According to recent news on CNBC TV, India is likely to impose 28% goods and services tax (GST) on cryptocurrency returns. India’s top decision-making body The Goods and Services Tax (GST) Council will be discussing the indirect taxes as the reports say. The GST Council has nominated a committee that will take up the proposal to impose 28% GST on all pursuits related to cryptocurrency. It is expected that the proposal will be presented before the GST Council in the next meeting.
The cryptocurrencies that originated from the revolutionizing blockchain technology will now have to face mountains of taxes in India including, 1% TDS, 30% tax on income from cryptos, and 28% goods and services tax (GST). These tax liabilities will also go to be applicable to the transactions of other digital assets as well. The 30% tax on the net profit earned from the cryptos has been implemented from April 1 while 1% TDS will be applicable from July 1 onwards.
According to one of the government spokespersons, the crypto activities include the sale and purchase of cryptocurrencies on different exchange platforms, holding digital assets in centralized and decentralized wallets, yield farming, participating in liquidity mining, and so on. The GST Council of India will be determining all the above-mentioned activities to arrive at a decision.
In February, the Union Finance Minister Nirmala Sitharaman announced a clear deduction of 30% tax on earnings from cryptocurrencies. While the Indian government is still holding back its decision to give cryptocurrencies and digital assets a legal statute, they are making sure to squeeze as many taxes as possible from the transactions. Whereas the taxing percentage will not be applied to the cost of purchase, the users and crypto investors will not be permitted to add any deductions, transaction losses, or recurring fees to offset the profit margins.
Also read: Indian Crypto Tax: boost or bane for Investors
Section 115BBH, Income Tax Act of 1961
According to the amendment in the Income Tax Act of 1961, Section 115BBH has been included that is related to virtual digital assets. By virtue of Section 115BBH, the income generated by transferring virtual assets from one person to another person or institution will be taxable by 30%. Also, the tax rate will be the same for business incomes, and short-term and long-term capital gains.
The section does not provide any deductions, expenditures, or allowance to set off any loss while computing the taxable income. Also, there will be no provision to adjust income loss incurred by the assessee from the transaction of virtual digital assets and cryptocurrencies.
Tax experts recommendation on dispositioning tax rates
In accordance with the leader at indirect tax consultancy firm Deloitte, ‘ Taxing of cryptocurrencies is quite nuanced’. He also added that the lawmakers must include multiple aspects like whether cryptocurrency falls under the category of goods or services, how to locate the transaction, and how other countries are taxing the crypto incomes.
It is very much clear from many experts that the issue is not the income coming from cryptocurrencies or digital assets but what needs to be taxed and how much needs to be taxed. Above all, the Indian ministry should be thinking about establishing a bill or law for cryptocurrency and its working platforms so that clear thinking can be propagated among the investors. It is also very important to give a legal tender to all the virtual digital assets before taxing them legally. However many industry analysts are hoping to be consulted for drafting together GST policies for virtual digital assets.
Also read: Thailand to lay off 15% tax on crypto income
Conclusion
In the meantime, some questions are still in the air. Will the Indian crypto investors will come together to fight against the taxation? To what extent the Indian economy will be affected? Is the taxing more important than establishing a robust frame structure to make crypto trading safe? Is the Indian Cyber & Information Security Division (C&IS) strong enough to investigate fraudulent activities, global digital hacking, and crypto tax evasions?
Are there any other questions related to this issue?
Let us know in the comment section below!
