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Goods or services? GST law committee’s cryptocurrency dilemma

Tax treatment decision after there’s clarity on classification

Topics
cryptocurrency | GST



After taxing income from virtual digital assets, the government is looking to soon bring clarity on the applicability of the goods and services tax (GST) on assets.



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First Published: Thu, June 09 2022. 06:12 IST




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digital assets: Tax on digital assets could go up, govt mulling GST on crypto mining, supply

The government is examining the applicability of goods and services tax (GST) on various cryptocurrency transactions including mining of these digital assets.

The issue is being examined internally at the Central Board of Indirect Taxes and Customs (CBIC) and a proposal will be taken to the GST Council, CBIC chairman Vivek Johri said.

“There are several aspects of the operation which intersect with GST as a tax,” he said in an interview to ET. The budget has proposed a flat 30% capital gains tax on virtual digital currencies beginning April 1, 2022. The levy of GST on other transactions in them could raise the overall incidence of tax on cryptocurrencies.

Services provided by a platform, or an exchange operator, were duly recognised as taxable services and authorities have been charging them to tax, Johri said.

CBIC will Take 2-3 Months

However, the issue of supply of cryptocurrencies required more detailed examination, Johri added.

“You mine crypto…the first question is does that involve a supply or not. Second is, I acquired crypto and I’m selling it to somebody else or I’m using it for barter. How do we deal with that,” he said, pointing to some of the issues the department is looking into. “Is that a supply of money, or is that a supply of goods and services, or is it just an actionable claim? These are the other aspects which involve the GST issue that we are examining at the moment,” he added.

Asked if it would be taken to the GST Council at its next meeting expected sometime in March, he said: “We’re trying, but it has to go through the process of the law committee and then go to the council.”

The issue is currently being examined within the CBIC and it could take 2-3 months, he added.

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EV Concession

On the issues of a tax concession to electric vehicle maker Tesla, Johri said it was felt that no change was required in the structure, while declining to comment on the specific case of the company.

“When the government examined the rate structure, it was found that there were other multinational carmakers that were importing CBUs (completely built units) at 100% customs tariff to sell here. We looked at the structure, but (after examination) we felt that no rejig was required at this stage,” Johri said.

Tesla has sought a 40% import duty on fully built electric cars against the current rate of 60% applicable on those priced below $40,000 and 100% on those above that threshold.


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