The Indian government is reportedly set to levy taxes on cryptocurrency trading and gains.
Business Standard reported the news on Wednesday, citing an anonymous senior finance ministry official "privy to the development." The official said both goods and services tax (GST) on the trading of cryptocurrencies and income tax (I-T) on crypto gains would be charged for the current financial year, April 2020 to March 2021.
"Bitcoins will be categorized as financial services attracting 18 percent GST on fee commission collected under this segment. Plus, tax (personal I-T) to be paid on the earnings from this," said the official.
A government circular detailing the taxes is expected to be released soon, according to the official.
Reports that the government will levy GST on crypto trades have been circulating since last December. At the time, the finance ministry's Central Economic Intelligence Bureau (CEIB) recommended to the Central Board of Indirect taxes and Customs (CBIC) that it collect 18% GST from crypto exchanges, CEIB director-general Mitali Madhusmita confirmed to The Block at the time.
Nischal Shetty, CEO of Binance-owned WazirX, at the time, told The Block that the exchange has been voluntarily paying 18% GST on trading fees collected from customers.
Levying a crypto tax, however, reportedly does not mean the Indian government will legalize cryptocurrencies. "Let it be clear that just because income-tax or GST has been charged on the transaction, it does not by itself make the transaction legitimate," a senior finance ministry official told The Hindu Business Line on Wednesday. "Taxability and legality of transactions are independent of each other."
Crypto investment activity in India will reportedly be banned via a new bill, as The Block reported last week. The ban, however, won't be imposed overnight and the government will reportedly give existing investors a three-to-six-month transition period for liquidating their investments.
To be sure, the bill's final text is not yet public. The bill is expected to be introduced in the ongoing budget session of Parliament, which concludes on April 8, with a recess taking between February 15 and March 8.
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