The government is working on classifying cryptocurrencies as goods and services under the GST Act, so that the full value of the transaction can be taxed. At present, only services provided by crypto exchanges attract 18 per cent GST and are classified as financial services.
The GST authorities are of the view that cryptos are equivalent to any lottery, casino, betting, gambling, horse racing, with 28 per cent GST applicable on its entire value. Apart from this, 3 per cent GST is levied on the entire transaction value in case of gold.
What do GST officers say?
An official said, “There is a need for clarity on levying GST on cryptocurrencies and we are considering whether it should be levied on full value, and whether cryptocurrencies can be classified as goods and services.” ‘
How much GST may have to be paid
Another official said that if GST is levied on the entire transaction of cryptocurrencies, then this rate could be between 0.1 to 1 per cent. The discussion on the tax rate is at an early stage, whether it is 0.1 per cent or one per cent. First the decision on the classification will have to be finalized and then the rate will be discussed.
What’s not clear in the GST law is the classification
The GST law does not clearly specify the classification of cryptocurrencies. Some clarity has been brought in the General Budget 2022-23 regarding the levy of income tax on crypto assets. The government is working on a separate law to regulate cryptocurrencies, but no draft has been publicly released yet.