In what could further spoil the mood of crypto investors in the country, GST council will meet next week to discuss a goods and services tax (GST) on cryptocurrency transactions, a report by Bloomberg suggested.
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 cryptocurrency assets.
First Published: Thu, June 09 2022. 06:12 IST
In what could further spoil the mood of crypto investors in the country, the goods and services tax (GST) Council is likely to consider imposing 28 per cent tax on cryptocurrencies. The proposal is likely to be tabled in the next GST Council meeting.
According to reports the 28 per cent GST will be in addition to the 30 per cent income tax on earnings from crypto asset transactions.
The GST Council has constituted a committee which will soon take up the proposal to impose 28% GST on all a services related to cryptos, CNBC TV 18 reported.
Imposing 28 per cent GST on cryptocurrencies is another shocker for cryptocurrency community in India.
Ankur Gupta, Practice Leader ( Indirect Tax), SW India said that looking at the taxability of cryptocurrency under Direct Tax introduced this year, it was just a matter of time that the taxability under GST also moves from 18% to 28%. Now when it has been made agenda for the next council meeting, it should sail through without any hindrance as well.
However, the imposition of 28% GST and 30% direct tax, would surely bleed out the majority of the profits which people have earned over a period of time when these cryptos are materialized, he added.
Amit Gupta, MD, SAG Infotech said as we all have been hearing for a long time, the government is reportedly considering levying a 28 per cent GST on all crypto transactions, including mining, sales and purchase of cryptocurrencies. There is already a 30 per cent tax being levied on profits made from the sale of crypto assets and NFTs.
“This second GST on crypto transactions is expected to further increase problems for the crypto industry and might even discourage many investors to trade in these digital assets,” Gupta said.
“Levying GST or any other additional tax on crypto essentially puts off the initial original value of decentralisation of digital and financial assets. After the 30% tax already reinforced on crypto, introducing an additional tax shall simply be putting off interests of the investors in the assets. The crypto economy certainly is big now and needs regulations , however the fine line between balance and centralisation needs to be taken care of. The core technology I.e. blockchain behind creation and transaction of such assets itself can be made secure enough to bring in necessary regulations in the sector. Piling up something with layers of taxes should not be a solution to curb things. Somehow, an additional GST would certainly bring the spirit of centralisation more than it brings regulation to the crypto economy,” said Chinka Gupta, CEO, ArcadeNetwork.
Kunal Jagdale, Founder, BitsAir Exchange said soon, a 28 percent GST on services and all cryptocurrency-related activities is proposed. It will be in addition to the 30% income tax on profits from cryptocurrency transactions. Following this initiative, the combination of the two taxes will make crypto currency provincially regulated in India, which is big plus for crypto investors.
He added that the imposition of a 28 percent GST on cryptocurrencies is not surprising given that many other items are subject to a 28 percent GST but it may discouraged a little bit to some users from engaging in cryptocurrency trading.
Meanwhile, the 30 per cent ‘crypto tax’ proposed in the Union Budget came into effect from April 1, 2022. From July 1, 2022, 1 per cent Tax Deducted at Source (TDS) will be applicable on crypto transactions.
The crypto industry’s tax woes in India may get worse as the government looks to expand indirect taxes on the space in the coming days. According to reports from local media, the country is formulating methods to expand the ambit of these indirect taxes, specifically the goods and services tax (GST), to cover a larger section of the crypto space.
The GST is an indirect tax that replaced many others in the country a year or two ago. It is levied on the supply of goods and services, including things like restaurant bills, e-commerce orders, and others. Some politicians have demanded the highest GST slab, which is levied at 28%, on the crypto industry.
According to a
report by the Hindustan Times, the tax proposals are to be analysed by the requisite law committees, which will recommend their views to the
The 28% GST is usually reserved for luxury goods and others that aren’t considered to be essential items. For instance, it is applied to gambling and lotteries, which is what parliamentarians in the country are likening crypto to when demanding this tax.
“Several MPs (members of Parliament) demanded to raise the GST on cryptocurrencies to 28% like gambling and lotteries. As Parliament is an apex body, their demands will also be examined by the law committee,” the report quoted sources as saying.
The GST is said to be in addition to the 30% income tax on earnings from virtual digital asset (VDA) transactions that the government announced during the Union Budget in February this year. It followed this up with a 1% tax deduction at source (TDS), which is levied on salaries and other incomes, of those selling cryptocurrencies.
The two taxes together have already discouraged many users from crypto trading, and an addition of 28% GST might make things worse. Not only that, but
crypto exchanges in the country may also struggle to keep track of all the taxes that are to be levied on such transactions, as will the users.
RIL tumbles nearly 4% on weaker than expected profits, slowdown in retail business and decline in Jio subscriber additions
Campus Activewear shares debuts at 21% premium despite weak market trends
“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.
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.