Anonymous sources in India are suggesting that the crypto-sceptical nation may be at a turning point with the possibility of a goods and service tax (GST) on cryptocurrency trading.
Bloomberg reported that the government might be applying an 18% GST as there is a chance that the Indian government could classify cryptocurrencies as a supply of “intangible goods” and, therefore, making them subject to the tax levy with separate laws to be introduced that address the use of cryptocurrencies for illicit activities.
The proposal is reportedly being considered by Central Board of Indirect Taxes and Customs which, according to the anonymous source, will be presented before the GST council one it is finalized.
The source makes the case that the income tax department had realized critical nature of taxing digital currencies sooner than later. This is due to the digital asset markets growth which can build up significant liabilities, making recovery difficult in the future.
The news is oddly contrasting with previous reports that have emerged from India, with April a particularly turbulent period. Earlier in the month, Bitcoin News reported that the Reserve Bank of India (RBI) was prohibiting all banks and financial entities from “facilitating transactions involving cryptocurrencies”, a move that sparked a petition that received 17,000 signatures, backed mostly by younger users who were employed in the blockchain industry.
Bitcoin bull Tim Draper chimed in during the April maelstrom, suggesting that the Indian government’s prohibitions against cryptocurrency would be “stifling innovation”. With that said, in May, Bitcoin News reported that despite the clampdowns, India has a wealth of crypto-savvy software developers that are more than capable of pushing innovation in the country. A study made by Indian HR company, Belong, brought to light the 5,000-strong developers who could drive the industry forward for India.
Efforts to create the taxation and regulatory frameworks were underway in late March when the largest tax filing platform began making inroads toward building appropriate regulations; the attempt to clarify cryptocurrency laws came shortly after exchanges and cryptocurrency traders came under significant pressures from the RBI and other banks.
The decision to apply the taxation laws on cryptocurrencies hinges largely on the outcomes of the ongoing regulatory efforts being made by the department of economic affairs. Indian crypto exchanges believe a complete ban would be “futile” as the RBI not allowing for banks to transact with them would force buyers and sellers to other means of settling trades. This could contribute to illegal activities and, therefore, cause the ban to come down even harder on the industry.
Treating cryptocurrencies as goods and services may allow for the undeniably lucrative market to stay in force in India. Classifying them as currencies, however, would require changes in the law.
Should a positive consensus be reached through the appropriate classification, taxation and consequently, regulation standards, then India could soon follow in the footsteps of other countries embracing the technology.
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