DECEMBER 19, 2017

By Dinesh K Vohra

ALMOST two years ago I had written an article "Neither Goods nor Services" wherein I had emphasized the need for a 3 rd category in the GST regime,which at present exclusively deals with a binary state of goods and services. GST regime is contemporary but lacks the vision for futuristic world needs which can cater to the needs of new advancements in the field of Information Technology (IT) and other continual technological advancements that are taking shape now or will appear in near future.

The phenomena of crypto currencies in India is now haunting government and central bankers alike. I had emphasized that a new world is slowly but surely emerging which won't fit into either goods or services domain. It is time of E-world/Virtual world/artificial intelligence that is emanating from futuristic advancements in technology. This emerging world is also causing problems in exports of some services which are being denied as "exports" by GST offices on one pretext or other.

Hence we can say that:

a- It is time to think differently and to think now without any delay

b- Its time to go for out-of-box thinking

c- Its time to create a common 3 rd category named as E-World/Virtual World, which will deal with futuristic technological innovations and related advancements.

This virtual world/E-world has now created a new form of currency called crypto currency. Crypto currencies like Bitcoin and expanding Bitcoin Exchanges in India has caught the Direct tax and Indirect tax departments on the wrong foot. It has also caught RBI on wrong unawares as it is unable to decide as to how these crypto currencies have to be treated. Entire government machinery is confused as to how to go ahead on these new advancements which are controlled by none. It is a fact that current tax laws are silent on these new emerging phenomena and need suitable amendments to deal with emerging situations.

Meanwhile, crypto currencies have come out with a unique payment model which was unthinkable few years back but is now a firm reality. Investments and payments are being carried through this corridor which is secretive and not controlled by anyone like internet. Crypto currencies now can't be treated as illegal as the same is acknowledged in many countries.

Some of the arguments made against this crypto currency are that it is a Ponzi or Pyramid Scheme. A pyramid scheme rests on a premise of as many as suckers as possible in scheme of things to lure others into system.

Some of the key highlights about crypto currencies as per few studies are:

a- Bitcoin, a crypto currency, came to life in and around 2009.

b- User's identity was shielded here (secret).

c- No one is in control of these crypto-currencies - no governments, no banks and not even creator of crypto-currency.It is like internet – not controlled by anyone.

d- The current number of users of these currencies are round 12million(as per few estimates) in world and expanding at breakneck speed.

e- Bitcoins derive their value partly through their scarcity which is defined by cryptographic lottery.

f- One can buy Bitcoins/crypto-currencies on online crypto-currency exchanges or one can earn them through a process known as "mining."

g- Few thousand people are already working full time in crypto currency industry.

h- Few thousand already using trading path daily and trading volumes now estimated to be few Billion dollars a year in India.

i- Large investments and payments have already been made through this corridor and is taking the market by storm.

j- Government of India has started taking note of this phenomenon now. Probably the Central Bank and government had thought that it was a temporary bubble and would die/burst soon but this optimism has proved to be wrong. And now it has set alarm bells in government corridors as entire system of investments and payments is secretive thus leaving no trail of payments behind.

Crypto-currency is just one dimension of Virtual world. Coming years and decades will usher us into a world which we had neither seen before nor conceived as pace of innovation in technology is mind boggling. Each innovation gets old within 15 days or a month now. This staggering change is real challenge. Some of the upcoming challenges and trends which we can perceive now from E-World/Artificial Intelligence/Virtual world can be summarized as:

a- Deep learning theories/platforms

b- Probabilistic programming

c- Natural language generation

d- Virtual agents

e- Artificial Intelligence optimized hardware

f- Digital twins

g- Generative adversarial networks

h- Machine learning platforms

i- Robotics process automation

j- Deep reinforcement learning

k- Forms of biometrics

l- And endless innovations and advancements in coming years

It is time government treat this phenomenon of virtual world/crypto currencies on urgent basis and makes a decision to remove all kinds of rumors and confusions in the market. In absence of such quick decisions, direct tax, indirect tax departments and RBI will go separate way sand will create utter chaos and investors will be the ultimate sufferers.

Suggestions:

a- Immediately induct a 3 rd category in GST regime to deal with world of Artificial intelligence/E-world/Virtual reality/ Futuristic advancements in IT world

b- Include crypto currencies in 3 rd domain and not try to fit them into services or goods domains by declaring them as goods or services as it will create a new world of litigations.

c- Realize that a new world is emerging and that doesn't fit into present Binary system of GST for taxation purpose.

d- A crypto currency should not be treated as currency as of now but it would be better to place them in this 3 rd domain of GST.

I do hope that the government acts fast to settle the dust.

(The author is Assistant Commissioner (Retd.) and Author of 18 books on Soft Skills/Management and a leading Motivational Speaker.)