Instead of banning cryptocurrencies in India, the Government is likely to impose 18 per cent Goods and Services Tax (GST) on its trading.
Reportedly, the tax will be part of a proposal being considered by Central Board of Indirect Taxes and Customs to classify cryptocurrencies as intangible or commodities, rather than currencies or securities.
The tax will be imposed irrespective of whether the digital assets are used for illegal activities or not.
The Government recently appointed a dedicated panel that was tasked with examining the existing framework of cryptocurrencies and to come up with measures for dealing with the digital assets. The panel will also consider how the government can consider bringing in legislation to stop crypto transactions and which body will have regulatory oversight over the market.
The Indian government has issued repeated warnings against digital currency investments, saying these were like “Ponzi schemes” that offer unusually high returns to early investors.
Taxation has always been an important angle to consider when formulating a regulatory framework for the crypto sector in India. However, others in the government pointed out that virtual coins are not a legal tender in the country and are of a highly speculative nature.
Nevertheless, the proposed rules are not enough to establish a regulatory framework that covers cryptocurrencies in its several areas, including investor protections and how they have sometimes been used as a medium for money-laundering and fraud schemes. But it remains a positive step since they help regulate trade in cryptocurrency while tapping into a previously untaxed source to generate income for the nation.
However, another government committee has recommended that India’s authorities take immediate steps to shut down the country’s cryptocurrency exchanges, saying that the use of Bitcoin and other such coins could result in a breach of anti-money laundering provisions.
