‘Today, cryptos are legal, unregulated and taxable’

In what could spell music to the ears of crypto industry and millions of investors and speculators in such digital assets, Finance Secretary TV Somanathan has asserted that cryptos are very much “legal” as of today even as they are unregulated and have been “taxable” since the time they occurred in India. Clearing the air around status of cryptos, Somanathan said that the present factual position on cryptos is that they are “legal, unregulated and taxable”.  He however noted that while taxability aspect has been made amply clear, especially after the introduction of standard treatment in recent budget, the other two parts of legality and regulating them are still in the realm of policy discussion and debate and that government is in wide consultations with stakeholders and foreign governments before firming up its stance on these two parts. Government continues to consider various options on whether cryptos should continue to be legal or be declared illegal, Somanathan added. Participating in BusinessLine’s “Decoding the Budget 2022-23” discussion, Somanathan said that Cryptos are not illegal today. “Until something is declared illegal and unless it violates a domestic existing law, it is legal. So crypto is legal today”, he said.

Somanathan also made it clear that tax amendment made in this year’s budget should not be seen as stamp of approval of government that it (cryptos) is a nice asset. “Legality and taxability are separate dimensions and one should not connect the two. Budget has clarified taxability”, he added. The post budget discussion was sponsored by Bank of Baroda credit cards, Hitachi and BSE.

Tenouous links

When asked if the link between public investments, private capex and public consumption is tenuous and whether budget was focusing right on the supply side instead of giving a push on the demand side, Somanathan conceded that links are tenuous and expressed hope that these links will play out in the coming days. Finance Secretary said that government had opted against cash in hand strategy as it came with lot of risks.  “Problem we see with cash transfers are two— given the size of this country, the number of people who are eligible for cash transfer, we either have to do a huge fiscal expansion which would be destabilising from a macro point of view or we can do a token cash transfer which would not be reflective for the pain and suffering that people have been through. Either we could some tokenism within the available fiscal space or we could do the big bust and perhaps re-do what we did in 2011 and created crisis in 2013. We see lot of risks in cash in hand strategy”, Somanathan said, adding that government was still open to consider better ideas. Somanathan said that on balance the government decided to put more money in public investments at this time and hopes that this would lead to revival of private investments and then go about consolidating. He, however, said that government was very clear about not taking path of high fiscal stimulus as that is very dangerous from a macroeconomic perspective. “We are clear that we cannot continue indefinitely on the path of stimulus on the basis that don’t worry denominator will grow faster if we have higher deficits and eventually everything will be alright. We don’t believe that and we have been through this path before. It is not certain that things will improve and pandemic may even come back. There are lots of risks from outside India too in terms of monetary policy in US, commodity prices, Ukraine, drone attack on Abu Dhabi — they have effects on fertiliser subsidy, tax revenues from petrol. There are number of extraneous risks and local risks through pandemic and external developments”, he said.

PM Gati Shakti

Somanathan highlighted that PM Gati Shakti is not totally different from national infrastructure pipeline. PM Gati Shakti has an approach to infrastructure that has quantitative dimension and also qualitative dimension. “This is broadly in line with national infrastructure pipeline. The main change is the qualitative dimension. Traditionally these have been separately planned. Key change is coordination between central ministries so that we make sure both Gati (speed) and Shakti ( strength) is both achieved together”, he said. He also said that ₹ 1 lakh crore for state capital expenditure will kick off quickly as these are smaller and dispersed projects that will be chosen by the states. He expressed confidence that both States and central components in the overall budgeted capex of ₹ 7.5 lakh crore will take off quickly — state component being faster than central government.

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