The Indian government is considering a tax on bitcoin transactions that would add $ 1 billion in revenue per year, a measure that some industry participants said is a sign of the government’s growing comfort with cryptocurrencies.
A proposal submitted to the Central Council for Indirect Taxation and Customs (CBIC) by the Central Economic Intelligence Office (CEIB) would classify bitcoin as an intangible asset and impose an 18% tax on goods and services (GST) on bitcoin transactions, according to The Times of India. The proposal also suggests treating bitcoin as a current asset and charging the GST on the margins made in trading.
An 18% GST on the estimated annual value of all bitcoin transactions of INR 40,000 crore (about $ 5.5 billion) would yield INR 7,200 crore or $ 1 billion in tax revenue.
Major India-based crypto exchanges say that a possible tax structure would bode well for the ecosystem. “The government pondering a tax structure is a sign of a better understanding of this new asset class and we hope it will lead to more positive news in the future,” said Sumit Gupta, CEO of Mumbai-based Crypto Exchange CoinDCX, in a bang on WhatsApp. “Regarding the tax rate and structure, this is something that we will expect and observe, but this is definitely a positive sign.”
Nischal Shetty, CEO of Binance-owned WazirX exchange, shared similar sentiments and added that clarity on the tax front could pave the way for increased Indian institutional participation in the bitcoin market. Bangalore-based WazirX and Bitbns said they are already paying GST on trading fees. “The amount of paid GST has grown by 500% in the past few months,” Gaurav Dahake, founder and CEO of Bitbns Trading in Bangalore, told CoinDesk.
Trading volumes on exchanges serving India’s customers have increased since the Supreme Court overturned the Bank Bank of India’s ban on cryptocurrencies in March. Although the Indian government does not consider bitcoin to be legal tender, simply maintaining cryptocurrencies is not illegal or prohibited.