The government of India is reportedly taking a different approach to regulating cryptocurrencies, mulling over an 18 percent Goods and Services Tax (GST) on trading the digital coins, The Next Web reported.
According to the report, citing Bloomberg, the Central Board of Indirect Taxes and Customs is looking at the proposal. A finalized draft will be presented to the GST Council. The government could hit the cryptocurrency with the GST tax retrospectively from July of 2017, which was when the GST was created, noted the report.
For the government of India to tax cryptocurrencies, the digital tokens have to be considered goods or commodities instead of currencies and securities. The miners, exchanges and wallets would be considered as services that enable the supply of goods. If the tax becomes law it will mark a big change in how the government of India has been approaching cryptocurrencies.
The Reserve Bank of India (RBI), India's central banking institution, has long been a critic of cryptocurrencies, warning users about the risks since as far back as 2013. In April, RBI banned regulated financial institutions in the country from dealing with cryptocurrencies, CNBC reported.
The bank wrote in a statement, “In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling [virtual currencies].”
Institutions that currently provide services related to cryptocurrencies will have to end those relationships “within a specified time.” The bank said a circular with more information is being issued separately.
In February, India’s finance minister said — per a transcript from The Hindu newspaper — that the government would “take all measures to eliminate the use of these crypto-assets in financing illegitimate activities or as part of the payment system.” And, in December, India’s finance ministry decried bitcoin trading (and other associated cryptocurrencies), claiming that it is, at base, the same as buying into a Ponzi scheme. The finance ministry noted that cryptocurrencies are not legal tender and, therefore, offer users absolutely no governmental protections.