18% GST On All Cryptocurrencies?
Bloomberg has shared a report, as per which Central Board of Indirect Taxes and Customs has proposed 18% GST on mining and trading of all digital currencies in India.
The proposal shall be shared with GST Council now, which will consider this during their next meeting.
The new proposal could be in response to a Delhi High Court order, wherein they had sought replies from the Govt. over the status of bitcoins and other cryptocurrencies in India.
Both RBI and Ministry of Finance were sent notices by Delhi HC, over a plea asking them to clarify the issue.
The proposal to tax cryptocurrencies can be a massive game changer, especially after Income Tax Dept. raided crypto-exchanges, and Govt. was about to term cryptocurrencies as illegal.
Taxation Of Cryptocurrencies: 6 Things You Should Know
Here are the major highlights from the proposal by Central Board of Indirect Taxes and Customs over taxing cryptocurrencies:
- Cryptocurrencies can be categorized as intangible goods, such as software and services, which means 18% GST can be applied over them.
- Purchase of cryptocurrencies can be considered as a supply of goods, and related activities such as supply, transfer, storage, accounting of digital currencies can be considered as services.
- In case both buyers and sellers are in India, then the sale of cryptocurrency shall be considered as a supply of software.
- In case sale and purchase of cryptocurrency are taking place outside India, then it would be covered under Import and Export of Services, and thus, integrated GST on cross-border supplies would be applied.
- Taxing cryptocurrency deals can be enforced retrospectively from July 1st, 2017 when GST was officially launched in India. This means dealers and traders of cryptocurrency can be asked to pay taxes effective July 1st, 2017.
- Mining of cryptocurrencies would be considered as a supply of goods, as mining produces digital coins. Likewise, Wallets which facilitate storing of digital coins would be taxed as well, under GST under storage of goods.
However, something issues are still ambiguous: For instance, the tax of 18% would be applied on the actual profits made in trading cryptocurrencies, or on the value of the investment.
Will banks allow buying of cryptocurrencies once 18% GST is approved? HDFC Bank and others had recently banned any buying or selling cryptocurrencies.
Once GST Council takes up this issue, then more clarity can be achieved.
We will keep you updated, as we receive more details.