After taxing income from virtual digital assets, the government is looking to soon bring clarity on the applicability of the goods and services tax (GST) on cryptocurrency assets.

At present, there is no specific provision for virtual assets in the GST regulations. It is levied at the rate of 18 per cent only on services provided by crypto exchanges, which are categorised as financial services.

“Discussions have been held around the classification of crypto assets. The law committee and the fitment committee of the GST Council will look into the classification and the tax treatment of crypto assets. The law panel will make suggestions on whether crypto is treated as a good, commodity, or service,” a senior government official told Business Standard.

The official added that based on the classification, the tax treatment of such assets would be taken up by the fitment committee after which it will be taken up by the GST Council. The official clarified that the process would take time and may not be part of the upcoming Council meeting, which is expected to be held late this month or early next month.

Sources said the Central Board of Indirect Taxes and Customs (CBIC) feels virtual assets could be included under Schedule 2 of the Central Goods and Services Tax Act, 2017, which specifies the activities or transactions that are to be treated as the supply of goods or supply of services. Besides, they also deliberated taxing certain transactions of crypto assets under the highest GST bracket of 28 per cent.

The GST panels are learnt to be also working on the valuation at which tax would be levied — that is, whether the GST would apply on margins or on the entire value.

“Some of the contentious transactions include mining of crypto assets or the exchange of virtual assets between the two persons. It is unlikely that crypto will be taxed on the gross value, per say,” another official said, adding that further deliberations are needed.

There are also discussions on imposing reverse charges on Indians investing in virtual digital assets through foreign crypto platforms, he added.

Source: Business Standard 
https://www.business-standard.com/article/economy-policy/goods-or-services-gst-law-committee-s-cryptocurrency-dilemma-122060900056_1.html

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