The Indian government plans to reclassify cryptocurrency exchanges as e-commerce platforms, which would lower the Goods and Services Taxes users must pay per transaction, or per trade, to 1%.
At present the government taxes 18% GST on transactions conducted on registered cryptocurrency exchanges, which is passed to users as trading fees. The process is similar to the tax protocol of India’s stock brokerages.
The new GST proposal could result in more tax liabilities for certain users. In July, it was reported that the government may ask foreign cryptocurrency exchanges to charge the same 18% GST as domestic equivalents to their clients when conducting business with Indian nationals. Overseas crypto exchanges are usually exempt from GST registration in India, resulting in a sizable tax gap between users of different exchanges.
Indian lawmakers remain divided by the construction of a regulatory framework for cryptocurrencies in the country. Proposed legislation ranges from classifying cryptocurrencies as commodities to outright bans on the trading of digital assets. In 2020 the Supreme Court struck down the Reserve Bank of India’s ban, which barred banks from conducting business with cryptocurrency