- March 21, 2022
- Posted by: admin1
- Category: DPN Topics
Section: Fiscal Policy
Context: The government is working on the classification of cryptocurrency as goods or services under the GST law, so that tax can be levied on the entire value of transactions.
- Currently, 18 per cent Goods and Services Tax (GST) is levied only on services provided by crypto exchanges and is categorized as financial services
- Cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28 per cent of GST on the entire value. Besides, GST at 3 per cent is levied on the entire transaction value in the case of gold.
- The Goods and Services Tax (GST) law does not clearly state about the classification of cryptocurrency and in the absence of a law regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies it as actionable claim.
- An actionable claim is a claim which can be made by a creditor, for any type of debt other than a debt secured by mortgage of immovable property.
- The 2022-23 Budget has brought in clarity with regard to the levy of income tax on crypto assets. From April 1, a 30 per cent I-T plus cess and surcharges, will be levied on such transactions in the same manner as it treats winnings from horse races or other speculative transactions.
- The Budget 2022-23 also proposed a 1 per cent TDS on payments towards virtual currencies beyond Rs 10,000 in a year and taxation of such gifts in the hands of the recipient. The threshold limit for TDS would be Rs 50,000 a year for specified persons, which include individuals/HUFs who are required to get their accounts audited under the I-T Act.
- The provisions related to 1 per cent TDS will come into effect from July 1, 2022, while the gains will be taxed effective April 1.
- Separately, the government is working on legislation to regulate cryptocurrencies, but no draft has yet been released publicly