Indian tax authority is reportedly mulling plans to impose a new 18 percent Goods and Services Tax (GST) on the trading of cryptocurrencies.
Bloomberg reported this morning that the tax would be part of a proposal being considered by Central Board of Indirect Taxes and Customs to classify cryptocurrencies as intangible or commodities, rather than currencies or securities.
This should clear the air on the status of such digital assets and how they will be taxed, though its use in illegal activities would have to be dealt with under other laws.
The Indian government has issued repeated warnings against digital currency investments, saying these were like “Ponzi schemes” that offer unusually high returns to early investors.
Taxation has always been an important angle to consider when formulating a regulatory framework for the crypto sector in India. However, others in the government pointed out that virtual coins are not a legal tender in the country and are of a highly speculative nature.
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Nevertheless, the proposed rules are not enough to establish a regulatory framework that covers cryptocurrencies in its several areas, including investor protections and how they have sometimes been used as a medium for money-laundering and fraud schemes. But it remains a positive step since they help regulate trade in cryptocurrency while tapping into a previously untaxed source to generate income for the nation.
India’s finance minister recently appointed a dedicated panel that was tasked with examining the existing framework of cryptocurrencies and to come up with measures for dealing with the digital assets.
The panel has yet to decide on how the government can consider bringing in legislation to stop crypto transactions and which body will have regulatory oversight over the market.
However, another government committee has recommended that India’s authorities take immediate steps to shut down the country’s cryptocurrency exchanges, saying that the use of Bitcoin and other such coins could result in a breach of anti-money laundering provisions.
Participants in India’s bitcoin market expressed their disappointment as they were hoping for some form of legislation to regulate the activities of local exchanges.