Union Finance Minister Nirmala Sitharaman announced a 30% tax on cryptocurrency income and a 1% TDS on cryptocurrency transactions. In two consecutive sessions of Parliament, however, the government was unable to introduce a Bill on the subject. Whether cryptocurrency is a currency, a commodity, or a service is a point of contention among experts. The government is planning to charge GST on cryptocurrency transactions.
According to two finance ministry officials, the government will levy goods and services tax (GST) on service fees on cryptocurrency transactions, not the digital asset’s gross value. However, the finance ministry has yet to figure out how to treat certain crypto transactions that could result in actionable claims in indirect tax terms.
GST applies to goods and services that are provided for a fee; however, some transactions—for example, a company giving away free crypto tokens to motivate employees or promote its products—might not fall under this category of supply and instead be classified as an actionable claim, which is exempt from GST. The government may seek clarification from the GST Council, according to officials who spoke on the condition of anonymity.
In the case of certain transactions, say mining activity of cryptocurrency or exchange between two persons in crypto assets, we have been examining whether it involves a transaction in the supply of goods or services, or if it is just an actionable claim that is neither goods nor services under GST law,” the second official said. He said if it is classified as goods or services, then GST will apply. “One view is that because it is an actionable claim, it is neither goods nor services. That part is not very clear. We are giving a good, hard look, and we will firm up our view in due course,” the official added.
Vivek Johri, Chairman, Central Board of Indirect Taxes and Custom, says that when a person does a transaction on an exchange located abroad, he will have to pay GST in India on reverse charge basis. In case of exchanges that are located abroad, the provision is that the place of supply of service would be India because the recipient of service is in India and, therefore, he will be liable to pay GST on reverse charge basis.
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