The government is working on classifying cryptocurrencies as goods or services under the Goods and Services Tax (GST) Act, so that the full value of the transaction can be taxed.
At present, only services provided by crypto exchanges attract 18% GST and are classified as financial services.
What do the officials say?
The GST authorities are of the view that cryptos are similar to any lottery, casino, betting, gambling, horse racing, with 28 per cent GST applicable on the entire price. Further, in case of gold, 3% GST is levied on the entire transaction value.
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“There is a need for clarity on levying GST on cryptocurrencies and we are considering whether it should be levied at full value, and whether cryptocurrencies can be classified as goods or services,” said an official. ‘
Know how much GST will have to be paid on earnings
Another official said that if GST is levied on the entire transaction of cryptocurrencies, then this rate could be in the range of 0.1 to 1 per cent. The official told PTI, “Discussions on the tax rate, whether it is 0.1 per cent or one per cent, are at an early stage. First the decision on classification will have to be finalized and then the rate will be discussed.
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The GST law does not clearly specify the classification of cryptocurrencies and in the absence of a law to regulate such virtual digital currencies, one has to take into account whether the legal framework classifies it as an actionable claim or not. . An actionable claim is a claim that deserves action in court. Some clarity has been brought in the Union Budget 2022-23 regarding the imposition of income tax on crypto assets. The government is working on a separate law to regulate cryptocurrencies, but no draft has been publicly released yet.