After 30% tax and one percent TDS, the cryptocurrency is ready to fight the GST; as it develops a survival strategy

Several reports stating that the Goods and Services Council (GST) may consider imposing a 28% GST on cryptocurrency-based services have raised concerns among several players. Understandably, many players believe that this move will adversely affect the sector in India. “While 18% tax is already imposed on cryptocurrency services, the financial implications of 28% GST will depend on the frequency of trading. If the cryptocurrency is classified as an asset or commodity, then 28% GST will be applicable. Otherwise, this will affect the Indian cryptocurrency scenario, because not only will the government increase the tax from 18% to 28%, it will still not clarify the identity of cryptocurrencies, “Ajeet Khurana told FE Digital Currency , cryptocurrency expert.

In the last few months, the government has taken several steps in an attempt to regulate transactions. On February 1, 2022, during the budget, the Minister of Finance of the Union Nirmala Sitaraman announced a 30% tax deduction and another percentage deductible withholding tax (TDS) for all transactions with cryptocurrency of FY23.

According to industry experts, this move, if implemented, will not affect large investors, while small traders may be affected during high-frequency trading. According to Gaurav Mehta, CEO, Catax application, GST, the presence of a value added tax rate of 28% is obvious that the government intends to restrict trade in cryptocurrencies with the policy instruments at its disposal. “I feel that the volumes of trade between the markets will fall and traders will turn to international exchanges, which is not within the scope of the Indian government. In addition, customers would like to move their cryptocurrencies from exchanges to private wallets. This can also lead to a direct link between decentralized exchanges and customers in terms of business activities, “he added.

In addition, customers are expected to pay the tax, unlike the exchange, but this also means that many consumers can also leave the wagon. “As the service charge charged by the exchanges is lower, the total amount of the GST will depend on the trading volumes. I believe that this step will have no effect on the valuation of Indian cryptocurrency exchanges, “Hurana explained.

Interestingly, industry observers believe that despite several challenges, the industry continues to receive investment with its own problems. “Despite a 30% tax and a one percent TDS application, I feel that investments in cryptocurrency are growing. Funds will continue to flow, given that cryptocurrency is a long-term investment and therefore foreign investors would like to enter Indian markets. There may be a decline in investment in the beginning, but data show that it will grow in the long run. “Compared to last year, investments have increased,” Mehta added.

As the government seeks to tighten the noose around digital currencies such as cryptocurrencies, many remain wondering about its future in India. Only time will tell.

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