Indian tax authorities are planning to put crypto activities in the category of services that attract the highest Goods and Services Tax (GST). According to media reports, the GST council has constituted a committee to study and map different crypto activities such as trading, staking, and wallets for tax purposes. As of now, crypto exchanges are levied 18% GST and are considered intermediaries offering financial services.
In line with the government’s policy
The GST Council is planning to club crypto activities with speculative activities such as gambling, lottery, betting, and horse racing, the media reports said. The GST committee instituted to study the crypto sector activities for taxation is supposed to present its report in the next GST council meeting, whose date is not finalized yet.
The GST Council mulling a higher rate is in line with the Indian government’s tough attitude towards the crypto industry.
Trail of anti-crypto moves
If the GST is raised from the existing 18% to 28%, it will be another major blow to the Indian crypto sector. Through the annual budget, the Indian government has introduced a new taxation policy for the crypto industry that levies a 30% capital gains tax and 1% TDS on the transfer of digital assets.
This move has eroded the trading volume on major crypto exchanges by up to 98 percent compared to the corresponding period in the previous year.
The Indian crypto market is also facing the wrath of regulators who have completely stopped instant retail payments services to crypto businesses including the exchanges. It has led major exchanges such as Coinbase, WazirX, CoinSwitch Kuber, and CoinDCX to disable the deposit option in Indian rupees.
Besides 30% income tax on crypto profits, 1% TDS, and 28% GST in the offing, crypto investors also have to factor in exchange fees, and some cess and surcharges. Taking all of them together, crypto investments become prohibitively expensive.
On top of this, a lack of regulations that offers a legal and safe environment for investors makes crypto investments all the more unattractive.
India’s loss is UAE’s gain
As a result of all these anti-cryptocurrency moves by the Indian government, crypto firms and their key officials are leaving India for countries where the business environment is more encouraging.
The UAE which has recently enacted a crypto regulation has seen many A-list crypto exchanges including Binance receiving licenses. Even Indian firms and executives are said to be setting shop in Abu Dhabi and Dubai.