The Indian government doesn’t register foreign exchanges as they are borderless and call for international collaboration to prevent regulatory arbitrage, said India’s Minister of State for Finance Pankaj Chaudhary in a written statement to the Parliament.
He said this in reply to a question by a Member of Parliament (MP), who wanted to know the legal status of foreign exchanges and their compliance with the 1% transaction tax that became effective from July 1, 2022.
The minister also informed the Parliament that Rs 60.64 (Approximately, $7.4 million) has been collected as TDS from cryptocurrency trading since July 1. After a 1% transaction tax came into force on July 1, Indian exchanges saw a mass exodus of traders, and the trading volume declined by up to 90 percent within a month.
However, foreign exchanges such as Binance have not seen any drop, if at all, in Indian traders on their platforms. These exchanges have also not informed whether they are complying with the 1% transaction tax or not.
Given a near collapse of crypto trading, crypto exchanges and other related businesses have been demanding relief in the transaction tax from the existing 1 percent to 0.01 – 0.05 percent. Besides, crypto gains are taxed at 30% without the provision to offset losses against profits.
There are some existing cess and surcharges that apply to financial transactions. Together, they make crypto trading in India unattractive and unprofitable.
