in lieu of banning digital currencies from its shores. Experts believe the Indian government should not operate or work in isolation and should consider global scenarios before finalizing the deal.
Pratik Jain, partner, Price Waterhouse LLP said the government needs to make adequate consultations with industry stakeholders before finalizing the deal.
“The other issue to be addressed is the clarity with regard to the classification of cryptos and the method by which the tax collection for this industry would be administered. Without resolution of these issues, specifying a higher tax rate by treating this industry on the same lines of lottery or betting may not be desirable,” Jain said.
Should the new taxes be finalized, the government will have to employ a working method to enforce their collections, and therein comes the roles of cryptocurrency exchanges and operators.
