Exchanges for virtual currencies have gained traction as a marketplace for buying, selling, and trading in India.
But the Goods and Services Tax (GST) introduced by the Indian government has sowed doubt and uncertainty across the crypto sector.
In this article, we will look at how the GST on crypt exchanges in India and what it implies for traders and investors.
Explaining GST and Its Implications for Cryptocurrency Trading Platform
Products and services in India are subject to a single tax known as GST. It consolidated many indirect taxes into one, including the Value-Added Tax (VAT), the Service Tax, and the Central Excise Duty. In India, the goods services tax is applicable to all purchases of goods and services, including cryptocurrency.
Cryptocurrency exchanges fall under the category of “intermediaries” under thegoods services tax system and are so obligated to collect taxes on behalf of the government. As with other financial services, cryptocurrency transactions are subject to an 18% tax.
However, there has been debate about whether or not GST should be applied to crypto exchanges in India.
The government has decided that crypto transactions should be taxed like any other sale.
On the other hand, there are others who work in the crypto space who say that cryptocurrencies ought to be treated as currency and hence exempt from GST.
Is a cryptocurrency exchange required to pay GST on its services?
Yes. Services performed by cryptocurrency exchanges are taxed under GST. As a result, crypto exchanges must collect GST from dealers and deposit it with the GST administration through GST Return Filing.
GST is included in the trading charge that is applied to the purchase price of ether, bitcoin, ripple, and other cryptocurrencies.
In the event of a crypto exchange based outside of India, the place of service supply is the location of the service recipient, which is India.
As a result, the service beneficiary, i.e. the crypto trader, is required to pay GST on a reverse charge basis.
Who is responsible for paying GST on the supply of cryptocurrencies and digital assets?
The seller of cryptocurrencies or digital assets is required to collect and deposit GST from the buyer.
No HSN Code or GST Rate is designated for digital assets. Thus, HSN Code 960899 under the category ‘others’ with an 18% tax rate can be utilised to declare the sale of cryptocurrency.
If the seller’s aggregate turnover reaches INR 40 lakhs or INR 20 Lakhs in special category states throughout the fiscal year, he or she must get GST Registration.
Once a cryptocurrency vendor registers for GST, they must collect and pay GST on each sales transaction.
Crypto Sellers can claim Input Tax Credit
The sellers of cryptocurrency or crypto exchanges can claim input tax credit for the following:
- GST paid on cryptocurrency, NFT, and VDA purchases
- GST paid on services utilised in the cryptocurrency trading industry, such as consultation services, software expenditures, broker commission, mining costs, and so on.
In conclusion, In India, cryptocurrencies are considered virtual assets, and hence income gained through cryptocurrency are subject to a 30% tax. Furthermore, 1% TDS (Tax Deducted at Source) applies to cryptocurrency transactions. The Crypto Exchanges must also pay GST on its services and follow all the GST rules and regulations.
Moreover, If you want any other guidance relating to GST Registration, please feel free to talk to our business advisors at 8881-069-069.
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