Responding to a member’s question in Rajya Sabha, the Indian finance minister clarified that the equalisation levy is imposed on the e-commerce operators, not on the investors. The finance minister was responding to queries by her party colleague Sushil Kumar Modi. Earlier reports emerged that the direct tax department is contemplating levying a 2% equalisation levy on digital assets. The clarification gives a temporary respite to crypto investors who may have bought cryptocurrency from foreign exchanges. However, if implemented, the exchanges may factor in the levy while deciding the service pricing.
Earlier this year, the Government was planning to impose a ban on cryptocurrencies. However, the government now intends to regulate the industry than impose a blanket ban. The minister informed the House that the Government has no information on the number of cryptocurrency exchanges operating in the country and the number of investors linked to the same.
On the usage of cryptocurrency for narcotic drug trafficking and money laundering, the minister said no such information has come to the notice of the Government. However, various law enforcement authorities are investigating allegations of money laundering and drug trafficking by use of cryptocurrencies.
In June, the Enforcement Directorate accused WazirX of allegedly violating provisions of the Foreign Exchange Management Act (FEMA) for cryptocurrency transactions worth ₹2,790.74 crores. In another investigation, the Maharashtra Narcotics Bureau had sought information from WazirX on alleged usage of the exchange for drugs purchase by Mumbai-based peddlers.
Meanwhile, the Reserve Bank said it conveyed its concerns on unregulated crypto currencies to Central Government. The central bank is currently examining the scope of central bank digital currencies (CBDC), the underlying technology, the validation mechanism, distribution architecture and degree of anonymity etc. RBI Deputy Governor T Rabi Sankar recently said that the central bank was “working towards a phased implementation strategy and examining use cases which could be implemented with little or no disruption”.