The Indian government doesn’t have to implement a new law to impose taxes on crypto transactions, because an existing law can be extended on them. 

According to analysts, the government has an existing “2% equalization levy” that can be extended on crypto assets that were purchased overseas.

In a report published by the Economic Times, the said law has the authority to require a 2% levy on top of the settlement price of cryptocurrencies bought outside the country. 

Equalization levy

The equalization levy law was first implemented by the Indian government in 2016, which requires a 6% tax on payments for e-commerce businesses without permanent presence or facilities in India. 

It was updated in 2020 and nicknamed “Google Tax” which now includes a 2% tax on any services provided by overseas e-commerce companies that are doing business in India. 

According to the experts, the words and definitions included in the law make it viable to be applied to cryptocurrency purchased outside the country. With this existing law, companies may be required to add a 2% levy on the price of crypto assets. 

But other financial experts have conceded that exact guidelines on how the government should handle crypto assets are somehow unclear under the Foreign Exchange Management Act.

India’s crypto position

Government officials in the country have always clashed about cryptocurrency matters. 

Just this June 2021, the Indian government has introduced a bill that would ban any cryptocurrency transactions, but some officials have criticized this bill, saying that cryptocurrencies should be recognized instead as an alternate asset class. 

But even in the midst of criticisms, the government, through the Reserve Bank of India (RBI) has maintained its anti-crypto stand, citing major risks in the use of the virtual currency.

Image courtesy of Cointelegraph News/YouTube

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Source: https://bitcoinerx.com/blockchain/india-can-impose-2-levy-on-crypto-bought-overseas/