crypto tax in India government may levy 28 percent GST

  • The crypto industry has already been buckling under income tax and TDS.
  • Trading volumes in India fell in April, right after the current set of taxes were brought into practice.
  • Politicians have asked for crypto to be treated under the same norms as lotteries and gambling.

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.

Tough times ahead

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 GST Council, which regulates matters related to this particular tax. It is chaired by the country’s finance minister, along with finance ministers of states.

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.

Taxing times for crypto

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.

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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.


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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