Cryptocurrency may attract 28% GST in addition to 30% tax

The Goods and Services Tax (GST) Council is considering levying 28 per cent GST on cryptocurrencies. According to a media report, the GST Council may discuss the proposal to tax cryptocurrencies in the upcoming meeting. The date of the meeting has not yet been decided. The proposed 28 percent GST is expected to be in addition to the 30 percent income tax on income from crypto asset transactions. Explain that in the Union Budget 2022-23, Finance Minister Nirmala Sitharaman had proposed a 30 percent tax on income from transfer of virtual digital assets. The new rules have come into effect from April 1.

According to the new rules, profits from all virtual digital assets, including cryptocurrencies, will be taxed at 30 percent. Gains from virtual digital assets including cryptocurrencies are taxable even if the total income of the taxpayer is less than the limit of Rs 2.5 lakh. The imposition of 28 per cent GST will result in heavy taxation on cryptocurrencies. This will bring cryptocurrencies on par with casinos, betting and lotteries as far as the level of taxation is concerned.

Significantly, India is planning to introduce a Reserve Bank-backed digital currency (CBDC). In this financial year, the Reserve Bank will issue digital currency. Finance Minister Nirmala Sitharaman had announced in her budget speech on February 1 that the Reserve Bank of India would issue a digital rupee/CBDC in the financial year 2022-23.

Apart from this, Finance Minister Nirmala Sitharaman, during an event at Stanford University in late April, had expressed apprehensions of misuse of cryptocurrency, saying that India will take a careful decision on its regulation.

He had said that the decision on crypto will not be taken in haste. He said that cryptocurrencies can also be manipulated for money laundering or terrorist financing.