Government considering classification of cryptocurrencies under GST law
Officers associated with GST mentioned that cryptocurrencies are similar to casinos, gambling, betting, which have 28% of the GST on the entire value.
New Delhi: The centre is working on the classification of cryptocurrency under the GST law to charge tax on the entire value of the transaction. Now, 18% Goods and Services Tax (GST) is levied only on services provided by crypto exchanges and is under the financial services category.
Officers associated with GST mentioned that cryptocurrencies are similar to casinos, gambling, betting, which have 28% of the GST on the entire value. Moreover, GST at 3% is levied on the entire transaction value in the case of gold.
According to another GST official, if GST is charged on the entire transaction of the cryptocurrency then the rate would be in the range of 0.1-1%. However, the rate will be only discussed once the ‘classification’ decision will be finalised.
GST has not clearly made a classification of cryptocurrency. In the absence of a law regulating such virtual digital currencies, the classification has to be taken into account to find out that the law classifies it as an actionable claim.
Thus, 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.
In the 2022-2023 Budget, the charge of income tax on crypto assets was brought to clarity. It was notified that from April 1, a 30% I-T plus cess and surcharges will be levied on such transactions, in the same manner, that way it happens with gambling, lottery, and other speculative transactions.
The Budget also proposed a 1% TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. Besides, the threshold limit for TDS would be Rs 50,000 a year for a concerned person, which would include individuals/HUFs, who would be required to get their accounts audited under the I-T Act.
Moreover, the provision related to 1% TDS will come into effect from July 1, 2022, while the gains will be taxed from April 1.
Separately, the government is working on legislation to regulate cryptocurrencies, however, no draft has been released yet.