The government is working on classification of cryptocurrency as goods or services under the Goods and Services Tax (GST) law
According to a PTI report, if the GST is imposed on the entire transaction of cryptocurrency then the GST rate can be between 0.1-1%
The GST law does not clearly group cryptocurrencies and without a law governing the virtual digital currency, the classification has to consider whether the legal framework groups cryptocurrency as an actionable claim
While the Indian government has already imposed 1% TDS on crypto transactions and 30% tax on income from crypto, the GST Council is now working on classifying cryptocurrency as goods or services to bring it under the ambit of the Goods and Services Tax (GST) law; in turn, planning to levy on the entire value of transactions.
As reported by PTI, the decision is expected to be taken during the 47th GST Council Meeting. The meet will take place at the end of March or beginning of April 2022.
While the GST slabs have not been defined for crypto so far, the crypto entities are currently paying 18% GST on the services they provide.
The report added that GST officers are also of the view that cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28% of GST on the entire value. Besides, a 3% GST is levied on the entire transaction value in case of gold.
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The government is seeking clarity relating to imposing GST on crypto and also, whether the tax has to be charged on the entire value. It is further shedding light on whether the cryptocurrencies can be termed as an actionable claim.
An actionable claim is essentially a claim or debt for which a creditor can take an action.
Reportedly, if the GST is imposed on the entire transaction of cryptocurrency then the GST rate can be between 0.1-1%.
The GST law does not clearly group cryptocurrencies and without a law governing the virtual digital currency, the classification has to consider whether the legal framework groups cryptocurrency as an actionable claim.
As per the government’s proposition, from April 1 onwards, a 30% income tax (I-T) plus cess and surcharges will be imposed on crypto transactions similar to winning money from horse races, lottery and other related transactions.
The government also proposed a 1% TDS on crypto payments over INR 10,000 in a year and also, imposing it on people who receive cryptocurrencies as a gift. This provision will come into effect from 1 July this year while the gains will be levied from April 1 this year. It further announced that central bank digital currency (CBDC) will be rolled out by 2022-2023.
Following the recent budget, investors, crypto traders and crypto exchanges showed mixed reactions towards levy of cryptocurrencies. On one side, exchanges were ecstatic that cryptocurrencies are recognised by the Indian government while, on the other side, investors and traders are not happy that crypto transactions will be taxed 30% and want tax slabs to be reduced.