Government is likely to designate bitcoin exchanges as e-commerce sites and Levy 1% GST

The Nation’s government intends to redefine bitcoin exchanges as e-commerce platforms, lowering Goods and Services Tax (GST) consumers have to pay per transaction, or per trade, to 1%.

The Indian government currently levies an 18% GST on transactions made on licenced cryptocurrency exchanges, which is passed on to customers as trading costs. The procedure is comparable to the tax protocol used by India’s stock brokerages.

The tax collected at source by such platforms could be offset against the tax burden of investors. Furthermore, these exchanges may be required to register with the GST.

The proposed action is intended to monitor virtual currency transactions. According to the article, the central government may categorize cryptocurrency exchanges into three types: platforms that operate as a facilitator, brokerages that allow buying and selling, and trading platforms that give a trading interface.

However, depending on the legal domicile of the exchange, the new GST proposal may result in increased tax liability for some customers. Business Insider India reported in July that the government may ask overseas cryptocurrency exchanges to charge the same 18 percent GST as local counterparts to their clientele when doing business with Indian people. Overseas crypto exchanges are often free from GST registration in India, resulting in a significant tax disparity between exchange users.

Meanwhile, the government is considering classifying the use of blockchain technology as an export and gradually lowering the tax on it.

This comes amid reports that the Centre intends to implement crypto investment regulations to safeguard investors rather than outright prohibit them. The Securities and Exchange Board of India (SEBI) may be recognised as the regulator, according to conjecture. According to sources familiar with the development, the taxation elements are also being worked on.

Building of a legislative framework for cryptocurrencies in India continues to divide Indian politicians. Proposed legislation spans from categorizing cryptocurrencies as commodities to outright prohibiting the trading of digital assets. Last year, the Supreme Court of India overturned the Reserve Bank of India’s restriction on banks doing business with cryptocurrency startups. Meanwhile, Prime Minister Narendra Modi has openly supported blockchain technology but has also been a victim of a cryptocurrency Twitter hoax hack.