Government to bring crypto under indirect tax regime | Mint – mint | Jewelry Dukan

The Ministry of Finance plans to define the characteristics of cryptocurrencies, their uses and how they fit into the existing legal framework, said two people aware of discussions in the government. Once its legal nature is decided, the appropriate GST rate will be determined, they said, asking not to be identified. It could even be a new GST record between 18% and 28%, they added.

“We’re still debating the applicability of GST in the case of crypto assets… right now it’s being levied on services… so we need to see if crypto assets are declared as goods or services. We can have a special price for it. It doesn’t necessarily have to be 18% or 28%. Maybe somewhere in between. We’ve had some talks about it and will make a decision soon,” said one of the two.

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The move shows the indirect tax administration’s efforts to keep up with changes in the technology and financial world.

“A better understanding of how cryptocurrencies fit into our legal system is a prerequisite for deciding on the GST rate,” said the second person.

An email sent to the Treasury Department on Friday seeking comments on the story had gone unanswered as of press time.

Crypto assets have been the subject of heated debates, with the Reserve Bank of India saying they pose a threat to the country’s financial stability. Meanwhile, the center is in contact with multilateral agencies and the Bank for International Settlements to reach a consensus on how to regulate such assets.

Experts said that while there is clarity about the application of GST to the fee charged by cryptocurrency exchanges for transactions, there is ambiguity for transactions between parties outside an exchange as to whether they are treated as the supply of goods or services or as currency exchange have to .

“Once there is regulatory clarity on the nature of cryptocurrency and how transactions are treated, it would be easier to align the tax framework with that regulatory framework,” said Abhishek Jain, Partner, Indirect Taxes at KPMG India.

Globally, central banks are skeptical about the decentralized finance trend due to the risks speculative cryptocurrencies pose to financial stability, a warning that has proved prophetic following the sharp declines in some currencies and the implosion of TerraUSD. a stablecoin, this year.

While the government currently believes that GST should only be levied on the margin or service fees and not on the entire value chain or the gross value of the asset, issues such as the tax treatment of certain transactions such as mining or “airdrop crypto Token” checked .

On the direct tax side, which deals with the income or capital gains from crypto transactions, the center introduced effective 1. It also introduced a 1% withholding tax (TDS) on payment of virtual assets exceeding it 10,000 in one year and taxation of such gifts in the hands of recipients from July 1st.

Pratik Jain, a partner at Price Waterhouse & Co. LLP, said cryptos are treated as financial or securities transactions in many jurisdictions and are therefore exempt from GST. “Given the complexity of transactions and differing practices, it would be important for the government to engage with the industry and make detailed considerations,” Jain said. He added that legislative changes may also be needed. “Some clarifications or guidance on past transactions would also be necessary to avoid unjustified disputes.”

MS Mani, a partner at Deloitte India, said the lack of a clear GST framework that includes classification, rates and input tax credit has created several ambiguities between exchanges, buyers and sellers. “Creating a clear framework would help all crypto market participants adopt a consistent treatment of crypto transactions,” he said.

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