GST & Income Tax Department may target Crypto Transactions

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Important news for Investors as the GST & Income Tax Department may target Crypto Transactions soon. If crypto transactions are taxed, investors might need to mention them in their ITR Filing. As per the recent reports, the Finance Ministry is considering taxing crypto income through trading and crypto exchanges. Sources argue that even if it happens, the government is unlikely to declare cryptocurrencies under a valid class position. This article highlights the latest news on crypto transactions tax liability.

International Crypto Exchanges might encounter an 18% GST Rate

  • Indian banks prohibited services to local crypto exchanges, thus they moved to foreign marketplaces.
  • As a consequence, the Indirect Tax Department is investigating whether these foreign exchanges might need to pay GST and have GST Registration. The reason being these exchanges are also providing “data” services.
  • Several Experts indicate that the services provided by these exchanges (trade-in cryptocurrencies) are an online information database access and retrieval (OIDAR) service. Thus, as per OIDAR rules, any digital or data service delivery to Indian Citizens or anyone based in India should be taxed.

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Experts says on Cryptocurrency taxability

The CEO of WazirX crypto exchange, states that clarifying the goods and services tax (GST) related to crypto will help in identifying the asset class of cryptocurrencies. He further states that Like other incomes, crypto profits can be taxed and should be mentioned while ITR Filing.

However, It is not apparent at the present time whether GST applies to the purchase of the cryptocurrency or to transaction fees paid by the Cryptocurrency buyer. In this regard, the government can shortly notify a legislative proposal which would make this choice clearer.

RBI Governor on CryptoCurrency

RBI Governor Shaktikanta Das shows deep concerns over cryptocurrencies such as Bitcoin (BTC). He states, “We have expressed to the government our serious and substantial concerns regarding cryptocurrencies from the standpoint of financial stability.” Also, The Reserve Bank of India (RBI) shared a booklet on January 25. The booklet explores use cases for a digital version of fiat currency.

GST Rates for Indian Exchanges

According to the experts, there is no clarity on GST in Indian exchanges, including the rate and the amount to be paid. However, Most Indian crypto exchanges pay 18% GST on their margins or commissions without any clarification from the tax authorities.

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