According to reports, the Indian government may impose a 28% Goods and Services Tax (GST), on crypto transactions. “Currently tax is levied only on the part of the services provided by crypto exchanges. Subjecting the whole transaction to tax at a higher slab of 28% could give the markets a free fall,” one tax expert warned.
Crypto Transactions Get 28% More GST from Council
India’s Goods and Services Tax (GST) Council will soon make a decision on whether to expand the scope of applicable transactions and levy a 28% GST on all services and activities related to cryptocurrencies, CNBC TV18 reported Monday.
The GST Council is the apex decision-making body chaired by the country’s finance minister. It has appointed its law committee, which will form an opinion on cryptocurrency and the GST issues. The publication received the following information from sources:
There are various aspects of cryptocurrencies — the transactions involving cryptos, cryptos being used to make purchases, cryptos being received as payments. These aspects will all be examined by the law committee.
“Tax proposals will be analyzed by the law committee, which will recommend its views to the GST Council for its consideration,” one person familiar with the matter was quoted as saying.
The sources explained that crypto exchanges in India are currently classified as “an intermediary service” and are taxed at 18% GST. “They will have to be classified separately,” the sources noted, adding:
If approved by the GST Council, all transactions will be subjected to 28% GST.
Online gambling (without betting) has a GST rate of 18%. Online gambling and betting are subject to 28% GST.
A few parliamentarians have asked that crypto transactions should be considered gambling. One person familiar with the issue explained: “Several MPs demanded to raise GST on cryptocurrencies to 28% like gambling and lotteries. As Parliament is an apex body, their demands will also be examined by the law committee.”
Saket Patawari (executive director, Nexdigm tax consulting firm) commented on India’s decision to expand the types of transactions subject to GST.
Tax is currently levied on only a portion of services offered by cryptocurrency exchanges. The market could be subject to a 28% higher tax rate if the entire transaction is included.
Currently, India taxes cryptocurrency income at 30 percent. On July 1, a 1 % tax will be deducted from crypto transactions (TDS).
Meanwhile, the Indian government is working on the country’s crypto policy. Officials from the Finance Ministry have met with representatives of the International Monetary Fund and World Bank to discuss cryptocurrency regulation.
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