India’s Goods and Service Tax (GST) Council is likely to introduce a 28% GST on all crypto transactions. This news was a big shock to crypto enthusiasts in the country. This GST could supposedly be levied on all activities and services related to cryptocurrency.
The government of India believes that virtual digital assets should be treated equally with lotteries, casinos, betting and even racecourses.
The services that additionally attracted the 28% GST along with the fixed 30% tax on profits include crypto mining and sale and purchase of the digital asset.
The formal approval has not yet been obtained, it will be discussed with the GST council before the next meeting. The date for the next GST meeting has yet to be set and announced.
Legal position of crypto remains obscure in India
The sale and purchase of cryptocurrencies on various exchanges will be strictly controlled. The GST Council oversees all these activities that take place on centralized and decentralized exchange platforms.
Based on these inferences, the GST Council will make its decision on whether or not to levy GST.
The Treasury Department has already imposed a 30% tax on profits made from the transfer of crypto assets and non-fungible tokens (NFTs).
Reports that India might consider imposing a GST have been circulating since the introduction of the 30% tax and 1% TDS.
No deduction is allowed except for the purchase cost along with no loss in trades not to be allowed to make up for losses incurred by traders and investors.
Despite the draconian tax system, India is still far behind in providing clarity on Bitcoin’s legal status.
There is still no law regulating digital assets. Many believed that the tax proposal may have legalized crypto trading, but there is a half-truth in that.
Finance Minister Nirmala Sitharaman stated that taxation does not equate to legalization. That case remains pending.
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Shift to Decentralized Crypto Exchanges?
India’s regressive tax policy has dampened the spirit of crypto traders, investors and even enthusiasts.
Investors have now started to find other ways to minimize tax, most have moved to long-term thinking.
Many people have started holding the assets for a longer period of time, which has immediately taken its toll on day-to-day trading. As a result, the trading volume has fallen sharply, according to this report.
Trading on decentralized platforms remains an idea investors are considering.
This has harmed centralized platforms as these platforms are required to collect Know Your Customer (KYC) data. The advantage that decentralized exchanges provide does not include KYC details and also facilitates Peer-To-Peer or P2P transactions.
However, this does not matter much because the moment crypto is converted to fiat currency, it is taxed.
Some investors have even considered entering the gaming and metaverse space, but India might consider taxing DeFi income as well, taking metaverse into account.
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Bitcoin traded for $31,000 | Source: BTCUSD on TradingView