Most major cryptocurrencies on Friday, May 27, registered sharp losses
GST officers are of the view that cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28 per cent of GST on the entire value
Cryptocurrency Under GST: The government is working to bring cryptocurrencies under the ambit of Goods & Services Tax (GST) in order to tax the entire value of transactions. Currently, cryptocurrency exchanges are taxed at 18 per cent slab of GST on services provided to users under the financial services category.
GST officers are of the view that cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28 per cent of GST on the entire value. Besides, GST at 3 per cent is levied on the entire transaction value in the case of gold.
“There is a clarity needed regarding levy of GST on cryptocurrencies, and whether it has to be levied on the entire value, We are seeing whether cryptocurrencies can be classified as goods or services and also removing any doubt on whether it can be called an actionable claim,” an official told PTI. Only after the classification is done will the GST rate on cryptocurrencies be decided.
What Happens If Crypto is Brought Under GST?
If GST is levied on the entire value of cryptocurrency transactions, the rate may be in the ballpark of 0.1 to 1 per cent, another official said. “The percentage of tax, whether it would be 0.1 per cent or one percent, is still being debated. First, a decision on the classification of the asset has be made, and then the tariff would be discussed,” yet another official said.
Because there is no clear definition of cryptocurrency in the Goods and Services Tax (GST) law, and because there is no law governing such virtual digital currencies, the categorization must consider whether the legal framework qualifies it as an actionable claim. An actionable claim is one that a creditor can make for any sort of debt that is not secured by a mortgage of immovable property.
Loss in One Crypto Asset Can’t Be Set Off Against Another
In the Union Budget 2022-23, the government has proposed that transfer of any virtual/cryptocurrency asset will be taxed at 30 per cent. No deduction except cost of acquisition will be allowed and no loss in transaction will be allowed to be carried forward.
Today, in a big jolt for the crypto industry, the government on Monday clarified that as per the Budget 2022 proposals investors will not be allowed to set-off losses in one crypto asset against another. Further, mining infrastructure will not be eligible to be deducted as the cost of acquisition.
Along with the 30 per cent tax, the Union Budget 2022-23 has also proposed a 1% TDS on the transfer of such assets. Tax experts were split on whether investors could set off losses in one crypto against another crypto asset. Set-off of losses means adjusting the losses against the profit or income of that particular year. This provision is available in stock investments.
Minister of State for Finance Pankaj Chaudhary informed Lok Sabha on Monday, “As per provisions of the proposed section 115BBH to the Income-tax Act, 1961 (the Act), loss from the transfer of VDA will not be allowed to be set off against the income arising from transfer of another VDA.” He was responding to the queries raised by the Member of Lok Sabha Karti Chidambaram on the status of cryptocurrency.
Read all the Latest Business News and Breaking News here
