The Indian Government is planning to expand the 2 percent equalisation levy on the cryptocurrencies purchased from foreign exchanges.
According to a report published by Economic Times on June 22, the analysts believe that existing law might demand to add a 2 percent levy onto the settlement price of crypto purchased from foreign crypto exchanges operating in India.
The Indian Government introduced the equalisation levy in 2016, for the first time. It imposed a 6 percent charge on payments for e-commerce supply and services to non-resident companies in the country.
However, in mid-2020, the government updated the equalisation levy. According to the upgraded version, the foreign e-commerce companies in India had to pay a 2 percent tax for the services they were offering. The tax experts believe that the 2 percent equalisation levy would also be imposed on the foreign-based cryptocurrency exchanges in the country.
Notably, after the upgradation of law, the equalisation levy is popular as Google Tax.
“The way the new equalisation levy is worded and defined, it appears that it will also be applicable on cryptocurrency bought from an exchange not based in India,” said Girish Vanvari, the founder of tax advisory firm Transaction Square.
He further added, “The way the new equalisation levy is worded and defined, it appears that it will also be applicable on cryptocurrency bought from an exchange not based in India.”
As per Amit Maheshwari, tax partner at tax consulting firm AKM Global, before imposing a 2 percent levy on the foreign-based crypto exchanges, the Indian Government should formulate a broader regulatory apparatus addressing crypto assets.
“In the absence of any guidelines on the treatment of crypto assets, there is ambiguity in how these would be treated under the tax laws and FEMA (Foreign Exchange Management Act).”
Since a long time, the Indian Government has been in dilemma regarding the regulatory status of crypto assets. A few days ago, it was reported that the government is reviewing whether it should ban crypto outright in the country or not. However, some experts believe that cryptocurrency should be addressed as an alternate asset class in India.