Buying NFTs may get more expensive for Indians as the government mulls over double taxation

• Non-fungible tokens (NFTs) in India may be subject to double taxation, according to a report by the Economic Times.
• Not only will NFTs be subjected to tax under the Goods and Services Tax (GST) but also the equalisation levy, which is normally reserved to foreign corporations.
• Earlier this month, India’s Finance Minister Nirmala Sitharaman had clarified that the equalisation levy does not apply to investors — not to e-commerce companies.

Non-fungible tokens (NFTs) have become a buzzword in India, even among those who may not necessarily be familiar with cryptocurrencies. But those looking to buy these digital collectibles in the country may have to end up paying more to the government.

Sources told the Economic Times that buying a NFT may not only attract the normal Goods and Services Tax (GST) but also a 2% equalisation levy, which is normally reserved for corporations based outside of India but operating within the country.

The idea also made the rounds when it came to cryptocurrencies being taxed in India, but the speculation was shot down by India’s Finance Minister, Nirmala Sitharaman, last month. “Equalisation levy is imposed on e-commerce operators, not on the investors,” she explained during the Monsoon Session of Parliament on July 27.

The controversial levy, also called the ‘Google Tax’, has historically only been imposed on foreign companies — like Amazon, Facebook and others. The logic behind the tax was for these companies to compensate the Indian government for earnings revenue from Indians through online ads.

If double taxation does indeed come into effect, the adoption of NFTs in India could get slower than what has been seen over the span of this year. There is also ongoing debate over the value of these digital assets. Not only are they volatile, as with cryptocurrencies, but they’re also entirely speculative — as with works of art and qualitative assets in real life.

What is an NFT?

The blockchain-based digital collectibles have been making headlines not just for their high valuations, but also due to new use cases popping up as a result of the pandemic.

In a world where social distancing and traveling are restricted, being able to attain collectibles online has been a popular choice for both the sporting world and its fans.

An NFT, as its name implies, is non-fungible. In technical terms, each NFT is a unique code or blockchain-based digital file. This means that one NFT cannot be exchanged for another like with cryptocurrencies, where one Bitcoin is identical to the next, aside from ownership.

The world’s largest platform for selling NFTs, OpenSea, saw trade volume surge 950% in the last 30 days to hit $1.22 billion, according to DappRadar.

NFTs are growing rapidly in India

In India, NFTs may not be the crypto investment of choice for everyone, but the rich kids are using them to diversify their portfolios. And, as seen globally, NFTs are also emerging as a new avenue for Indian artists to showcase their work and generate revenue.

Indie pop icon Ritviz and visual artist Santanu Hazarika sold their collaboration for $391.80 on the Indian crypto exchange WazirX’s NFT marketplace within 10 seconds going live. TV host and actor Vishal Malhotra was another big wig to sell his NFT, but for a much higher amount of $5,500.

These are only a few of the 160 pieces of digital art that the WazirX-backed platform sold within a month of its launch in June.After its initial success, the NFT marketplace launched collectibles solely focused on athletes participating in the Tokyo Olympics this year. The company has mined GIFs, artwork, and other digital mementos to capture the historical wins seen in Japan.

In addition to WazirX’s platform, NFTically is another NFT marketplace available to Indian investors, which also allows them to set up their own shop if they don’t want to operate on NFTically’s main platform.

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