Indian ministerial panel to convene next week to discuss tax on crypto transactions

An Indian ministerial panel is set to get together next week to explore the possibility of imposing a goods and services tax on cryptocurrency transactions.

The panel, comprised of finance ministers from both the federal government and the states, is seeking to broaden the tax net to more effectively track dealings in virtual digital assets, according to sources familiar with the matter, Bloomberg reported on June 22.

Notably, the panel will convene in the northern Indian state of Chandigarh for two days, beginning on June 28.

According to the persons, it is doubtful that the panel will settle on a rate at the future meeting; nonetheless, talks may take place over putting it in the highest tax bracket, which is 28%. 

India imposes a 30% tax on crypto income

In an effort to gauge the country’s crypto market’s size and monitor users, Finance Minister Nirmala Sitharaman imposed a 30% tax on income from the transfer of virtual assets and a 1% tax at source on all crypto transactions earlier this year. It was believed that this step would remove any doubts about the legal legality of cryptocurrency transactions.

Yet, there is still a lack of certainty about the application of a sales tax on digital currencies because of the absence of clarification regarding whether digital currencies should be treated as products or services and since there is no regulatory structure in place. 

Legislation to either regulate or strengthen restrictions is now being drafted by the federal government, but it is not likely to be passed until a global consensus has been reached on how to handle such assets.

Since the beginning of the year, digital currencies, along with other risky assets, have been coming under increasing amounts of pressure as a direct result of the decision by central banks across the world to begin raising interest rates in an effort to stem the tide of rising inflation. 

Notably, Bitcoin prices have fallen by almost 50% this year, while Ether prices have dropped by 70%.