Crypto adoption or abandonment: what will India decide?
The Government Central India has been known to blatantly denigrate cryptocurrencies from the very beginning. Lack of knowledge and information amid a bubble of confusion over Bitcoin, cryptocurrencies directly associated with the black market and illegal activity. As a result, the RBI 2018’s proposed rushed ban on crypto trading has left Indian traders uncertain of the future for more than two years.
While the Supreme Court verdict ruled out the ban in favor traders, as of March 2020, no regulations on cryptocurrency trading were in sight. However, the boom in Indian business activity has since been quite palpable. The pandemic year that wiped out some of the world’s largest economies appears to have finally paved the way for what can only be called the start of mass adoption of digital currencies on private blockchain networks.
The last few years have established several advanced Defi protocols in the market, as well as leading financial and technology experts like Elon Musk (now the richest man in the world), openly expressing their confidence in crypto -coins. As most of the world rallied around a more positive view of cryptocurrencies by the end of 2020, the Indian government took an almost hysterical approach, camouflaged in a string of fancy numbers.
Proposal: 18% GST on cryptocurrency
The Central Economic Intelligence Bureau of India, in communication with the Central Board of Indirect Taxes and Customs, proposed to levy 18% GST on crypto trading . India’s Times reported that the tax would generate INR 7200 crore in revenue per year. The proposal, while shrouded in a blanket of heavy numbers, has created an alarm throughout the crypto community.
As the thirst for legal cryptocurrency regulations drives traders in India, high taxation can lead traders to turn to foreign exchanges and P2P platforms. While crypto trading in India is estimated at INR 40,000 crore per year, heavy taxation may not exactly be the best step forward just to fill the gap in annual income.
Accepted or Abandoned: Asset Subject to Unfair Taxation
On a bittersweet note and at the cost of a massive tax figure, cryptocurrencies would finally have legal recognition in India. Digital assets would be more likely to be treated as an asset class or a commodity like gold, grain, oil, etc. once they are officially taxed. However, it is still a long time before cryptocurrencies are recognized as legal tender – a reliable payment method, as in Japan.
The demand for a set of regulations has always been a priority for traders. . And for a long time it seemed that the Indian government was oblivious to this need. Since the TPS proposal would first require a regulatory framework on cryptocurrency before imposing a tax, India could see a more regulated market.
“A regulatory framework needs to be in place for cryptocurrency before taxation was considered. Once that is in place, the question will be about its tax treatment. The currency is not subject to GST and therefore the full value of the cryptocurrency should not be covered by the tax. Only exchange, or brokerage, fees should be subject to GST, ”said Abhishek Jain, tax associate at EY.
When the need for a regulatory framework is an obvious addition to the proposed tax levy, the need for GST on cryptocurrencies is viewed as completely void by crypto leaders like Nischal Shetty. The CEO of WazirX has expressed concern that the amount is unachievable and that no other country has imposed such a tax percentage.
“This would mean investors have to get an appreciation of 18 % to justify their purchase, ”Shetty said.
The massive tax percentage figure prompted a swift response from exchanges, highlighting the amount already paid in GST on fees and commissions. Moreover, even in the category of an asset class like gold itself with 3% GST, 18% is much higher than standard rates. Being traded and treated as financial assets, Bitcoin and other cryptocurrencies should be taxed like any other monetary asset.
Undeniably, cryptocurrencies receive any form of recognition legal in India will already be a historic event. However, nothing can be said for sure. The lack of follow-up has left some uncertainty in the air. One thing is certain: the cryptocurrency boycott is something a nation like India cannot afford.
With Bitcoin trending almost daily towards a new all-time high, the market crypto world broke the intangible mark of $ 1 trillion just over a week ago. Where Bitcoin’s parabolic surge in 2017 followed by its meteoric fall is still etched in history, the market at the time was ruled by a FOMO bubble.
Prominent advancement and adoption Cryptocurrencies are leading the current bull this time around with the main Paypal payment system listing cryptocurrencies on its platform used around the world. As the rest of the world’s major economies are finally enjoying the benefits of cryptocurrencies, can we really expect India to remain oblivious?