India - some observations

Written by Bob Deutsch, CTA, Senior Tax Counsel

Recently I returned from a highly engaging and interesting trip to India – a fascinating country in so many ways! 

While there, I occasionally read some of the Indian financial papers to glean some insights into what issues arise in the Indian press as compared to Australia. 

Perhaps the most interesting observation is that it all seems so familiar – seemingly endless attacks on the Government either for doing something or for not doing something, similar attacks on the opposition and the minor parties. All that in the run up to the next Indian Federal Election which is due to be held, believe it or not, in May 2019. The only real difference is that our election will be held on one Saturday from 8am to 6pm; the Indian Federal Election will be held over 15 days, starting in late April and culminating in final votes being cast in mid-May. 

In tax terms, the biggest issue by far in India seems to be the implementation and operation of the comprehensive dual-GST which was introduced with effect from 1 July 2017. This might sound familiar – the GST was introduced with the intention of replacing a host of indirect taxes levied both Federally and at the State level. (There are 29 such States in India and a few extra so-called Territories.) Actually getting those extra indirect taxes abolished seems to be somewhat of an issue – sounds very familiar!! 

As far as I can tell, the Indian GST is more complex than ours. There are variable rates of GST with education and healthcare being exempt and exports zero-rated. Most everything else appears to be subject to variable GST rates ranging from 5% to 28%. For hotel accommodation and restaurants (which was most relevant to me as a traveller) the prevailing rate seemed to be 18%. 

Unlike in Australia where mercifully the advertised price must include GST, in India it never includes GST. Thus, until you get used to the system, you end up with a bill that is surprisingly larger than what was anticipated. 

From the myriad press reports I noticed, I got a real sense that the GST that they have introduced is way more complicated than ours, both in terms of the applicable rates and the various classifications. 

There certainly seems to be a significant degree of whinging and whining about the tax, much more than is the case in Australia. 

I also read with great interest about the latest twist in cryptocurrencies. This involved a company called Quadrigacx, a Canadian cryptocurrency exchange. It seems that the boss of Quadrigacx died somewhat unexpectedly in India in December 2018. At the time, the boss, it seems, was the sole person in charge of handling deposits and payouts, running, in particular, the only encrypted laptop to which only he knew the password. The boss’ wife declared in court that “despite repeated and diligent researches, I have not been able to find the password written down anywhere”. 

Apparently, there are some 90,000 customers with cryptocurrency deposits held by Quadrigacx with a total value in the order of US $140 million. 

The whole situation appears to be becoming murkier by the day, with some people now raising suspicions about the death certificate issued by the Government of Rajasthan (one of the 29 States in India). 

This is not the first time that issues have arisen with the security and accessibility of cryptocurrency “wallets”. Anecdotally, I’ve heard of one individual who apparently threw away his laptop at a time when his cryptocurrency embedded on his laptop was largely worthless only to find some time later that it had become incredibly valuable as a result of the surge in the Bitcoin price. A vast fortune in cryptocurrencies was thus encoded on his computer which was lost in the rubbish. Last reports had him with various assistants sifting unsuccessfully through large piles of landfill. 

Many months ago, I commented on the tax consequences of making and losing money on cryptocurrencies. All this reminds me that sometimes we overplay the tax issues. Before anyone gets too excited about the tax consequences of cryptocurrency gains and losses, one needs to be satisfied as to the security and accessibility of the cryptocurrency in a commercial sense. 

Tax should never be ignored but nor should it ever be treated as the key driver of a commercial arrangement. The investor needs first to be satisfied that the investment is sound in a commercial sense, and only then be concerned with the tax consequences of making or losing money in relation to that investment.

Also, in recent issues of TaxVine I have been seeking member feedback regarding the proposals that are being put forward by Labor. 

I posed the statement in relation to which feedback is requested as “it will be good for Australia” rather than it will be good for you or for the tax profession. This is quite deliberate as I am hoping to be able to say something constructive about what our membership thinks will be good or not for the country as a whole. 

I propose to discuss the results of this survey in my address at The Tax Institute's 34th National Convention in Hobart on March 14 2019, and the results will be publicly available from that day on.

Members, we welcome your thoughts via the TaxVineFeedback inbox.


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