Existing law in India could mandate a 2% levy on cryptocurrency purchases from offshore exchanges
According to Economic Times, India Government’s 2% equalization levy could be extended to crypto-assets purchased from off-shore exchanges.
India considers the 2% levy is applicable for cryptocurrency assets bought from foreign exchanges
Analysts are deducing that the existing law may require an additional 2% tax on the settlement price of cryptocurrencies purchased from overseas crypto exchanges operating in the Indian market.
The balanced tax rate was first introduced by the government in 2016, imposing a 6% tax rate on payments for e-commerce supplies and services to non-resident companies without a permanent establishment in India.
However, the balanced tax rate was updated in mid-2020. Now known as the “Google Tax,” the updated law imposed a 2% tax on services provided by e-commerce operators foreign companies doing business in India. In it, tax experts deduced that the tariffs could also apply to foreign-based crypto exchanges that cater to Indian customers.
Girish Vanvari, founder of tax advisory firm Transaction Square
“The way the new equalization levy is worded and defined, it appears that it will also be applicable on cryptocurrency bought from an exchange not based in India,” said Girish Vanvari, founder of tax advisory firm Transaction Square, added:
“The levy is on the selling price and companies may be required to add this to the cost of the crypto assets.”
However, it would be difficult for the Indian government to impose a 2% tax without establishing a broader regulatory apparatus to deal with crypto assets. The regulatory status of crypto assets has long been a matter of controversy. Not long ago, the Indian government was considering whether to introduce a bill to ban cryptocurrencies entirely, with some officials arguing digital assets should be classified as an alternate asset class.
About six months ago, as AZCoin News reported, the central government of India is currently considering a proposed Goods and Services (GST) tax on Bitcoin, estimated to amount to Rupees 40,000 ($ 5.45 billion) annually.
The Reserve Bank of India (RBI), appears to have maintained its anti-crypto stance, with RBI Governor Shaktikanta Das stating the central bank has major concerns regarding cryptocurrency that it has conveyed to the government.
In March 2020, India’s Supreme Court repealed the RBI’s two-year prohibition on local financial firms providing banking services to businesses operating with crypto assets.
Read more:
- The Indian Government May Be Regulating Crypto As An Asset Class Under The Purview Of The Securities And Exchange Board Of India (SEBI)
- Bitcoin May Finally Be Regulated As An Asset Class In India After Three Years Of Legal Battles And Countless Committees