The government is working on classification of cryptocurrency as goods or services under the GST law, so that tax can be levied on the entire value of transactions.
Currently, 18% Goods and Services Tax (GST) is levied only on service provided by crypto exchanges and is categorised as financial services.
GST officers are of the view that cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28% of GST on the entire value. Besides, GST at 3% is levied on the entire transaction value in case of gold.
According to media reports, if the GST is levied on the entire transaction of cryptocurrencies then the rate could be in the range of 0.1 to 1%.
The Goods and Services Tax (GST) law does not clearly state about classification of cryptocurrency and in the absence of a law on regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies it as actionable claim.
An actionable claim is a claim which can be made by a creditor, for any type of debt other than a debt secured by mortgage of immovable property.
The 2022-23 Budget has brought in clarity with regard to levy of income tax on crypto assets. From April 1, a 30% I-T plus cess and surcharges, will be levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactions.
The Budget 2022-23 also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.
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