Raise taxes but don’t ban crypto assets, cryptocurrency exchanges urge Centre
Raise taxes but don’t ban crypto assets, cryptocurrency exchanges urge govt.
New Delhi: As the Centre is all set to unveil one of the world’s strictest policies against cryptocurrencies, exchanges that facilitate trading in crypto assets have reportedly approached the government and sought clear rules for controlling and taxing digital currency, suggesting that the government should bring them under the highest tax brackets, and not to impose a blanket ban.
Worth mentioning here is that the Reserve Bank of India (RBI) has barred all regulated entities, including banks, from dealing with cryptocurrencies. Recently, RBI Governor Shaktikanta Das said that the use of blockchain technology has many positive aspects that need to be exploited”. However, cryptocurrencies such as Bitcoins that are traded, the central bank has flagged many concerns. Last month, RBI Deputy Governor BP Kanungo had said the apex bank was examining the model of its proposed digital currency and would come out with its decision “very soon”.
Digital currency exchanges have suggested that investors’ returns can be taxed at 35 per cent and cryptocurrency exchanges can pay 28 per cent goods and services tax (GST). At present, there is a lack of clarification about how much taxes are applicable on Bitcoin, the most popular virtual currency in India, and other cryptocurrencies under income tax or GST, and whether the digital currency can be treated at par currency, equity, gold or technology or as a lottery. Income-tax rates on returns from different assets range between 10 per cent and 35 per cent.
Rashmi Deshpande, partner at corporate law firm Khaitan & Co, told ET: “A complete ban on crypto assets may not be feasible given the amount of revenues being generated by businesses built in and around this technology. Further, the government may not want to lose the revenue it gets from the taxes generated by the sector.”
Citing industry estimates, Reuters earlier this week reported that despite the Centre actively considering a ban, transaction volumes have surged and 8 crore investors in India now hold Rs 10,000 crore ($1.4 billion) in crypto-investments. However, no official data is available.
The financial daily quoted Shivam Thakral, CEO of BuyUcoin, a cryptocurrency exchange, as saying that the Centre can regulate and even “make good tax revenue out of it”, highlighting that Indian investors may lose out the blockchain technology advancements.
It has been reported that the proposed Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 is poised to give investors a three-month period to liquidate crypto-assets. Industry insiders believe that income taxes on investors’ returns and GST on exchanges could considerably eliminate returns and profits made in the last one year, the publication mentioned.
According to Monark Modi, founder and CEO of cryptocurrency exchange Bitex, the proposed ban would only encourage more illicit activities as many investors approach the grey or black market to invest in cryptocurrencies.