India Likely to Levy 18% Goods and Services Tax on Cryptocurrency Trading

According to the latest reports coming from Bloomberg, the Indian tax authority is now working on plans to impose an 18% Goods and Services Tax on trading of digital currencies. The report goes to note that one of the reasons to levy this new tax is that the Central Board of Indirect Taxes and Customs classifies digital currencies as intangible assets or commodities, instead of securities or currency.

The authorities have also been mulling out options for separate laws to be considered for the use of digital currencies for criminal activities. The proposal will be put before the Goods and Services Tax Council before getting finalized.

The value of digital currency transactions would be based on its value in rupees or any other equivalent and easily convertible foreign currency. Full all the transactions that involve parties outside India would be liable for IGST i.e. Integrated GST.

Below are some of the salient points of the tax-proposal vis-a-vis reported by the publication.

• Purchase or sale of cryptocurrencies should be considered as supply of goods, and those facilitating transactions like supply, transfer, storage, accounting, among others, will be treated as services.
• Value of a cryptocurrency may be determined based on the transaction value in rupees or the equivalent of any freely convertible foreign currency.
• If buyers and sellers are in India, the transaction would be treated as a supply of software and the buyer’s location will be the place of supply.
• For transfer and sale, the location of the registered person will be the place of supply. However, for sale to non-registered persons, location of the supplier would be considered as the place of supply.
• Transactions beyond the Indian territory will be liable for integrated GST, and would be considered as import or export of goods. IGST will be levied on cross-border supplies.

Note that these are just the propositions and recommendations put forward by the tax department and no decision has been taken in this regard. The interesting fact is that the committee has asked to levy GST from July 1, the same day from when the central bank has asked other local banks to end their relationship with crypto exchanges.

Another notable thing is that in addition to crypto trading, crypto mining activities will also be brought under the ambit of GST tax laws while treating it as a “supply of service”. Moreover, miners who earn more than 20 lakhs from their computational rigs have to register their business entity with the GST Council. Moreover, wallet providers will also be taxed as per the GST laws, as they receive and supply the digital currency.