Crypto tax for the upcoming Financial Year is seen as a bottleneck towards crypto innovation and adoption.
The upcoming crypto tax regime is quite stringent on the industry. Many are believing that it could bring down the number of investors and startups in the country.
Unveiling the New Cryto Tax Regime
On February 1, Minister of Finance, Ms. Nirmala Sitharaman unveiled the new crypto tax regime which states that any Virtual Digital Asset shall be taxed at a rate of 30%.
Also announced was the 1% Tax Deduction at Source (TDS) which would be levied on transfers of crypto assets. Any transaction higher than the value of INR 10,000 will be subject to TDS beginning from July 1.
GST is Applicable on Abroad Based Exchanges
On February 3, the Chairman of the Central Board of Indirect Taxes and Customs (CBIC), Mr. Vivek Johri clarified that transacting on a crypto exchange located abroad is liable to be taxed under the Goods and Services Tax (GST).
Investors transacting on foreign-based crypto exchanges will have to pay GST in India on reverse charge basis.
Since the place of supply of service is in India and the recipient of service is in India, the investor will have to pay GST.
A news from an unofficial source on Sunday reported that the Government of India is working on the classification of crypto under the Goods and Services Tax (GST) law. GST officers see crypto as similar to lottery, casinos, betting, gambling, horse racing, which have 28% of GST on the entire value.
An official said that if “GST is levied on the entire transaction of cryptocurrencies then the rate could be in the range of 0.1% to 1%.”
Currently, 18% GST is levied only on services provided by crypto exchanges.
RBI Has Not Proposed Any Crypto Trading Framework
On Monday, the Minister of Finance (State), Mr. Pankaj Chaudhary revealed that RBI has not made any proposal to formulate any mechanism for the trading of crypto assets.
Moreover, RBI is not going to categorize crypto as securities or other financial instruments.
Investors Cannot Offset Loss in One Crypto with Profit in Another
On Monday, Minister of Finance (State), Mr. Pankaj Chaudhary also clarified that while computing the income from the transfer of Virtual Digital Asset (VDA), no deduction in respect of any expenditure (other than the cost of acquisition) or allowance is allowed.
Moreover, the infrastructure costs incurred in the mining of VDA will not be treated as the cost of acquisition as same as capital expenditure, which is not allowable as deduction.
All these provisions will fall under section 115BBH of the Income-tax Act 1961, which will be added to the Finance Bill 2022.
The Bill also proposes to define what a VDA is.
Moreover, the loss from the transfer of VDA will not be allowed to be set off against the income arising from the transfer of another VDA. It means that if you made losses in Ethereum, but gains in Bitcoin, you will not be able to set off these losses against the profits.
This crypto tax regime is seen as an obstacle towards adoption and entrepreneurship. These laws are unfavourable for the industry.
News recommendation: Crypto Apps Grew 401% Annually & 902% in the October-December Quarter of 2021
Be First to Comment