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Regulation is key in determining whether an industry will flourish. Favourable laws and government interest towards technologies of the future have seen countries prosper. In this week’s rollup, we look at steps some countries have taken to ensure they are at the forefront of the next technological revolution. We also look at others, who are shooting themselves in the foot.
Crypto Tax Policy Framework Passes in Lok Sabha Despite Opposition
On Friday, India’s lower house of parliament, the Lok Sabha, passed the 2022 Finance Bill, which included 39 amendments proposed by Nirmala Sitharaman. The amendment on crypto established a 30% tax targeting digital asset and NFT transactions and did not allow for deductions from trading losses while calculating income. In addition, taxpayers in India will have an additional 1% tax deducted at source, or TDS. The proposed framework received opposition from many Indian lawmakers in parliament as well as local industry leaders who claimed that the legislation would likely “kill crypto” in the country. Ritesh Pandey and Pinaki Mishra, both members of Lok Sabha, spoke in parliament about their disappointment with the newly passed laws.
Read more on how the community reacted, here.
https://cointelegraph.com/news/crypto-tax-policy-framework-passes-india-s-parliament-despite-pushback-from-lawmakers
As per the latest clarification issued by the Government of India, gains made trading one token cannot be offset against losses made trading another. For e.g. imagine for an initial investment of INR 200 you buy token A and token B for INR 100 each. If the price of token A increases to INR 200 and the price of token B becomes 0, you will still have INR 200 net. However, as per the clarification, the government will charge you 30% tax on the INR 100 gain of token A reducing your net amount to INR 170 (200-30). Therefore, even though you didn't actually lose money, due to the tax norms, you will lose INR 30. If this is implemented, it will definitely prove to be a death sentence for crypto investing in India.
Read more on what the government announced, here.
The crypto tax announced during the recent budget will become applicable on 1st April, 2022. As highlighted by the government, this is only the first step towards regulating crypto and a lot more action is expected to follow. The Goods and Services Tax (GST) law does not clearly state about classification of cryptocurrency and in the absence of a law on regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies it as actionable claim. An actionable claim is a claim which can be made by a creditor, for any type of debt other than a debt secured by mortgage of immovable property. At the moment services provided by crypto exchanges are under the 18% GST tax slab. However, regulatory authorities view crypto as gambling rather than investing and are considering bringing it under the same 28% GST tax slab.
Read more on this, here.
https://economictimes.indiatimes.com/news/economy/policy/govt-working-on-classification-of-cryptocurrency-under-gst-law/articleshow/90333798.cms