GST on cryptocurrency: Crypto transactions might soon attract GST, as per a recent report

Cryptocurrency transactions may soon attract GST!

GST on Cryptocurrency transactions

Cryptocurrencies as an asset class have grown significantly in the last few years. Once, it was considered a scam, but now its use as an investment asset is being developed at a rapid pace. The total number of cryptocurrencies as of June 2022 has crossed 12,000, and 1,000 cryptocurrencies are being added every month. Most cryptocurrencies are scams, and they make money only for the developers while looting innocent investors. Therefore, sticking to the top cryptocurrencies is important. 

The taxation of cryptocurrencies has always been up to the interpretation of analysts. There have been no formal and comprehensive guidelines regarding the same. But, if a recent report is to be believed, the cryptocurrencies may soon attract GST. Also, the guidelines are expected to be comprehensive as the government plans to tax this asset class. 

Related: 5 popular cryptocurrency exchanges accessible in India

GST on cryptocurrencies

A report in the Mint has stated that the government is trying to define the characteristics of cryptocurrencies. When the process is complete, the GST rate will be decided. Till now, direct tax and cryptocurrency are 30% which is applicable to all virtual assets. As far as indirect taxes are concerned, cryptocurrencies do not come under the ambit of GST. But soon, cryptocurrencies may soon attract GST. The GST rate will be decided after the analysis of whether cryptocurrency is a good or a service.

If GST is implemented on cryptocurrencies, the direct tax will continue as well. This means that the total tax on cryptocurrency transactions will be a combination of direct tax and indirect tax. Till the time the final laws are implemented, the discrepancies regarding the taxation of cryptocurrencies will continue.

When the direct tax was implemented on cryptocurrencies, the transaction volume on the exchanges declined. The same is expected if indirect tax is added as well. Also, if GST is implemented, the rules might complicate trading. This means that only the top exchanges will survive.

Related: How to invest in cryptocurrencies?

Conclusion

The implementation of GST on cryptocurrencies is expected to alter the landscape of cryptocurrencies in India. This will mean that the volumes might initially decline. But the clarity might add some investor interest as well. If the rules are finalised, this will be a good step in identifying cryptocurrencies as an asset class in India. So, if you are a cryptocurrency investor, the initial jitters might hamper your portfolio, but the long-term stability of the asset might improve.

Related: Should India ban or regulate cryptocurrencies?

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