Center plans to introduce a “reverse charge” tax on virtual asset transactions on foreign platforms as part of the latest round of crypto regulations aimed at imposing taxes on foreign companies like Coinbase, Binance and Bitfinex doing business in India do . This would apply to all “virtual digital assets” from bitcoin, ethereum and all other coins to NFT and its associated revenues. Currently, overseas crypto exchanges (not registered in India) targeting Indian investors are not required to pay taxes in the country, while domestic platforms pay 18% Goods and Services Tax (GST) on the commission they receive from traders Craving .
In the reverse charge system, the recipient of goods or services is liable for tax instead of the supplier. Simply put, if an investor buys digital coins from foreign exchanges that are not listed in India, they will have to pay the GST on a reverse charge basis. The proposed reverse charge, which has yet to be introduced, could be taxed at 18% on commissions earned from transactions on foreign crypto exchanges. This would increase the overall transaction costs for investors trading on foreign platforms.
The move also aims to discourage investors from switching to foreign exchanges to avoid a 30% tax on income from cryptocurrencies and other digital assets. Finance Minister Nirmala Sitharaman had proposed a flat-rate taxation of 30% on income from crypto and digital assets in her 2022 Budget, which came into effect on April 1 after the Lok Sabha passed the Finance Bill. What’s more, every sale of a crypto asset, whether it’s a gain or a loss, is subject to 1% TDS and offset against crypto tax at the end of the year.
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