• Wed. Jun 22nd, 2022

India to impose 28% tax on digital currency transactions: report

ByHazel R. Lang

May 13, 2022

India is set to impose a 28% goods and services tax (GST) on digital currency transactions, sources familiar with the matter have revealed. The move comes barely a month since the country imposed a 30% tax on personal income from trading in digital assets.

The Goods and Services Tax Council of India is said to be at an advanced stage with the new tax, local sources told CNBC-TV18. The tax proposal is currently with the Council’s Laws Committee for review. And while the date for the next board meeting has yet to be decided, the basic processes that pave the way for the proposal have already begun, the sources revealed.

The GST Council has determined that all digital asset exchanges in India act as intermediaries, which offer services, and as such they should be included in the GST slab like all other similar services. In India, GST tax is an indirect tax paid on all goods and services. If the proposed tax regime is imposed, it will put digital asset trading on a par with gambling, which also attracts a 28% GST tax, providing insight into how the government collects digital currency investments.

Already, Indian digital asset traders pay 30% income tax. This tax came into effect on April 1 after being included in the 2022-23 budget.

Some experts believe that the proposed tax will be a nail in the coffin of digital asset trading in India, which is already subject to immense taxation.

Ankur Gupta, a practice leader in charge of indirect taxes at accounting firm SW India, told CNBC-TV18 that “…the imposition of 28% GST and 30% direct tax, would surely bleed the majority of the profits people have earned plus a period of time when those cryptos materialize.

Others, such as PricewaterhouseCoopers partner Pratik Jain, have criticized the lack of consultation with industry stakeholders before making such an impactful decision. He believes that key stakeholders, including digital asset exchanges and industry bodies, should have been involved in the deliberations before the decision was made.

The digital asset industry initially welcomed taxation. After all, a few months before, the government had announced that it would ban digital assets altogether, and so taxation seemed to be the government signaling that it legally recognized the sector. However, over time, Indian traders have realized that these taxes can be just as catastrophic, as BlockReview founder Kumaraguru Ramanujam recently told CoinGeek.

“People were mostly relieved because they probably felt good thinking the government hadn’t banned digital currencies outright, but the reality is now sinking in for traders as the tax percentage reported on all assets Virtual Digital Assets (VDA) is pretty strict,” he said. .

As one financial advisor summed it up, “Crypto is slowly dying in India.”

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