India might impose a Goods and Services Tax (GST) on cryptocurrency trading, Bloomberg reports, citing people familiar with the matter. Even though no legal status has been established in relation to cryptocurrencies, the government is seriously thinking about an 18% GST, the anonymous sources revealed. India’s Central Board of Indirect Taxes and Customs will present the proposal to the GST Council once the draft is completed.
Digital currencies like Bitcoin and Ethereum might be classified as intangible goods, suggesting that they’ll have a status similar to software products. The sources said that other laws would be considered in the case when cryptocurrencies are used in illegal activities.
India hasn’t explicitly forbidden cryptocurrencies, but the Reserve Bank of India banned local banks from dealing with crypto-oriented companies, thus continuing the government’s negative stance on the phenomenon. In response, several crypto-oriented companies have joined together to file motions with the Delhi High Court.
If the tax proposal is indeed implemented, it might suggest that cryptocurrencies will enter the legal area.
The current proposal of GST on crypto trading reads the following conditions:
- The trade of digital currencies should be viewed as the supply of goods, and the entities providing transactions such as supply, transfer, accounting, and storage should be considered as services.
- The value of a digital currency might be based on the transaction rate in fiat currencies starting with rupees.
- If the parties involved in a cryptocurrency trade are located in India, the transaction should be considered as a supply of software while the buyer’s location should be treated as the place of supply.
- If one of the parties is outside Indian territory, the transactions will become liable for integrated GST (IGST) and will be viewed as the import or export of goods.
Bitcoin mining will be considered a supply of service as it generates new digital currency units and involves rewards and fees, the sources said. If the value of the mining reward surpassed Rs 20 lakh, retail miners would have to register under GST, the proposal suggests.
Besides miners, cryptocurrency wallets, wallet providers, and cryptocurrency exchanges will also have to register under GST and pay taxes on commissions. If Indians choose to use foreign crypto exchanges, the transactions will be treated as imports of services, and they’ll have to pay IGST.
This article appeared first on Cryptovest
