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More tax on cryptocurrency? Will you have to pay GST now? Experts react on expected impact

Experts feel that imposing further tax on crypto transactions in the form of GST would be disastrous for the crypto industry in India. 

More tax on cryptocurrency? Will you have to pay GST now? Experts react on expected impact
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GST on cryptocurrency: After announcing 30% tax on income from cryptocurrencies and 1% TDS on crypto transfers, the Government of India is reportedly working on classification of crypto as goods or services under the GST law. This will help the Government in levying tax on the entire value of transactions. 

As per the current rules, 18% tax is levied on the service provided by crypto exchanges categorised as “financial services”. 

News agency PTI recently reported that GST officers were viewing crypto as similar to lottery, casinos, betting, gambling and horse racing, which have 28% GST on the entire value plus 3% more in case of gold. 

An official was quoted as saying that clarity was required on whether to impose GST on entire value in case of cryptos and whether they can be classified as goods or services. 

The report further quoted an official as saying he GST rate in entire crypto transactions could be in the range of 0.1% to 1%. 

The Government has already announced 1% TDS on every crypto transaction, which will come into effect from July 1.

Experts feel that imposing further tax on crypto transactions in the form of GST would be disastrous for the crypto industry in India. 

“The fact that GST officers are of the view that cryptos, by nature, are similar to lottery, betting or gambling is itself a very problematic regulatory scenario. Comparing cryptos with gambling is a regressive regulatory approach which does not even seem to be aligned with Government’s call for taking a balanced approach on the issue,”  Purushottam Anand, advocate and founder of Crypto Legal, told FE Online. 

“If GST is applied on the entire transaction, instead of only on the service component, the total tax burden – income tax and GST – will become prohibitive for the investors. Such excessive and unreasonable taxation will also hamper growth and innovation in the industry and will significantly reduce foreign investment,” added.

Om Malviya, President, Tezos India, said that the GST council should take note of the fact that adding GST on top of crypto tax and TDS would put more pressure on crypto community. 

“Adding Cryptocurrency under the ambit of GST on top of crypto tax and TDS is bound to put more pressure on the crypto community. With the scope of pushing a decentralised financial system for the better, this might defy the actual purpose of the same. The GST council must take a serious note on this,” Malviya said.

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First published on: 28-03-2022 at 16:44 IST