India may levy Goods and Services Tax on cryptocurrency trading, according to people with direct knowledge of the matter, even as there’s lack of clarity about their legal status in the country.
The government may levy an 18 percent GST, the people said requesting anonymity as they weren’t authorised to speak to the media. The proposal, being considered by Central Board of Indirect Taxes and Customs, will be tabled before the GST Council after it’s finalised, they said.
Cryptocurrencies could be classified as intangible goods on a par with software, they said, adding that its use in illegal activities would have to be dealt with under other laws.
India hasn’t officially banned or legalised virtual currencies, but the government has, on multiple occasions, pointed to the risks involved. More so, after bitcoin surged 19 times to nearly $19,000 last year before losing most of its gains. The Reserve Bank of India in April barred lenders from dealing with entities trading in cryptocurrencies, giving them three months to unwind business. Crypto exchanges, however, moved the court against the directive.
The decision to tax cryptocurrencies will also hinge on the outcome of the panel set up to suggest a way to regulate them. BloombergQuint had earlier reported that while the Department of Economic Affairs seeks to regulate virtual currencies, investigative agencies want a ban.
The Income Tax Department also issued notices to cryptocurrency traders and is trying to recover dues. If such virtual currencies aren’t proactively taxed, the liability would increase and make recovery difficult, one of the people quoted above said. That’s why CBIC must also move in tandem, he said.
Also Read: What Bitcoin Is Really Worth May No Longer Be Such A Mystery
According to the proposal:
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