Draft Notes for discussion - Local Currency and Aspects of Taxation of Crypto Currency.
Most groups planning an alternative local economy (see LETS make it happen- http://www.doccentre.net/docsweb/Localisation/Lets-make-it-happen.pdf using their own forms of exchange whether barter, or tokens, or promissory notes were developing systems to deal in electronic ledgers. Block chain based electronic ledgers now known as crypto- currency meant that the correctness and verification o the ledger would be done by hashing transactions both as credit and debits of that currency as well as the contract underlying each transaction. Thus maintaining privacy of transaction as well as making a decentralised ledger, verifiable. The computers doing the hashing work, were said to be "mining" that currency.
This opened a new possibilities for networking and exchange between different local currencies. Though internal transactions need not be hashed if the local currency collective had a system of authentication of transactions without the hashing process. These were usually cooperatives and small-community based systems. Unfortunately, most IT advocates would rather go for the simplified integrated systems, saying that the system is in the hands of individuals who have to play according to the algorithm of block chain as was neutral/agnostic to who owned the computer which was mining.
The local alternative currency movement however is betting on the local community coming together and using polled resources to maknage their currency. Thus this is an ideological or rather political decision.
The new threat to local currency -- taxation of crypto-currenc ?.
There seems to be no clarity on the taxation of Cryptocurrency. a set of FAQs are expected. See https://www.ndtv.com/business/faq-on-taxation-of-crypto-virtual-digital-assets-in-works-2874957
The finance minister's announcement of 30% taxation, probably refers to taxation as windfall gains, or speculative income. Thus when you convert your Crypto to rupees , whatever "winnings' (gains you get will be taxed at 30% as per this announcement.) It look like losses from one crypto cannot be offset against gains in another crypto.
The question is .. if you gains is still stored in the currency concerned, will it be taxed? and if so, will it be in rupees or in the crypto itself . Which means that it is left to the government to change to rupees..
Another indication was that crypto will be treated as an "asset class".. in which case the tax will be on capital gains
Treating Crypto as a means of exchange: When you buy Cryto currency, The government plans to tax for the transaction at 1%, perhaps when you buy, much like the STT. When you sell your crypto, you will have to pay either as windfall gains, or as Business income. In which case it would only be fair to charge tax in the crypto concerned and not in the rupees equivalent of its value on a particular date.
As Business Income: it will be for those who are transacting regularly for buying or selling services or goods. Net income/losses will perhaps be treated as "income from other sources" Here the GST implications need to be considered. Technically any services is subject to GST. The issue is will you be paying GST in rupees, or in the crypto itself. The problem is whether govt. has given a thought to the implications of it holding a big chunk of it tax collections in crypto. It will perhaps have to pay for govt. expenditure and assets also in crypto.
The alternative view
Those advocating local economy (see LETS booklet) , and using local exchange currency have always felt that they would pay taxes to the state, but in the local currency concerned. This they felt will force the government to spend its earning in the development and assets of the local eco-system. And since there would also be transactions in the fiat currency, taxation in that could be paid as per rupees value.
Thus GST will be on local goods, if sold to locals in local currency will be paid to the centre, but spent in local economy alone, except for whatever is "charged" or "fees for infra etc" that the local area may need, ask for etc.
What is crypto currency? https://youtu.be/pvGLe-AVkz0?t=71
Please see: https://cleartax.in/s/cryptocurrency-taxation-guide .. So far, the Indian government has not yet granted any status of legal tender to cryptocurrencies. In 2018, RBI tried to impose a ban by restricting banking facilities to the crypto exchanges. However, the ban was ruled out by the Supreme Court on constitutional grounds and virtual exchanges fundamental rights. By mentioning taxation of crypto currency, in the budget and it tax rate, the government perhaps wanted to pre-empt a "grandfathering" of assets situation, as it probably feared that there would be a bullrun for crypto, before any backdoor form of legalisation, of crypto, even as "speculative income"..