The Indian government is considering a tax on bitcoin transactions that will add $ 1 billion a year, which according to some industry participants is a sign of the government’s growing comfort with cryptocurrencies.
A proposal put forward by the Central Economic Intelligence Bureau (CEIB) to the Central Council for Indirect Taxes and Customs (CBIC) would categorize bitcoin as an intangible asset and an 18% tax on goods and services (GST) imposed on bitcoin transactions, according to The Times of India. The proposal also proposes that bitcoin be used as current assets and that GST be levied on margins made in trading.
An 18% VAT on the estimated annual value of all bitcoin transactions of INR 40,000 (approximately $ 5.5 billion) would yield INR 7,200 or $ 1 billion in tax revenue.
Prominent crypto exchanges in India say that a potential tax structure would be good for the ecosystem. “The government’s tax structure is a sign of better understanding of this new asset class and we are hopeful that it will lead to more positive news going forward,” said Sumit Gupta, CEO of CoinDCX, a crypto exchange in Mumbai, in a WhatsApp chat said. “As for the tax rate and structure, we’ll wait and see, but it’s definitely a positive sign.”
Nischal Shetty, CEO of Binance’s Wance exchange, possesses similar sentiments, adding that clarity on the tax front could pave the way for increased Indian institutional participation in the bitcoin market. WazirX and the exchange of Bitbns in Bangalore said they are already paying GST for trading fees. “The GST amount paid has grown by 500% over the past few months,” Gaurav Dahake, founder and CEO of Bangalore-based exchange Bitbns, told CoinDesk.
Trading volumes on exchanges offered by clients in India have been increasing since the Supreme Court annulled the Reserve Bank of India (central bank)’s banking ban on cryptocurrencies in March. Although the Indian government does not consider the legal tender of bitcoin, it is simply not illegal or forbidden to own cryptocurrencies.