Bybit to Levy 18% GST on Indian Users, Making Crypto Trading Costlier

Bybit, a global crypto exchange, has started charging an 18% Goods and Services Tax (GST) on trading and transaction fees for users in India. This GST is in addition to the 30% income tax on crypto gains and the 1% tax deducted at source (TDS) on transactions above ₹10,000. The new charges make crypto trading costlier for Indian users and signal stricter enforcement of tax rules on offshore platforms.

Bybit said it’s implementing the tax as per India’s tax laws. The GST will be applied to services like spot and margin trading, derivatives, fiat conversions, and crypto withdrawals. The tax will be directly deducted from users’ assets. Bybit is also phasing out several services in India, including crypto loans, the Bybit card, and trading bots. From July 17, Indian users won’t be able to make new card transactions, and any outstanding borrowings will be auto-repaid.

For a long time, Indian traders used foreign exchanges to avoid local taxes. But with Bybit now following Indian tax laws, experts say this loophole is closing fast. If more exchanges like Binance, KuCoin, and Gate.io follow, Indian traders may lose access to tax-free global platforms.

Raj Kapoor of the India Blockchain Alliance noted this marks a major shift. “This shows that Indian authorities are applying pressure on offshore platforms to comply. If others follow, the tax advantage of trading abroad will disappear,” he said.

The government is reportedly using the Online Information Database Access and Retrieval (OIDAR) system to bring foreign digital platforms under GST. Indian exchanges already comply with these tax rules, either by including GST in their fees or adding it separately.

While Indian exchanges follow GST rules and deduct TDS, many foreign platforms don’t. This non-compliance may soon lead to penalties or legal action. Some users and exchanges have already received notices from the tax department for failing to report crypto income.

Sumit Gupta, co-founder of CoinDCX, warned users to avoid non-compliant exchanges. “It exposes investors to both legal risks and scams,” he said. He also stressed that users should not be penalised for mistakes made by platforms.

India already has one of the most burdensome tax structures for crypto,30% tax on profits with no loss offset, 1% TDS, and now 18% GST. A study by Esya Centre estimated this could lead to a loss of $1.2 trillion in trade volume from Indian exchanges.

Global exchange OKX has already exited India, citing regulatory issues. Many smaller Indian platforms may either shut down or merge with bigger players due to rising costs and compliance pressure.

“If taxes go up further, crypto day-trading and arbitrage could become unviable,” Kapoor warned. He also expressed concerns about a rise in underground crypto activity through VPNs and unregulated peer-to-peer networks if tax burdens keep rising without proper regulation.

Given the tax burden, many traders are now asking whether crypto trading is still profitable. Experts say only certain types of traders like long-term holders, high-volume traders, or those using unregulated platforms may still earn decent profits.

“Active trading is barely profitable for most retail users now,” Kapoor said. “Only large, high-frequency traders or long-term investors in bull markets may survive in this environment.”

Rohan Sharan of Timechain Labs said traders need to adapt. “It’s not about quick gains anymore. With these taxes, only long-term, strategic investing or structured arbitrage will work.”

Indian exchanges are asking the government to reduce TDS to 0.01%, allow loss offsets, and treat digital assets like other capital assets. However, these requests have yet to be accepted.

Finance Minister Nirmala Sitharaman clarified in March 2024 that cryptocurrencies cannot be treated as legal tender in India.

Still, India remains a top market in crypto adoption. “People believe in crypto’s future. But the current tax policy is pushing users to risky, non-compliant platforms,” Gupta said. He added that reforms could boost local participation, improve liquidity, and increase tax revenues.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates