Cryptocurrency As A Goods Or Service Under GST Law: A Report

The government is working on the classification of cryptocurrencies under the GST law: Report

New Delhi:

The government is working to classify cryptocurrencies 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 categorized as financial services.

GST officials are of the view that cryptos, by nature, are similar to lotteries, casinos, betting, gambling, horse racing, which have 28 percent of GST on the total value. In addition, GST at 3 per cent is levied on the entire transaction value in the case of gold.

‚ÄúThere is a need for clarity on the GST levy on cryptocurrencies, and whether it should be levied on the entire value, We are looking at whether cryptocurrencies can be classified as goods or services and also removing any doubt as to whether they can be called can action was taken. claims, “an official said.

Another official said if GST was levied on entire cryptocurrency transactions, then the rate could be 0.1 to 1 per cent.

“Discussions are still in the early stages on the tax rate, either 0.1 per cent or 1 per cent. First, the classification decision needs to be finalized, and the rate will be discussed,” the official told PTI.

The Goods and Services Tax (GST) law does not explicitly state the classification of cryptocurrencies. In the absence of laws regulating such virtual digital currencies, classification should consider whether the legal framework classifies them as actionable claims.

An actionable claim is a claim that can be made by a creditor for any type of debt other than a debt secured by an immovable property mortgage.

Budget 2022-23 has clarified the income tax levy on crypto assets. Beginning April 1, 30 percent of IT as well as cess and surcharges will be levied on such transactions in the same manner as it entertains wins from horse races or other speculative transactions.

Budget 2022-23 also proposes 1 per cent TDS on payments against virtual currency in excess of Rs 10,000 per annum and tax for such gifts in the hands of the recipient. The threshold limit for TDS is Rs 50,000 per annum for certain persons, including individuals/HUFs who are required to have their accounts audited under the IT Act.

The 1 per cent TDS related provision will be effective July 1, 2022, while profits will be taxed effective April 1.

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

AMRG Senior Partner & Associates Rajat Mohan said actionable claims, other than lotteries, betting and gambling, are not eligible for GST.

“Private cryptocurrencies cannot be called ‘money’ nor categorized as ‘securities’ for taxation; therefore, what remains to be examined is whether the legal framework will categorize the same as ‘actionable claims’ or not,” he added. Mr. Mohan.


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