Revenue Secretary Tarun Bajaj said people are already paying taxes on capital gains derived from crypto trading. At present, India has no institutional mechanism on how to tax the unregulated asset or a categorisation under the GST.
Revenue Secretary Tarun Bajaj told news agency PTI on Friday that the government would be considering changes in the income tax laws to bring cryptocurrencies under the tax net. These changes could be a part of the annual budget for the next financial year.
The revenue secretary stated that some people are already paying capital gains on the income derived from cryptocurrency. He added that in terms of GST also, the laws are very clear. The rate of taxation would be applicable as those in the case of other services.
"We will take a call. I understand that already people are paying taxes on it. Now that it has really grown a lot, we will see whether we can actually bring in some changes in law position or not. But that would be a budget activity. We are already nearing the budget, we have to look at that point of time," Bajaj told PTI in an interview.
On being asked about a potential tax collected provision being enforced for crypto trading, the secretary said, "If we come up with a new law then we will see what is it to be done."
He added that the government would be taking resort to existing norms to categorise facilitators, brokerages and trading platforms and the modus operandi of taxation from existing platforms involving similar services. He added that whatever GST rates are applicable on them, would be extended to cryptocurrency trading as well. "They have to get themselves registered. The GST law is very clear. If there is an activity, if there is a broker who is helping people and charging brokerage fee, GST would get charged," he said.
The Government is expected to introduce a bill on cryptocurrency trading during the winter session of the parliament beginning November 29. This comes in the backdrop of rising concerns over the unregulated asset luring investors with misleading claims. Notably, there have been a rising number of advertisements, featuring even film stars, promising easy and high returns on investments in cryptocurrencies in recent times.
At present, India had no regulatory mechanism on the use of cryptocurrencies. Prime Minister Narendra Modi, last week, held a meeting on cryptocurrencies with senior officials and indications are that strong regulatory steps could be taken to deal with the issue.
Earlier this week, the Standing Committee on Finance, chaired by BJP member Jayant Sinha, met the representatives of crypto exchanges, blockchain and Crypto Assets Council (BACC), among others, and arrived at a conclusion that cryptocurrencies should not be banned, but it should be regulated.
Reserve Bank of India chief Shaktikanta Das had flagged concerns about cryptocurrency being a serious matter of concern to the central bank from the perspective of macroeconomic and financial stability. "With reasonable confidence, I can say, the number of participants (in the cryptocurrency market) seems exaggerated. The bulk of investors have invested Rs 1000, Rs 2000 or Rs 3,000. Perhaps, there is an attempt to enrol as many people as possible," the governor had stated.
The Supreme Court in early March 2020, had nullified the RBI circular banning cryptocurrencies. Following this on February 5, 2021, the central bank had instituted an internal panel to suggest a model of the central bank's digital currency. The RBI had announced its intent to come out with an official digital currency, in the face of proliferation of cryptocurrencies like Bitcoin about which the central bank has many concerns.
On March 4, 2021, the Supreme Court had set aside an RBI circular of April 6, 2018, prohibiting banks and entities regulated by it from providing services in relation to virtual currencies.
In September, El Salvador was the first country to have made the unregulated asset a legal tender. The country's government had claimed that regularisation into the mainstream would help many citizens access banking services for the first time. As per BBC, President Nayib Bukele says the cryptocurrency will help Salvadorans working abroad to send money back home. The move triggered several protests by citizens fearing economic and financial instability in the Latin American country.
(With inputs from PTI)