If the government passes tax law, investors using foreign crypto platforms might have to pay 30% tax on gains, 1% TDS as well as GST reverse charge.
The Government of India is mulling over imposing a reverse charge GST on customers using foreign crypto platforms, as previously reported by Business Today.
A Finance Ministry official told Business Today, “If a crypto exchange is based out of India, and is not impacted from GST implication, then the receiver who is based out of India will be liable to pay GST on reverse charge basis. This could be reflected in 4B of GSTR-1 and is in the final stages of discussion now.”
If the government passes this tax law, investors using foreign crypto platforms might have to pay 30 per cent tax on gains, 1 per cent TDS as well as GST reverse charge.
As per the Finance Ministry official, anytime a registered person (an Indian investor) purchases cryptos from an unregistered supplier (the financial intermediary, which is a foreign crypto exchange), the receiver must pay GST on a reverse charge basis.
This new tax might act as disincentive for investors using foreign crypto platforms, says Smit Khakhkhar, Chief Technical Officer, Coin Crunch India. He told Business Today, “Reverse charge would be a hassle for novice investors who are looking to diversify their portfolio, this will discourage investors from trading on offshore exchanges, and implementing reverse charge specifically on crypto trades would be unjust.”
He further added that, “A lot of investors invest in foreign stocks and pay brokerage to foreign brokers, no GST on reverse charge basis has been enforced on it yet.”
Sharat Chandra, vice president, Research and Strategy, EarthID, a Web3 platform had similar views. He further highlighted that this might actually lead to the death of India’s crypto industry and will heighten the crypto brain drain.
Chandra told Business Today, “The crypto industry is reeling under unfavourable taxation, low-trading volumes and increased compliance costs. Any further tax will eventually lead to the industry’s death by taxation and further augment the exodus of talent and capital from the country.”