The Indian government is considering a bitcoin transaction tax that would bring in annual sales of $ 1 billion. Some industry stakeholders said this was a sign of the government’s growing comfort in cryptocurrencies.
A proposal from the Central Economic Intelligence Bureau (CEIB) to the Central Board of Indirect Taxes & Customs (CBIC) would classify Bitcoin as an intangible asset and impose an 18% tax on goods and services (GST) on Bitcoin transactions in The Times of India. The proposal also suggests treating Bitcoin as a short-term asset and calculating GST for the margins made in trading.
A GST of 18% on the estimated annual value of all Bitcoin transactions of INR 40,000 billion (about $ 5.5 billion) would result in tax revenues of INR 7,200 billion, or $ 1 billion.
Prominent crypto exchanges based in India say a potential tax structure would bode well for the ecosystem. “The government’s thinking about a tax structure is a sign of a better understanding of this novel asset class, and we hope this will lead to more positive news going forward,” said Sumit Gupta, CEO of Mumbai-based crypto exchange CoinDCX, in one WhatsApp chat. “In terms of tax rate and structure, we’ll wait and see, but this is definitely a positive sign.”
Nischal Shetty, CEO of the WazirX exchange owned by Binance, reiterated similar views, adding that clarity on the tax front could pave the way for India’s greater institutional involvement in the Bitcoin market. WazirX and Bangalore-based exchange Bitbns said they are already paying GST for trading fees. “The amount of GST paid has increased 500% in the past few months,” Gaurav Dahake, founder and CEO of Bangalore-based exchange Bitbns, told CoinDesk.
The volume of trading on exchanges for clients based in India has increased since the Supreme Court lifted the Reserve Bank of India’s (central bank) ban on cryptocurrencies in March. While the Indian government does not consider Bitcoin legal tender, holding cryptocurrencies is not illegal or prohibited.