Govt should clarify crypto as money or goods: Experts
Investors voice concerns over double taxation of 30% I-T & 28% GST on profits made from trading in cryptocurrencies; Several wallets are being deactivated as retail investors shying away from crypto trading
Mumbai: Cryptocurrencies should be treated at par with money for the limited purposes of the GST law, feel experts
As of now, there is no clarity yet on the treatment of cryptocurrencies under the GST regime. Bizz Buzz interacted with some stakeholders to know their opinion on the crucial topic.
A new provision to levy income-tax (I-T) on transactions involving virtual digital assets (including cryptocurrencies) was introduced through the Finance Act, 2022. While the new framework is a significant step in the right direction to bring clarity with respect to taxation of cryptocurrencies, there are still several open-ended issues within the framework.
A study by Vidhi Legal Centre has advised the government to treat cryptocurrencies at par with money for the limited purposes of the GST law. And also, clarify whether cryptocurrency qualifies as 'money' or 'goods'.
However, several issues would emanate from classifying cryptocurrencies as goods under the GST law. Accordingly, cryptocurrencies should be treated at par with money for the limited
purposes of the GST law. This approach will foster neutrality, simplicity, transparency, and certainty in the framework, it says.
Raj Kapoor, chief advisor, eCryptoverse, says: "Crypto tax is a deterrent for most retail investors. With crypto investments today bringing in virtually no gains, and mostly losses, retail investments have dried up as taxes are high and we can't offset them against other losses."
Several wallets are being deactivated as the retail investors now stare at an uncertain asset class with a top tax rate to boot, he said.
Soon, a 28 per cent GST on services and all cryptocurrency-related activities is proposed. It will be in addition to the 30 per cent income-tax on profits from cryptocurrency transactions. Following this initiative, the combination of the two taxes will make cryptocurrency provincially regulated in India, which is big plus for crypto investors. Kunal Jagdale, Founder, BitsAir Exchange, says: "The imposition of a 28 per cent GST on cryptocurrencies is not surprising given that many other items are subject to a 28 per cent GST but it may discourage a little bit to some users from engaging in cryptocurrency trading."
Levying GST or any other additional tax on crypto essentially puts off the initial original value of decentralisation of digital and financial assets.
"After the 30 per cent tax already reinforced on crypto, introducing an additional tax shall simply be putting off interests of the investors in the assets. The crypto economy certainly is big now and needs regulations, however, the fine line between balance and centralisation needs to be taken care of," says Chinka Gupta, CEO, ArcadeNetwork.
The core technology or blockchain behind creation and transaction of such assets itself can be made secure enough to bring in necessary regulations in the sector. Piling up something with layers of taxes should not be a solution to curb things. Somehow, an additional GST would certainly bring the spirit of centralisation more than it brings regulation to the crypto economy.
The government is reportedly considering levying a 28 per cent GST on all crypto transactions, including mining, sales and purchase of cryptocurrencies.
"There is already a 30 per cent tax being levied on profits made from the sale of crypto assets and NFTs. This second GST on crypto transactions is expected to further increase problems for the crypto industry and might even discourage many investors to trade in these digital assets," opines Amit Gupta, MD, SAG Infotech.