India May Impose 18% Tax on Cryptocurrency Trading - Report
The tax could be applied retroactively from July 1, 2017 and impact all industry participants, from miners to wallets and exchanges
India is considering imposing an 18% Goods and Service tax (GST) on cryptocurrency trading, Bloomberg reported on Wednesday, citing anonymous sources familiar with the government plans.
Under the proposal, purchases or sales of digital currencies would be viewed as supply of intangible goods, and those facilitating transactions through transfer, storage, accounting and supply would be treated as services. This means that all participants in crypto trading, like wallets and exchanges, will pay taxes.
The proposal also includes levying a tax on cryptocurrency miners' block rewards and requiring these miners to register with the government if the rewards they reap exceed INR 2 million (USD 29 300) in value.
The tax would also apply on cryptocurrency trades on an international level since these would be classified as imports and exports with an Integrated Goods and Services Tax (IGST) applied. The value of the cryptocurrency would be based on the value in Indian rupee or freely convertible foreign currency, the insiders further revealed.
Policy May Come into Force Retroactively
The legislative change, being considered by India’s Central Board of Indirect Taxes and Customs, will be tabled before the GST Council once finalized. While no decision has been made yet, the Bloomberg sources indicated that the tax could be applied retroactively from July 1, 2017 — the day the country’s new indirect tax regime was implemented. This means that traders and exchanges will have to pay for actions they took before the new policy — an aspect likely to be challenged in courts.
Indian crypto businesses already turned to the courts after in April the Reserve Bank of India (RBI) prohibited regulated financial institutions from providing services to cryptocurrency exchanges. India's Supreme Court will hear the appeal against that ban on July 20.
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. Despite the central bank’s efforts to reduce the ability of businesses and citizens to interact with cryptocurrencies, India has so far refrained from issuing regulations on the market.
While India is yet to take a firm call on the cryptocurrencies’ legal status, the considered move is not the first targeting taxation of the industry. In February, the country’s tax department issued notices to around 100 000 traders and investors who have not included their cryptocurrency investment on income tax returns. The move was made after surveys of exchanges found that USD 3.5 billion in cryptocurrency transactions may have been performed by citizens over the previous 17 months.
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