Chances are you have already received that “one important message” from someone, an article about GST on Cryptocurrency.
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Goods and Services Tax on Cryptocurrency
According to the report, a proposal to apply GST on Cryptocurrency is being considered by Central Board of Indirect Taxes and Customs. It will be tabled before the GST Council after it’s finalised.
Crypto assets will be considered on par with the likes of other intangible assets: software.
According to the proposal, as reported by BloombergQuint:
- Purchase or sale of cryptocurrencies should be considered as supply of goods, and those facilitating transactions like supply, transfer, storage, accounting, among others, will be treated as services.
- Value of a cryptocurrency may be determined based on the transaction value in rupees or the equivalent of any freely convertible foreign currency.
- If buyers and sellers are in India, the transaction would be treated as a supply of software and the buyer’s location will be the place of supply.
- For transfer and sale, the location of the registered person will be the place of supply. However, for sale to non-registered persons, location of the supplier would be considered as the place of supply.
- Transactions beyond the Indian territory will be liable for integrated GST, and would be considered as import or export of goods. IGST will be levied on cross-border supplies.
Tax on Transactions from July, 2017
While no decision has been made, the sources have said that retrospective taxation will be considered from July 01, 2017 – the day GST was brought in effect. Treating Cryptocurrencies as goods and services would mean paying 18% tax on buying and selling of cryptocurrencies.
If retrospective taxation is issued, you have to sit and calculate tax on every single transaction of cryptocurrency you did from July 01, 2017.
Tax on Mining
Crypto mining will be taxed as supply of services according to the said proposal. Tax should be collected from miner on transaction fees and reward, and if value of the reward exceeds Rs 20 lakh, individual miners will have to register under GST, as mentioned in the article.
Indian Exchanges have to Register under GST; Foreign Exchanges should pay IGST
Once again, quoted from the article – Cryptocurrency exchanges will have to register under GST and pay tax on the commission they earn, according to the proposal. For exchanges located outside India, service provided by them to Indians would be considered import of a service, and they will have to pay IGST.
On the move, Sumit Gupta, the Chief executive of Coindcx says,
“Adding GST to crypto transactions would just increase the price of crypto in India compared to the international value. Users will be discouraged to trade in India and will find alternative routes to acquire the assets.”
Another user and frequent contributer to CoinCrunch Rahul Basu says it is not rational to tax cryptocurrency transactions because governments do not own cryptocurrency. “(Governments) should tax the profits people cash out on selling… because government controls fiat money”.
While taxation is necessary to keep the country running, taxing each transaction of cryptocurrency will discourage traders, and quite possibly that is the aim of the regulators too.
But while we await the decision on RBI’s Banking ban from the Supreme Court and the report from Garg Committee about regulations, this is a move that most likely looks like “Gaon Basa Nahi, lutere pehle hi aa gaye” – something what happens when your friends ask for a party after the news of a pay hike.
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