In early February 2022, after the Government announced some decisions related to the digital assets in its Budget session, the cryptocurrency scene in India is pretty hot.
The Union government plans to include cryptocurrency under the goods and services umbrella, which would mean a Goods and Services Tax could be imposed on the digital currencies soon.
PTI reported that discussions related to the understanding of this matter are still in their early stages.
The government plans to levy GST on cryptocurrencies
Currently, cryptocurrency exchanges are subject to an 18% GST tax.
The government plans to include cryptocurrency under the GST law as financial services so that a tax can be charged on the entire transaction value.
“There is a clarity needed regarding 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,” stated a GST official.
Moreover, GST officials believe that cryptocurrencies share similarities with casinos, betting, gambling, lottery, and horse racing, among others in nature, and as these entities attract a 28% GST on the entire value, so should cryptocurrency transactions.
Besides, any transaction of gold attracts a 3% tax charged on the entire transaction value.
“Discussions are in a nascent stage on the rate of tax, whether it would be 0.1 per cent or 1%. First, a classification decision will have to be finalised, and the rate will be discussed,” cited a PTI report.
As per the Budget 2022, a TDS of 1% on payments made towards virtual currencies of more than Rs 10,000 in a year was made.
A threshold limit of Rs 50,000/year TDS was made for pacific persons, which also include individuals/HUFs who need to get their accounts audited under the I-T Act.