Indian Goods and Services Tax (GST) Board is likely to introduce a 28% GST on all crypto transactions. This news came as a major shock to crypto enthusiasts nationwide. This GST could supposedly be levied on all cryptocurrency-related activities and services.
The Indian government is of the view that virtual digital assets should be treated the same as lotteries, casinos, betting and even racetracks.
Services that have attracted 28% GST on top of the 30% flat tax on winnings include crypto mining and the sale and purchase of the digital asset.
Formal approval has not yet arrived, it will be discussed with the GST council before the next meeting. The date of the next TSG meeting has not yet been finalized and announced.
The legal position of crypto continues to be murky in India
The sale and purchase of cryptocurrencies on various exchanges should be closely monitored. The GST Council will keep an eye on all such activity occurring on centralized and decentralized exchanges.
Based on these deductions, the GST Board will make its decision whether or not to levy GST.
The Ministry of Finance has already imposed a 30% tax on profits derived from the transfer of crypto assets and non-fungible tokens (NFTs).
Reports that India might consider imposing a GST have been circulating since the 30% tax and 1% TDS were decided.
No deductions were allowed except for the cost of acquisition and no loss in transactions not to be allowed to offset losses incurred by traders and investors.
Despite the draconian tax system, India still lags far behind in terms of clarity regarding Bitcoin’s legal status.
There is still no law in place that regulates digital assets. Many thought the tax proposal could have legalized crypto trading, however, there is a half-truth to this.
Finance Minister Nirmala Sitharaman said taxing does not mean legalizing. This question remains under study.
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Switch to decentralized crypto exchanges?
India’s regressive tax policy has chilled the minds of crypto traders, investors and even enthusiasts.
Investors have now started to find other ways to minimize their taxation, with most opting for a long-term view.
Many people started to hold the assets longer, which directly weighed on day-to-day trading. This led to a considerable drop in trading volume, according to this report.
Trading on decentralized platforms remains an idea investors are considering.
This has hurt centralized platforms as these platforms are required to collect Know Your Customer (KYC) details. The advantage provided by decentralized exchanges does not include any KYC details and also facilitates Peer-To-Peer or P2P transactions.
However, it doesn’t make much difference because the moment the crypto is converted into fiat currency, it will be taxed.
Some investors have even considered entering the gaming and metaverse space, however, India might also consider taxing DeFi earnings, which will take the metaverse into account.
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