India is weighing up whether to impose goods and service tax (GST) on cryptocurrency trades, a report suggests.
According to Bloomberg, people close to the matter said that the government might levy GST of 18 percent on digital currency trades, despite the Reserve Bank of India’s recent ban restricting banks from dealing with cryptocurrencies or trading platforms.
The anonymous sources said that the Central Board of Indirect Taxes and Custom is currently considering the proposal, which will also be put before the Goods and Service Tax Council once it is finalized.
The proposal outlines that purchases and sales of cryptocurrencies are subject to taxes, as they are considered a supply of goods, the report suggests.
The value of a cryptocurrency transaction would be based on the value in rupees or the equivalent in freely convertible foreign currency. Transactions involving parties outside India would be liable for integrated GST (IGST), and would be considered an import or export of goods.
Meanwhile, cryptocurrency transactions made for reasons such as “supply, transfer, storage and accounting” would be considered services, as would crypto mining, Bloomberg says. However, cryptocurrency exchanges and digital wallets would have to pay GST under the proposal, while foreign exchanges would be liable for IGST.
The sources further said that, although no decision has been made so far, the government could levy the new tax regime as soon as July 1. It may, though, have to wait as the government decides if and how to regulate the technology.
India’s tax department has in recent months been cracking down on tax avoidance by crypto traders. It issued notices to around 100,000 traders and investors in February after surveys of exchanges found that $3.5 billion in cryptocurrency transactions may have been performed by citizens over the previous 17 months.
Bitcoin and rupees image via Shutterstock