Govt working on classification of cryptocurrency under GST law

The government is working on the classification of cryptocurrency as goods or services under the GST law so that tax can be levied on the entire value of transactions.

Currently, 18 per cent Goods and Services Tax (GST) is levied only on services provided by crypto exchanges and is categorised as financial services.

GST officers are of the view that cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28 per cent of GST on the entire value. Besides, GST at three per cent is levied on the entire transaction value in the case of gold.

Also Read | No plans to introduce cryptocurrency, says Centre

“There is a clarity needed in regard to levy of GST on cryptocurrencies and whether it has to be levied on the entire value, We are seeing whether cryptocurrencies can be classified as goods or services and also removing any doubt on whether it can be called an actionable claim,” an official said.

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 one per cent.

“Discussions are in a nascent stage on the rate of tax, whether it would be 0.1 per cent or one per cent. First, a decision on classification will have to be finalised and then the rate will be discussed,” the official told PTI.

The Goods and Services Tax (GST) law does not clearly state the classification of cryptocurrency and in the absence of a law regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies it as an actionable claim.

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.

Also Read | A latecomer’s guide to cryptocurrencies

The 2022-23 Budget has brought in clarity with regard to the levy of income tax on crypto assets. From April 1, a 30 per cent I-T plus cess and surcharges, will be levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactions.

The Budget 2022-23 also proposed one per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.

The provisions related to one per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1.

Separately, the government is working on legislation to regulate cryptocurrencies, but no draft has yet been released publicly.

AMRG & Associates Senior Partner Rajat Mohan said actionable claims, other than lottery, betting and gambling are not exigible to GST.

“Private cryptocurrency can neither be termed ‘money’ nor be categorized as ‘securities’ for taxation, thereby, what remains to be checked is whether the legal framework would categorize the same as ‘actionable claim’ or not,” Mohan added.

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Accused deleted cryptocurrency wallet after investing stolen Rs 12.65 lakh: Police

The three people arrested from Nagpur for allegedly stealing Rs 12.65 lakh from the bank account of UT resident, Krishan Kanhaiya, had reportedly invested the money in cryptocurrency through Wazix Cryptocurrency wallet, the police said on Wednesday.

The three, including a distant relative of Kanhaiya, have also told the police that they invested the money in USDT by tagging Coin98 crypto currency wallet, which they later deleted after making access through one pass key or a phrase of 12 words, DSP (cyber) Rashmi Yadav Sharma said. The three arrested were identified as Nihal Dinkar Dohare, 21, a mechanical engineer, Aatish Ashok Rawat, 18, and Sanjay Gaikwad, 18, of Nagpur.

Aatish and Sanjay are pursuing BBA. Aatish is the relative of Kanhaiya, a resident of Sector 41 from whose bank account the Rs 12.65 lakh was stolen. A team of UT cyber cell, comprising S-I KD Singh, head constables Bahadur Lal, Balwinder Singh, and Rajinder, constable Baljeet Singh, and woman constable Poonam had arrested the trio in Nagpur February 7. They have been sent to one day police custody on Wednesday.

Police said Kanhaiya had gone to Nagpur to meet his relatives. It was there that Aatish got hold of Kanhaiya’s mobile phone and accessed confidential details, swapped SIM into the phone of Nihal Dinkar and transferred Rs 12.65 lakh. The cheating came to light after Kanhiya’s son, Rahul Rawat, checked the account details, on February 1.

“During interrogation, the accused disclosed that they have invested the cheated amount in USDT ($15398.1619) by tagging coin98 wallet and later deleted the wallet after investment. One pass key or a phrase of 12 words is needed to open the coin98 wallet. We are interrogating the trio to try and recover that passcode to recover the money from coin98 crypto currency wallet, Wazirx Crypto currency wallet,” DSP Sharma said.

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