The government is working on a comprehensive indirect tax regime for crypto assets, which will check revenue loss to the exchequer due to the uncertain nature of these assets, reported Livemint on Monday.
Nirmala Sitharam-led finance ministry is planning to define the characteristics of cryptocurrencies, their use, and how they fit into the existing legal framework, people aware of the development told Livemint. The ministry, after deciding its legal nature, will fix the GST rate for cryptocurrencies, as it could be in a new GST slab rate, between 18 per cent and 28 per cent, reported Livemint, quoting its sources.
“We are still discussing the applicability of GST in case of crypto assets…right now, it is levied on services… so we need to see if crypto assets are declared as a good or service. We can have a special rate for it. It may not necessarily be 18 per cent or 28 per cent. Maybe somewhere between that. We have had a few discussions on it and will arrive at a decision soon,” one of the two people told Livemint.
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“A better understanding of how cryptocurrencies fit into our legal system is the pre-requisite for the decision on the GST rate,” the second person told the newspaper.
This comes amid heated debates on crypto assets in India as the Reserve Bank of India has said they are a threat to the nation's financial stability. On the other hand, the central government is in touch with multilateral agencies and the Bank for International Settlements to develop a consensus on regulating such assets, reported Livemint.
The GST will only be applicable on the margin or service fees, and not on the entire value of the asset, government is also examining the treatment of certain transactions like mining or ‘airdropped crypto tokens'.
The Centre has earlier announced a 30 per cent tax on income from crypto assets with effect from April 1, 2022, and 1 per cent TDS on payment of virtual assets more than Rs 10,000 in a year and taxation of such gifts in the hands of recipients from July 1.