The Finance Ministry of Indian Government has proposed to introduce GST @ 18% on Bitcoin trading. Central Economic Intelligence Bureau (CEIB) wing of the Ministry says they can generate US$ 987 Million annually through GST.
CEIB – Indian Finance Ministry’s wing – had proposed tax levy under the head “Good & Services Tax (GST)” in respect of cryptocurrency.
CEIB had drafted a bill in which it had proposed to impose a tax @ 18% on trade of Bitcoin. The proposed law had been presented before the Indian Rajya Sabha (i.e. Parliament/Upper House) for approval.
It was confirmed by Indian local media outlets that the law had still not been passed. As per the Indian Constitution, any new law would be presented to Parliament. The parliamentarians then discuss and debate upon the law and decide whether or not the law should be passed. For the time being the law had been under discussion.
Meanwhile, CEIB informed that if the proposed GST had been levied on Bitcoin trade then the Government would be able to generate huge funds. It told that 7,200 Crores of Indian Rupees (equivalent to US$987 Million) would be collected annually under the GST.
Earlier a thorough study regarding Bitcoin and other cryptocurrency was conducted by Indian Tax Authorities. The study revealed that Bitcoin can be treated as tangible securities under the relevant Indian Law. Therefore, the Government could impose tax upon Bitcoin trading under GST head, suggested Tax Authorities.
On the basis of this study, Indian Finance Minister gave its approval to CEIB to prepare a draft law and seek its approval.
It was later confirmed also that in 2018, Indian Government had proposed to impose similar levy on cryptocurrency transactions. However, it ended up putting a ban on crypto transactions which was then contested before Indian High Court up till Supreme Court. It was only in April 2020 that the ban was lifted under the specific directions of Indian Supreme Court.
When the news of the imposition of 18% GST made its way to Indian crypto exchanges, they showed their disagreement on it.
VarunSethi, who is a well-known blockchain lawyer in India, said that imposition of tax upon Bitcoin trading was inevitable. He explained that the entire Indian crypto industry had known beforehand that sooner or later this was going to happen. Sethi also told that the imposition of GST had twofold effects.
Sethi explained firstly that Indian crypto industry was in its initial phase of adopting digitalization, so the decision of imposing GST on Bitcoin trading was sooner than expected. Secondly, he explained that now Bitcoin trading had been provided with legal cover and this was more important than anything else.
Sethi recollected the time when the Government had suspended crypto trading entirely in the country. He said that there was no need to impose an exorbitant levy but somehow the initiative would be rather welcome. A large majority from Indian crypto industry would gladly appreciate the levy, he suggested.
However, there had been apparent uncertainty surrounding Indian crypto industry and still the law had not been passed.