On Monday, sources reported that regulators in India are drafting a complete indirect tax scheme for crypto assets. This scheme aims to prevent revenue loss to the exchequer due to cryptocurrency’s volatile nature.
Sources familiar with the matter have revealed that the finance ministry, headed by Nirmala Sitharam, plans to clarify the characteristics of cryptocurrencies, their usage, and how they fit into the existing legal system.
According to sources, the GST (Goods and Services Tax) rate for cryptocurrencies will be set once the ministry determines its legal status. This rate could fall anywhere from 18% to 28%.
The Indian Government has pushed several initiatives related to cryptocurrencies. Sitharaman proposed a 30% tax deduction and an additional 1% tax deductible at source (TDS) on all cryptocurrency transactions beginning in FY23 in her budget speech on February 1, 2022. The law came into effect on July 1.
Now, the panel is looking to expand the tax net in order to better monitor transactions involving digital assets, including those that take place in virtual environments. Before that, however, the regulators are looking to review whether to classify cryptocurrencies as goods or commodities.
One representative said that regulators need “a better understanding of how cryptocurrencies fit into our legal system” before deciding on a GST rate.
The government is also considering how to classify specific transactions, such as mining or ‘airdropped crypto tokens,’ although for now, GST will only apply to the margin or service fees and not the total value of the asset.
The Reserve Bank of India has previously warned that cryptocurrency investments pose a threat to India’s economy, sparking intense debates about the legitimacy of such investments.
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Source: Cryptocurrency - investing.com
