India Won’t Introduce New Crypto Legislation Until Global Consensus; New Tax Regime Kicks In
India intends to frame new crypto legislation only after a global consensus occurs, which many industry veterans believe will only slow down the sector following the new taxation regime introduced on Friday.
CoinSwitch co-founder and CEO Ashish Singhal told Be[In]Crypto that the crypto market is driven by high-frequency traders, just like the intraday traders in the equity markets. The exchange serves as India’s largest crypto investing app, which earlier this week was recognized for its purpose-driven culture and flexible work-life.
“These traders operate on extremely thin margins, and locking up their capital with high TDS will restrict their ability to operate,” he added.
Singhal further highlighted that Indians have already invested more than $6 billion in the crypto sector, and prohibitive taxes are likely to expose them to possible losses, possibly driving them out of the industry.
Trading volumes might nosedive
Most industry players await further clarification from the government with respect to pending crypto legislation. The collective request for the administration to collaboratively lay out a framework that is conducive to the growth of the industry helps set the ground work while India continues to take a “lie in wait” approach.
“Trading volumes are expected to dip significantly after the new tax provisions come into effect,” said Meyya Nagappan, leader of international tax at Nishith Desai Associates to local media. “The full impact (will be) felt in the next year, when even common people who have bought cryptos will feel (it).”
However, nosediving trading volume is the least of these exchanges concerns, according to CoinDCX co-founder and CEO Sumit Gupta.
“The lack of an opportunity to offset expenses and carry forward losses will act as a deterrent for small businesses and will hamper wider adoption,” he noted.
Earlier today, the government stated it would wait for global consensus before framing legislation around crypto, according to Bloomberg.
While speaking at an event on Friday, Union Finance Minister Nirmala Sitharaman agreed that crypto regulation is “a commitment that the government has to fulfill.” However, Sitharaman failed to elaborate further on the route that the administration might take.
As crypto businesses are trying to come to terms with the direct tax regime under the finance bill, the added burden of indirect tax is another industry worry.
Eleven crypto exchanges were recently identified for having evaded Goods and Services Tax (GST). Following the probe, the exchanges were required to pay approximately $12 million in back taxes and penalties to the government.
Be[In]Crypto also reached out to Rajat Mittal, tax counselor with the Supreme Court of India, to understand if there will be additional GST liabilities that these exchanges will face going forward.
Mittal explained that the GST calculation is currently an “interpretational” issue and not a tax evasion problem. However, the tax expert opined that GST on top of a ‘regressive tax regime’ will be a ‘virtual death bed’ for the crypto industry in India.
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