According to Bloomberg Quint, India may be considering the possibility of levying GST on cryptocurrency trading. This is a proposal that is being forwarded despite there being no clear-cut statement from the government, confirming their stance on the legality of the market.
The Indian government is going to levy 18% GST on all cryptocurrency trades, according to people who have spoken to Bloomberg and have chosen to stay anonymous, and that the proposal was with the Central Board of Indirect Taxes and Customs. They added, that the cryptocurrency market is going to be put into the bracket of intangible goods among other products like software and other products that have no actual physical presence.
The Government of India is very conflicted about the cryptocurrency market because of the obvious risks that it poses to economies and investors in general. The country, unanimously, has made no decision on whether or not to legalise or ban the use of it, but only a month ago, at the beginning of April, The Reserve Bank of India issued a circular demanding all businesses registered with them to wind down cryptocurrency related activities.
This came as a large shock to the Indian crypto community because they feel that this is the first step towards a full-fledged ban. The announcement sent shock waves through the community and many people represented their views in forms of petitions and discussions. Recently, many news reports have come forward saying that cryptocurrency exchanges in the country have taken to legally appeal the circular released by the RBI. There are in current logs, two court cases that deal with this particular circular issue, one filed at the Delhi High Court and the other with the Supreme Court of India.
There is a lot of chatter about the fact that two of the largest exchanges in the country have made no statement on the matter and have not been very proactive in the fight against the circular. They instead have said that the fact that such a circular is doing the rounds is unfortunate and that they are looking for ways to work with the circular instead of against it.
The Proposal According to the proposal that is currently being considered by the Central Board of Indirect Taxes and Customs, cryptocurrencies must be treated with the following point in mind;
- Purchase or sale of cryptocurrencies should be considered as a supply of goods, and those facilitating transactions like supply, transfer, storage, accounting, among others, will be treated as services.
- Value of a cryptocurrency may be determined based on the transaction value in rupees or the equivalent of any freely convertible foreign currency.
- If buyers and sellers are in India, the transaction would be treated as a supply of software and the buyer’s location will be the place of supply.
- For transfer and sale, the location of the registered person will be the place of supply. However, for sale to non-registered persons, the location of the supplier would be considered as the place of supply.
- Transactions beyond the Indian territory will be liable for integrated GST and would be considered an import or export of goods. IGST will be levied on cross-border supplies.
After the Central Board of Indirect Taxes and Customs is done with consideration, the proposal is going to be presented to the GST Council of India in the case that they make a decision in favour of the proposal. Under this proposal, mining is also now a taxable activity. Apparently, there is also a possibility that the government will be levying tax in retrospect from the day that GST was rolled out for India; 1st of June 2017.
Cryptocurrency Regulation in the Country
The Government of India has been very fluid in its stance when it comes to cryptocurrencies. They have neither legalised it nor banned it completely, however, time and time again regulatory bodies and organisations within the country have issued warnings and pointed to the risks of dealing in them.
The troublesome thing about this anonymous announcement is that it further adds to the confusion and speculation that surrounds the market and community in the country. The RBI circular deadline is fast approaching and the cryptocurrency community in India is not sure what this actually means in terms of on ground changes in the country, this new announcement of the possibility of the government levying taxes only further proves that the country has none and feels no obligation to provide a concrete stance on the market.
Having said that, if and when there is a formal announcement of this new cryptocurrency taxation bill, it will kick up the debate on whether the market is legal in India or not. It will rake up the debate all over again and maybe this time, the government will make its stance clearer.
Either way, all eyes are on India now, as the RBI deadline approaches faster and faster and as the court cases on the matter pick up speed plus now the added curiosity around this mysterious proposal that is making the rounds in the finance departments in the Government of India.
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