The Indian government is working on the classification of cryptocurrency as goods or services under the Goods and Services Tax (GST) law so that tax can be levied on the entire value of transactions, a PTI report suggested.
GST officers are of the view that cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28 percent of GST on the entire value. Besides, GST at 3 percent is levied on the entire transaction value in the case of gold, the report further added.
Another official said that if the GST is levied on the entire transaction of cryptocurrencies then the rate could be in the range of 0.1 to 1 percent.
“Discussions are in a nascent stage on the rate of tax, whether it would be 0.1 percent or 1 percent. First, a decision on classification will have to be finalized and then the rate will be discussed,” the official told PTI.
At present, 18 percent GST is levied only on services provided by crypto exchanges and is categorized as financial services.
The GST law does not clearly talk about the classification of cryptocurrency and in the absence of a law on regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies it as an actionable claim, the report further added.
An actionable claim is a claim which can be made by a creditor, for any type of debt other than a debt secured by a mortgage of immovable property.
Finance Minister Nirmala Sitharaman in her Budget 2022 speech proposed taxation on transactions of virtual digital assets like Bitcoin and Ethereum, or cryptocurrency tax.
Income from the transfer of any virtual digital assets will be taxed at 30 percent, Finance Minister Nirmala Sitharaman said in her budget speech. However, losses from the sale of digital assets cannot be offset against other income, she added.
The crypto market in India grew 641 percent in the year through June 2021, according to an October report from Chainalysis, an industry research firm.
As the new tax regime comes into force on April 1, the Income Tax department will rely more on voluntary disclosure on acquisition cost of virtual digital assets (VDA), or cryptocurrencies. But in case of a doubt, the disclosures will be thoroughly reexamined, reported BusinessLine.
