As India seeks global collaboration on regulating cryptocurrencies, with Prime Minister Narendra Modi identifying them at the Sydney Dialogue Thursday one of the key areas where democracies should work together, the Centre is deliberating on a taxation framework for the sector following concerns that digital currencies are skirting the banking system.
Government officials told The Indian Express that the Finance Ministry is leading these discussions, and the question of bringing the sector under the ambit of direct and indirect taxes are among the issues under active discussion.
The issue of regulatory gaps is also being discussed in meetings involving the Government and regulators such as the Reserve Bank of India (RBI), an official said.
For holders and traders of digital currencies, deliberations are underway to explore the possibility of imposing short term and long term capital gains tax, officials said. For service providers in the cryptocurrency ecosystem, the option of imposing GST at the rate of 18 per cent, in line with the rate for most services in the financial sector, is being explored, they said.
According to the officials, a key aspect being considered to bring cryptocurrency players under the regulatory ambit is broadening the definition of a brokerage to include entities that undertake or facilitate digital asset trades, which would include practically all cryptocurrency exchanges.
While the process of including these players in the GST ambit is expected to be long-drawn, given that a proposal has to be put up before the GST Council, official sources said that for direct taxes, the Finance Ministry has the option of taking up the issue through amendments to the Finance Bill.
“The issue of defining and regulating cryptocurrencies will be taken up through legislation, whereas taxation aspects need to be dealt with separately,” an official said.
Source from: https://indianexpress.com/article/india/centre-works-on-tax-framework-to-regulate-cryptocurrencies-7630114/