A reverse charge is a tax owed by the recipient of goods or services rather than the supplier.
The burden of goods and services taxation (GST) will rest on an Indian investor who purchases services from a domestically unregistered crypto exchange.
What is Government planning?
“If a crypto exchange is situated in India and is not subject to GST, then the receiver will be obligated to pay GST on a reverse charge basis,” a source told Business Today TV.
According to reports, depending on commissions gained through crypto transactions, the percentage of this reverse charge may be 18 to 28 percent.
“The legality of virtual digital assets could be examined under schedule 2 of The Central Goods and Services Act, 2017, which lists the activities or transactions to be treated as supply of goods or services,” the source continued.
Indian authorities have been continuously voicing their concerns on digital assets and discouraging the masses from adopting the same.
As India is considering expanding the scope of its goods and services tax (GST) to include cryptocurrency, while the judgment is expected this month at the GST council, investors have already been paying 30% tax on cryptocurrency earnings since April 1.
“[The government] is unlikely to tax crypto on the overall value of the transaction, per se,” the source added to Business Today. The conversations are at a point where more thought is required.”
Moreover, SEBI, the Indian regulator of stock markets, advised celebrities against endorsing crypto trading platforms or products directly or by lending their voices. Since, as per SEBI, these products or services are risky and could harm common people.
The Reserve Bank of India raises concerns, but the industry is divided.
The Reserve Bank of India (RBI) recently cautioned the Parliamentary Standing Committee on Finance that bitcoin could lead to “dollarization.”
According to Jaijit Bhattacharya, president of the Centre for Digital Economic Policy Research, the problem with using foreign currency in any economy is that the central bank lacks authority over the currency when using monetary policy tools.
Meanwhile, the RBI’s tough position on cryptocurrency continues to cause investors legal concerns.
Despite such worries, the Confederation of Indian Industry (CII) president Sanjiv Bajaj stated in another interview that the business should be controlled rather than outlawed.
India should refrain from outright banning cryptocurrencies and virtual digital assets, according to Confederation of Indian Industry (CII) head Sanjiv Bajaj, who also noted that such goods could have constructive purposes.
“At CII, we feel that these are emerging new inventive assets, technologies, or products. In a conversation with The Hindu, Mr. Bajaj stated, “We should not overtly ban them.”
“We know they have drawbacks, but they can also provide benefits and worldwide connect the world,” he remarked. “So, our idea is to monitor and regulate them, possibly in a sandbox setting, try them out in a more controlled context and learn from them, and afterward decide what makes perfect sense and what doesn’t,” he suggested, adding that the government could then assess whether or not they are useful.