India’s crypto industry has little or no hope the government will change its crypto-taxation stance, and is discussing a Supreme Court challenge to stave off the impending tax legislation.
CoinDesk spoke to several industry executives who believe the government is likely to stick to the tax proposals announced on Feb. 1.
“It seems so. This is what’s most realistic and probable. We could see changes in the fine print but not expecting any changes to the major policies,” said an executive of a major crypto exchange speaking on condition of anonymity. India’s proposed crypto tax rules are all set to become law before the end of the month.
Earlier this year, Indian Finance Minister Nirmala Sitharaman had announced a 30% capital gains tax on crypto, a 1% tax deducted at source (TDS), no offsetting of losses and taxes on gifts, too. There were some expectations the government could look at easing some of the burden on crypto gains, but those expectations are all but gone. However, there is still a glimmer of hope the 1% TDS could be reduced.
The industry as a whole had pushed for tax breaks during the informal discussions with the government held since the proposals were announced on Feb. 1. Executives of multiple exchanges confirmed that a number of meetings have taken place with the decision-makers.
“We had four meetings, three of which were to only submit information and discussion was not allowed. In one meeting there was a discussion and when we mentioned the issue of the 1% TDS we were told [we] should worry about GST (Goods & Services Tax) as that may be a bigger concern,” the founder of a leading Indian crypto exchange said.
The government is working to bring cryptocurrencies under the ambit of GST, an unnamed government official told the Press Trust Of India, the largest news agency in the nation. India levies an 18% tax on the services provided by exchanges, which could be increased to 28% as officials view crypto as something akin to gambling or horse racing.
Legal recourse on the table
In the event the government does not reduce the 1% TDS, the industry could challenge the taxes as a whole in the Supreme Court of India, several industry leaders told CoinDesk. At least three leading executives of different crypto exchanges confirmed that “the Supreme Court option has been discussed by exchanges but no decision has yet been taken.”
This legal last-resort would be in the form of a public interest litigation, or PIL.
“That is the legal way to go. But it won’t be a single exchange. It would have to be a collaborative effort, including crypto exchanges, [non-fungible token] platforms and blockchain companies since everyone will be affected,” said one of the three executives of different major crypto exchanges.
According to two executives from different exchanges, some entities may choose to sit out the legal challenge because they have adopted a “collaborative and symbiotic approach” to regulation as opposed to “an adversarial approach.” Another executive said that some exchanges, closely working with authorities, may continue to seek favorable regulation through “education and discussion.”
Several others believed the 30% tax is certainly unlikely to be reduced for the coming financial year but the government will have to tweak it soon. “Such a high tax rate will not work forever,” said a founder of an exchange.
UPDATE (March 22, 13:00 UTC): Updates first paragraph to clarify the industry's stance.
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