The India’s Ministry of Finance has begun work on a comprehensive ‘Goods and Service Tax’ (GST) plan, which is reportedly shaping up to be an indirect tax on crypto assets, according to local Indian media. The purpose of considering an indirect tax on crypto is to act as a check against potential revenue loss to the exchequer due to the ambiguity around the true nature of the asset class.
Based on its legal status, a new GST rate for cryptocurrencies will be decided upon, which could potentially fall between 18% to 28%, the report stated. Finance Minister of India Nirmala Sitharam intends to define the characteristics of cryptocurrencies, their use, and how they fit into the existing legal framework.
To determine the tax rate under the GST regime, investors will first have to wait for a determination of whether cryptocurrencies will be defined as goods, or as services. According to reports, the Finance Ministry could enforce a specialized rate for digital assets, which may not necessarily fall between 18% and 28%. The decision is expected to be made sooner, rather than later.
The report also revealed that the GST will only be calculated in relation to margin and service fees, and not on the entire value of the crypto asset itself while the government considers its treatment of specialized transactions like mining and airdropped crypto tokens.
India Holds Heated Debates On Crypto Assets
The treatment of cryptocurrencies and how they fit into India’s legal system has long been a subject of contention in the country.
Sitharaman recently cautioned investors against crypto investments, citing their volatility, while the Reserve Bank of India has gone on record to state that crypto assets are a threat to the nation’s financial stability.
In recent developments around crypto regulation, Sitharaman met with Managing Director of the International Monetary Fund Kristalina Georgieva in Delhi to discuss the significance of the regulation of crypto assets, and the need to form a globally coordinated, synchronised approach to the issue.
Despite its overall caution, India recently stepped up its bid for a Central Bank Digital Currency (CBDC) project. India’s central bank, the Reserve Bank of India (RBI), has asked four public sector banks to run a pilot for the CBDC ahead of a potential rollout within this financial year.
On the Flipside
- Earlier in 2022, India levied a 30% tax on income from crypto assets, along with 1% TDS on payment of virtual assets worth more than 10,000 INR in a year, and taxation of such gifts in the hands of recipients. If finalized, the additional GST will make crypto one of the most heavily taxed asset classes in India.
Why You Should Care
India has become an important crypto market, dominating the global crypto adoption index, ranking in the top 10 among 154 countries alongside huge markets like the U.S.. Considering this, the Indian government is becoming more proactive in clarifying its definitions around crypto.
Read more about India’s crypto tax system:
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