Goods and Service Tax (GST) Council is planning to levy a 28 percent tax on cryptocurrencies.
The government’s view is to bring cryptocurrencies at par with lottery, casinos, racecourses, and betting, CNBC-TV18 quoting sources said.
The matter is up for consideration by the GST Council’s nominated law committee, before it puts forward the suggestions to the fitment committee and to the GST Council for a formal nod.
“The proposal is to levy 28 percent GST on services and all activities related to cryptocurrencies soon. The law committee’s view will be tabled before the fitment committee, and it is then for the fitment committee to suggest a rate, which is likely to be 28 percent, and post this, the proposal will be taken to the GST Council for a formal nod,” sources said.
Even as the date of the next council meeting remains undecided, the backend work to pave way for the proposal has already started, sources added.
“There are various aspects of cryptocurrencies – the transactions involving cryptos, cryptos being used to make purchases, cryptos being received as payments. All these aspects are under examination and will be discussed by the law committee,” sources said.
The sources said all crypto exchanges in India act as intermediaries. “They sell cryptos from foreign exchanges to people in India. So, this is a service, and currently, this is at 18 percent GST slab and classified as an intermediary service. Post the discussion at the law committee, this service is likely to be classified under a different head, under the list of services, where it could attract 28 percent GST, if agreed upon by the law committee, fitment committee, and the GST Council,” the sources added.
Currently, online gaming (without betting) attracts 18 percent GST right now. However, the ones involving betting along with gambling, race clubs, attract 28 percent.
Earlier this month, the panel of state finance ministers was unanimous on hiking the GST rate on casinos, racecourses, and online gaming services to 28 percent, West Bengal finance minister Chandrima Bhattacharya had said. However, a call on whether the tax should be levied on gross or net valuation was to be taken after further deliberations.
Apart from the GST, crypto investors also pay a 30 percent income tax plus cess and surcharges on earnings from virtual digital asset transactions after such a proposal was announced in the 2022-23 Budget. This came into effect on April 1.
The Budget also proposed a 1 percent 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 includes individuals/HUFs who are required to get their accounts audited under the I-T Act. The TDS will come into effect from July 1.
Apart from all the taxes, traders also shell out some money as trading fees to exchanges.