India eyes 18% tax on cryptocurrency trading: report
The situation for cryptocurrency traders and investors has become slightly less rosy in India, following reports that these digital assets could soon be classed as intangible assets. According to a Bloomberg Quint report, an 18% tax is being examined on all cryptocurrency trading by the Central Board of Indirect Taxes and Customs.
There are considerable implications for such a move, which would effectively mean that crypto traders would be taxed and that cryptocurrency miners would effectively be losing 18% of their income. The tax would be applied retrospectively from July 1, 2017, sources familiar with the matter told the news outlet.
This 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 (GST) applied. The value of the cryptocurrency would be based on the Indian Rupee transaction value.
This new development would make India on a comparable level to U.S. for taxes on cryptocurrencies. In the United States, cryptocurrencies are classified as property, much like real estate. The actual buying and selling of cryptocurrencies like BTC is not taxable, but if the virtual coins are sold with a profit, then that profit is liable to capital gains tax.
In India, cryptocurrency mining is also deemed as a service supply with the coins mined also classified as property. Additionally, if the rewards exceed $30,000, the miner will have to register under GST. Mining rewards are currently at the $100,000 mark, but these also depend on market value, according to reports.
There has been a considerable legal crackdown on cryptocurrencies in India in recent months. This has been challenged by Ahmedabad-based exchange CoinRecoil, which argued that the Indian constitution provides for citizens to engage in any occupation, trade or business. This legal motion highlights the fact that the Reserve Bank of India (RBI) has not come up with sufficiently strong for the cryptocurrency crackdown and is required by law to justify the ban.
It’s worth noting that the RBI is not banning cryptocurrencies like BTC, but has decided that banks and entities under its control would be prohibited from doing business with any person or entity involved with cryptocurrencies. The RBI had issued a directive for banks to close existing accounts by July 2018 and led to statements clarifying that the legality of cryptocurrencies would not be affected.
It is also being reported that startups in the cryptocurrency sector are leaving India to set up shop in countries such as Singapore, Japan and more recently Estonia. The latter is being touted as a crypto-friendly country with several hundred blockchain and crypto startups already well established.
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