The cryptocurrency industry has been chaotic in the world’s second largest country by population, India. For the past almost two years, the Indian government attempted to regulate cryptocurrency exchanges and cryptocurrency projects, and pushed a negative agenda on the industry. The interest in cryptocurrencies and Bitcoin has been increasing drastically in the country, ever since the country’s currency reform. Local cryptocurrency exchanges experienced huge growths in users, users’ interest and in trading volume. Of course, this didn’t go unnoticed by the Indian government and they were quick to impose some regulations.
India’s central bank called cryptocurrency investments illegal and condemned Bitcoin’s use case. That didn’t scare anyone initially and the industry continued to evolve as they will. Later, the Indian authorities investigated cryptocurrency exchanges and froze some exchange bank accounts. All of these factors, plus the government’s discouraging opinion on Bitcoin’s legal matter and overall use case, raised FUD or fear, uncertainty and doubt throughout the Indian blockchain community.
The future was uncertain and some people felt forced to sell their cryptocurrencies to hedge the losses, thinking that a cryptocurrency ban is coming fast. We last wrote about it few months ago and now a glimmer of hope is on the horizon for the Indian community and investors. If you want to read more about what was happening in India, click here.
India: The Cryptocurrency Dilema
It seems that, after months of imposing a negative narrative on cryptocurrencies, the Indian government may soon impose a GST tax on cryptocurrency trading. It is reported by Bloomberg, that the GST tax or goods and services tax will be 18%, and it will include digital currency trades, despite the fact that the Indian Reserve Bank has recently banned the banks’ involvement and dealings with cryptocurrency exchange platforms and tokens. The proposed GST tax states that all trades, sales and purchases of cryptocurrency tokens are subjected to taxes, because of their services nature.
The digital assets will be classified as intangible goods and more regulations will be proposed for fighting illegal cryptocurrency activities. Cryptocurrency transactions will be valued in Indian rupees or foreign currency equivalents. Transactions that use cryptocurrencies, made with the “supply, transfer, storage and accounting” reasoning, will be considered services, as will cryptocurrency mining. Also, cryptocurrency transactions that involve international parties, will be liable for integrated goods and services tax or IGST, and will be counted as import and export of goods.
On top of that, exchanges will have to pay a GST tax on commissions and foreign exchanges will be able to apply for IGST. The proposal will be considered by the Central Board of Indirect Taxes and Custom and after that it must be approved by the Indian Council of Goods and Service Tax so it can be finalized and imposed. There is currently no information on when the new taxes will be imposed, but it could be as soon as the beginning of July.
Is this good news for Indian cryptocurrency traders?
Indian tax authorities have been very active in the recent months, in their efforts to pursue and punish tax evasion, especially when they found out that more than 3.5$ billion in cryptocurrency transactions were made in the last year and a half. More than 100,000 cryptocurrency traders have received a notice to pay their taxes on crypto in February. And no wonder, the rise of cryptocurrencies was a wakeup call for a lot of countries and corporations.
It is reported that cryptocurrency trading exchanges in India have returned more than 5.5$ million in tax gains from the beginning of 2018. Labeling cryptocurrencies as goods and services will make things simpler and taxes easier. Also it means that the Indian government is softening up on cryptocurrencies. This could be early signals for cryptocurrency adoption in India and should resolve some of the FUD that community was feeling.
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