India’s Crypto Investors Could Face 2% Levy on Purchases From Overseas Exchanges

Crypto bought from overseas exchanges by investors in India could be subject to a 2% levy, according to an Economic Times report .

• India's tax department is looking into whether a 2% equalisation levy applies to crypto assets, Economic Times reported Monday, citing people with knowledge of the matter.
• The levy – also known as the "Google tax" – imposes the charge on services provided in India by overseas e-commerce companies.
• Experts have speculated whether this could apply to crypto exchanges.
• "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," Girish Vanvari, the founder of tax-advisory firm Transaction Square, told ET.
• The levy would apply to the selling price, therefore exchanges may need to add it to the cost of the assets, he said.
• Nevertheless, it may be difficult for the government to impose the levy in the absence of a regulatory framework for the treatment of crypto assets, according to Amit Maheshwari, a partner at tax-consulting firm AKM Global.
• “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)," he said.
• Legislation has been in the works in recent months to ban crypto outright in India. However, there were signs earlier this month that the government would take a more lenient approach and classify bitcoin as an asset class and have the crypto sector regulated by the Securities and Exchange Board.