Although India still displays uncertainty in its approach towards cryptocurrencies, the local government is reportedly considering implementing an 18% goods and services tax on BTC transactions. With such transactions exceeding $5 billion annually, the newly proposed tax could generate additional revenue of about $1 billion.
According to the Times of India coverage, the Central Economic Intelligence Bureau (CEIB) has forwarded the proposal to the Central Board of Indirect Taxes & Customs (CBIC).
The CEIB has recently published a report exploring different usages of cryptocurrencies and concluded that bitcoin could fall under the category “intangible asset” class. This would mean that the nation could impose a goods and services tax on all transactions involving the primary digital asset.
The agency also outlined that if implemented, this taxation could assist in reducing BTC’s alleged involvement in illicit activities.
The CEIB report has estimated that the volume of bitcoin transactions is about Rs 40,000 crore annually (app. $5.5 billion). Should the world’s second most-populated nation indeed proceed with the tax, the government could receive up to Rs 7,200 crore ($1 billion) per year.
It’s worth noting that this is the second cryptocurrency-related taxation legislation India has explored lately. A previous report from early December indicated that the Tax Department considered up to 30% tax on profits made from investing in digital assets.
The giant Asian country has a somewhat long and intriguing history with cryptocurrencies. Back in 2018, the nation’s central bank (the Reserve Bank of India) prohibited all financial institutions working with the bank to operate with any cryptocurrency businesses.
Although this wasn’t a direct ban on cryptocurrency usage, most companies averted operating in the country. However, India’s Supreme Court lifted the RBI’s decision earlier this year and referred to it as “unconstitutional.”
Shortly after, the country started showing massive interest in digital assets with skyrocketing trading volumes and new investments from crypto firms.
Nevertheless, the RBI said it will dispute the Supreme Court’s ruling as it believes that bad actors are employing cryptocurrency to execute illegal transactions.