While the legality of cryptocurrencies in India is still unclear, the government is reportedly considering levying a Goods and Services Tax (GST) on crypto trading and mining. The Central Board of Indirect Taxes and Customs is working on a proposal to impose an 18% GST on cryptocurrencies, according to Bloomberg report. The proposal will be considered by the Goods and Services Tax (GST) Council once it is finalized.
According to the proposal, selling and buying of digital currencies and transactions including transfer, storage, supply or accounting are subject to taxes, as they come under 'supply of goods'. Further, mining will also be classified as 'supply of service' and taxes will be levied on any fees/ rewards earned by Indian miners. Moreover, wallet providers, cryptocurrency exchanges and miners earning over Rs.20 lakh will be required to register under GST.
If the transaction takes place in India, it would be considered as a supply of software and the place of supply will be the buyer’s location. As for selling or transfer of cryptocurrency, the place of supply would be the registered party’s location. And if the sale is carried out by a non-registered individual, the place of supply would be the supplier’s location. International transfers would be classified under 'import or export of good's and thereby Integrated GST (IGST) will be imposed on any cross-border transactions. The value of a cryptocurrency transaction would be on the basis of its value in rupees or its equivalent of a freely convertible foreign currency. Furthermore, GST would be imposed on commissions earned by cryptocurrency exchanges, while IGST would be imposed on foreign exchanges.
According to reports, the taxes on cryptocurrency may also be imposed retroactively since the start of GST system since July last year. This would mean that the tax would be applicable to all cryptocurrency transactions and trading activity and users will have to pay the taxes on all their activity since GST was enforced. The new proposal could be issued as soon as July 1 this year, once the government decides on how to go about it.
Rosemary has studied Journalism and is cryptocurrency enthusiast who loves writing. She is a regular contributor and a part of the Cryptoground's News Reporting Team. She has been following crypto space for a year now and understands the nitty-gritty quite well. She largely writes about the hot news revolving around ethereum blockchain and cryptocurrency. Rosemary is also a fitness junkie.