In a significant move, the Central Board of Indirect Taxes and Customs (CBIC) is working on defining a legal framework for applying goods and services tax (GST) on crypto or virtual digital assets appears to be around the corner, with the working on an agenda paper on the topic.
The board has been interacting with the industry to decide on the GST rate for crypto assets and identify whether they should be classified as ‘goods’ or a ‘service’, besides related issues.
Union Finance Minister Nirmala Sitharamis planning to define the characteristics of cryptocurrencies, their use, and how they fit into the existing legal framework, people aware of the development told Livemint.
As per sources, the ministry, after deciding its legal nature, will fix the GST rate for cryptocurrencies, as it could be in a new GST slab rate, between 18 per cent and 28 per cent, reported Livemint, quoting its sources.
This comes amid heated debates on crypto assets in India as the Reserve Bank of India has said they are a threat to the nation’s financial stability. On the other hand, the central government is in touch with multilateral agencies and the Bank for International Settlements to develop a consensus on regulating such assets, reported Livemint.
The GST will only be applicable on the margin or service fees, and not on the entire value of the asset, government is also examining the treatment of certain transactions like mining or ‘airdropped crypto tokens’.
The Centre has earlier announced a 30 per cent tax on income from crypto assets with effect from April 1, 2022, and 1 per cent TDS on payment of virtual assets more than Rs 10,000 in a year and taxation of such gifts in the hands of recipients from July 1.