India’s Goods and Service Tax (GST) Council is likely to introduce a 28% GST on all crypto transactions. This news has been a major shocker for crypto enthusiasts in the country. This GST might supposedly be levied on all activities and services related to cryptocurrency.
The government of India is of the opinion that Virtual Digital Assets are to be treated equal to lotteries, casinos, betting and even racecourses.
The services which have attracted the 28% GST additionally along with the flat 30% tax on gains include crypto mining and sales and purchase of the digital asset.
The formal approval hasn’t come through yet, it will be discussed with the GST council before the next meeting. The date for the next GST meeting is yet to be finalised and announced.
Legal Position Of Crypto Continues To Be Murky In India
The sale and purchase of cryptocurrencies on various exchanges shall be under tight scrutiny. The GST Council shall keep an eye on all these activities that occur on centralised and decentralised exchange platforms.
Based on these inferences, the GST Council shall deliver its decision on whether to levy GST or not.
Ministry of Finance has already imposed a 30% tax on profits made from the transfer of crypto assets and non-fungible tokens (NFTs).
The reports that India could consider imposing a GST were doing the rounds ever since the 30% tax and 1% TDS were decided to be implemented.
No deduction has been allowed, except the cost of acquisition along with no loss in transactions to not be permitted to set off losses incurred by traders and investors.
Despite the draconian taxation system, India still is far behind in terms of providing clarity regarding the legal status of Bitcoin.
There still is no law in place that regulates digital asset. Many believed that the tax proposal might have legalised crypto trading, however, there is half-truth to that.
Finance Minister, Nirmala Sitharaman, stated that taxing isn’t equating it with legalising it. That matter remains under consideration.
Related Reading | 30% On Crypto Gains Not Enough; India To Tax DeFi Now
Shift To Decentralised Crypto Exchanges?
India’s regressive taxation policy has dampened the spirit of crypto traders, investors and even enthusiasts.
Investors have now started to find other ways to minimise being taxed, most have shifted to thinking long-term.
Many people have started to hold the assets for a longer time, which has directly taken a toll on daily trading. This has caused trading volume to fall considerably, according to this report.
Trading on decentralised platforms remains an idea that investors are considering.
This has hurt centralised platforms as these platforms are bound to collect Know Your Customer (KYC) details. The benefit that Decentralised exchanges provide include no KYC details and also facilitates Peer-To-Peer or P2P transactions.
This however, doesn’t do much of a difference as the moment crypto is converted into fiat currency, it shall be taxed.
Some investors have even considered entering the gaming and metaverse space, however, India might consider taxing income from DeFi too which will take into account metaverse.
Related Readings | India To Be Considerate With Crypto Regulations; Shall Not Impede Innovation