Bitcoin

18 per cent GST on bitcoin transactions, government could potentially gain Rs 7,200 crore annually on bitcoin trading

The CEIB (Central Economic Intelligence Bureau) has conducted a study on levying GST on cryptocurrencies. It suggested finance ministry that bitcoin can be categorised under ‘intangible assets’ class and GST could be imposed on all transactions

The Central Economic Intelligence Bureau (CEIB), an arm of the union finance ministry has put forward a proposal to impose 18 per cent GST on bitcoin transactions. The CEIB told the Central Board of Indirect Taxes & Customs (CBIC) that government could potentially gain Rs 7,200 crore annually on bitcoin trading.

The CEIB has conducted a study on levying GST on cryptocurrencies. It suggested finance ministry that bitcoin can be categorised under ‘intangible assets’ class and GST could be imposed on all transactions, according to a Times of India report. It added that cryptocurrency can be treated as currents assets and GST charged on the margins made in its trading.

Key Points of the Proposal

  • Cryptocurrency `mining’ will be treated as a supply of service since it generates cryptocurrency and involves rewards and trans-action fees. Tax will be collected from the miner on transaction fees or reward. If the value of the re-ward exceeds Rs. 20 lakh, individual miners will need to register them-selves under the Goods and Services Tax (GST).
  • The proposal also considers `wallets’ storing keys taxable. Wallet service providers should be registered under GST.
  • Cryptocurrency exchanges need to register and pay tax on their earning.
  • Trading may attract 18 percent GST.
  • Buying and selling of crypto currencies will be considered under the category of supply of goods. Other related facilitating transactions will be counted under services and these would include supply, transfer, storage, accounting, among others.
  • The transaction value in rupees or the equivalent of any freely convertible foreign currency will be used to determine the value of cryptocurrency.
  • In a scenario where both buyer and seller are in India, a transaction would be treated, as a supply of soft-ware and the buyer’s location will be the place of supply.
  • For transfer and sale, the location of the registered person will be the place of supply. However, in a scenario where sale has to be made to non-registered persons, the location of the supplier would be considered as the place of supply.
  • Integrated GST would be applicable for transactions conducted beyond the Indian territory and would be considered as import or export of goods. IGST will be levied on cross-border supplies.

Last year, the Supreme Court asked the government to come up with cryptocurrency regulation policies. The apex court in March, this year struck down the curb on cryptocurrency trade in India. The SC quashed an earlier ban imposed by the Reserve Bank of India (RBI) on trading in virtual currencies such as bitcoin.

The RBI had virtually banned cryptocurrency trading in 2018 and had directed that all entities regulated by it shall not deal in virtual currencies or provide services for facilitating any person or entity in dealing with or settling those

Currently, bitcoin, as a medium of payment, has neither been authorised nor been regulated by any central authority in India. Further, no set rules, regulations, or guidelines have been laid down for resolving disputes that could arise while dealing with bitcoin. Hence, bitcoin transactions come with their own set of risks.

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