Indian Government is considering to levy Income tax as well as GST tax on cryptocurrencies. A news report from Business Standard today quoted some anonymous source in Finance Ministry telling that a Circular in this regard will be issued soon.

Taxes will come into effect in current Financial Year itself (1 April, 2020 to 31 March 2021) implying everyone will need to pay income tax on cryptocurrency gains made within this year.

Aside Income Tax, Goods & Services Tax (GST) of 18% on fee and commission collected will also be applicable on Crypto Exchanges. The Finance Ministry official told (as quoted in the news report), "Bitcoins will be categorised as financial services attracting 18 per cent GST on fee commission collected under this segment."

Income Tax & Revenue Department is responsible to collect taxes irrespective of legal status of income. According to IT Act 1961, all income (legal or illegal) are taxable. So even if the above mentioned Circular is not issued, income generated from cryptocurrency is, and always was taxable.

However, categorizing it will bring clarity for the GST slab.

Thus, this news in no way assign any legality to crypto transactions in India.
The fate of legality of holding and trading cryptocurrencies in India is still unknown as the Bill regarding this is yet to be presented in the Parliament.

Additional tax on tokens like xSUSHI, SOAR etc.?

However, I was wondering whether 18% GST will be applicable on 0.3% trading fee earned by liquidity providers of AMM pools. If so, earnings of 0.05% earned by xSUSHI stakers will also be liable for 18% GST. Not only xSUSHI but token holders of projects like SOAR, that applies 1% fee on every token transaction and distributes it among its token holders will also attract 18% GST in addition to income tax.

Is this why Indian Crypto Exchanges are moving their Bank A/cs?

I'm also unsure of how GST will be collected from foreign platforms.
This may have something to do with recent change of bank accounts of several crypto exchanges. In last couple of weeks, we have seen Indian Crypto Exchanges abandoning their old bank accounts. I've noticed deposit and withdrawal related notifications from Exchanges like Coin DCX, BitBNS, Nuo etc.

But let us leave all that to Chartered Accountants for interpretations.