The Indian government is considering a Bitcoin transaction tax that would add $ 1 billion in revenue per year, a move that some industry participants have called a sign of the government’s growing comfort with cryptocurrencies.
A proposal presented to the Central Board of Indirect Taxes & Customs (CBIC) by the Central Economic Intelligence Bureau (CEIB) would classify bitcoin as an intangible asset and impose a Goods and Services Tax (GST) of 18% on bitcoin transactions, according to The Times of India. The proposal also suggests treating bitcoin as a current asset and charging GST on margins made in trading.
An 18% GST on the estimated annual value of all Bitcoin transactions of 40,000 INR crore (approximately $ 5.5 billion) would bring in 7200 INR crore or $ 1 billion in tax revenue.
Prominent crypto exchanges based in India claim that a potential tax structure would bode well for the ecosystem.
“The government thinking about a tax structure is a sign of a better understanding of this new asset class and we hope this will lead to more positive news in the future,” said Sumit Gupta, CEO of the exchange. Mumbai based crypto CoinDCX, in a WhatsApp chat. “As far as the tax rate and the structure go, we’ll wait and watch, but that’s certainly a positive sign.”
Nischal Shetty, CEO of Binance-owned WazirX exchange, echoed similar sentiments and added that clarity on the fiscal front could pave the way for increased Indian institutional participation in the bitcoin market. Bitbns, a WazirX and Bangalore-based exchange, said it already pays GST on trading fees. “The amount of GST paid has increased by 500% in recent months,” Gaurav Dahake, founder and CEO of Bangalore-based exchange Bitbns, told CoinDesk.
Trading volumes on exchanges for clients based in India have increased since the Supreme Court overturned the Reserve Bank of India’s banking ban on cryptocurrencies in March. Although the Indian government does not consider bitcoin to be legal tender, simply holding cryptocurrency is neither illegal nor prohibited.