Starting June 28, Indian tax authorities will discuss implementing the highest 28% rate of goods and services tax on cryptocurrency transactions. This would leave cryptocurrencies on par with lotteries and casinos.
If approved, a 28% tax will be on top of the 30% crypto income tax and 1% tax for transactions exceeding 10,000 Indian rupees (US$128), which will come into effect on July 1.
Approval of the highest rate is very likely, as the government is seeking to discourage Indians from investing in cryptocurrencies.
No Place for Crypto
India has the second biggest crypto market share, according to a report by Chainanalysis. Attention to cryptocurrencies has been on the rise among Indians. In 2021 two Indian crypto exchanges, CoinSwitch Kuber and CoinDCX, achieved unicorn status.
While there are no precise statistics, crypto industry experts estimate that the country may hold as many as 20 million crypto investors, including Bollywood actors, which promoted Bitcoin in TV and newspaper ads. Job listing reports showed that blockchain-related jobs exploded in India within the past two years.
Despite its popularity, the Indian government insists on regulating the market by applying a harsh taxation policy. On April 1, 2022, the 30% crypto income tax came into effect. Within a few months, crypto trading volume dropped by 30%, and major exchanges like Coinbase and FTX considered leaving the Indian market altogether.
To avoid the heavy taxation, many Indians turned to DeFi projects that were not in the scope of the crypto income tax. As a result, Indian tax authorities also plan to implement a 20% tax on DeFi gains. The Economic Times has reported that as many as 50 Indian cryptos and blockchain entrepreneurs had moved their businesses out of the country to Dubai and Singapore. However, the government is willing to go even further.
“There is no advantage of cryptocurrency for this country. I request the youth of this nation to not go towards cryptocurrency,” said politician Sushil Kumar Modi, urging the current government to increase the tax up to 55%.
In the interview for Forkast, Modi was surprised that youth are so into cryptocurrencies when mutual funds and the stock market are more secure and safer for investors.
“We have given time to younger people who want to exit (cryptos),” Modi said. Those who want to remain will have to contend with higher taxes “because it is like gambling”. [..] “We feel these cryptos are not good for the financial stability of any country. Only countries with unstable finances are legalizing these tenders,” said Modi.