Current Indian laws may impose a 2% tax on the purchase of cryptocurrencies from overseas exchanges that serve the Indian market.
According to local sources, the Indian government’s 2% “offset tax” can be extended to crypto assets purchased on offshore exchanges.
As reported by the Economic Times on June 22, analysts inferred that existing laws may require a 2% tax on the settlement price of cryptocurrencies purchased by foreign cryptocurrency exchanges operating in the market.
The government imposed a 6% tariff on payments for e-commerce supplies and services of non-resident companies that do not have a permanent establishment in India in 2016; however, the compensation rate will be updated in mid-2020.
Now called “Google Tax”, the updated legislation imposes a 2% tax on services provided by offshore e-commerce operators operating in India, and tax experts infer that the fee may also apply to overseas cryptocurrencies serving India Exchange. customer.
“The way the new equalisation levy is worded and defined, it appears that it will also be applicable on cryptocurrency bought from an exchange not based in India,” Girish Vanvari, founder of tax advisory firm Transaction Square, told Economic Times. He added:
“The levy is on the selling price and companies may be required to add this to the cost of the crypto assets.”
Amit Maheshwari, tax partner at tax consulting firm AKM Global, argued it would be difficult for India’s government to impose a 2% levy without first establishing a broader regulatory apparatus addressing crypto assets, stating:
“In the absence of any guidelines on the treatment of crypto assets, there is ambiguity in how these would be treated under the tax laws and FEMA (Foreign Exchange Management Act).”
The regulatory status of crypto assets has been a controversial topic for a long time. Cointelegraph reported on June 16 that the Indian government is reviewing whether to introduce a bill to completely ban cryptocurrencies. Some officials believe that digital assets should be classified as Alternative assets class.
The Reserve Bank of India (RBI) seems to have maintained its anti-cryptocurrency stance. The Governor of the Reserve Bank of India Shaktikanta Das claimed that the central bank has “significant concerns” about the cryptocurrency it communicates to the government.
In March 2020, the Supreme Court of India revoked the Reserve Bank of India’s two-year ban on local financial companies that provide banking services to companies operating in crypto assets.