Cryptocurrencies Under India GST Laws

India currency and legal gavel and book

Cryptocurrency is a ‘Digital Asset’ which exists outside the purview/ control of governments/ authorities, distributed across a network of computers, and is based on blockchain technology.

GST and India flag image

The Indian government brought cryptocurrencies within the Income tax net in the budget 2022, by imposing 30% tax on the profits made from the transfer of such assets, with the caveat that the Indian Finance Minister clarified that taxing such assets does not make them legitimate (legal) in India. Taxing cryptocurrency transactions was a sovereign power of the country.

The Indian government is now working on putting cryptocurrency transactions under the GST legislation as a further step. The government’s endeavour seems to be to classify cryptocurrencies as goods or services under the GST law, allowing tax to be levied on the entire value of transactions, as opposed to the current situation, in which 18% GST is only levied on services provided by Crypto Exchanges that are classified as financial services. 

Classification is the key issue here and one can analyse the same from multiple perspectives.

 Is it possible to classify cryptocurrency as “goods”? The word “goods” is defined by Indian GST legislation as “any sort of moveable property other than money and securities, including actionable claims…” Money and securities are specifically excluded from the definition. Cryptocurrency may not be considered as an actionable claim since the term typically refers to the claim of a creditor on debts other than the mortgage of immovable property. As such, classifying the transfer of cryptocurrencies as goods may not be appropriate.

 The term “services” has been defined under India GST as “anything other than goods, money, and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency, or denomination for which a separate consideration is charged…” As a result, categorizing transfers in cryptocurrency as services may not be acceptable. It is also worth noting that the word ‘digital asset’ sounds a lot like ‘intangibles’, like Intellectual Property Rights, Computer Software, and so on. 

The Indian Government seems to consider cryptocurrencies, by their very nature, to be analogous to lottery, casinos, betting, gambling, horse racing, etc. that are subject to a 28 percent GST on the total transaction amount.,. There is also a press report that if the entire transaction is taxed, the GST rate applicable for cryptocurrency transactions will be substantially lower, ranging from 0.1 to 1%. We do, however, believe that the government proposed classification is fair considering that bitcoin operations do not entail the “game of chances” idea that is relevant to the lottery, gambling, etc.

 As of now, there is no law to regulate dealings in such virtual currencies, and the government, in addition to the above GST classification, seems to be simultaneously working on legislation to govern Cryptocurrencies. No draft law has been released so far.

Also published on LinkedIn

The information provided in this article does not, and is not intended to constitute tax advice, instead, all information, content, and materials in this article is for general informational purpose only. The content on this posting is provided “as is;” no representations are made that the content is error-free. All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed.



Check Us Out On Social Media

Additional Insights

Connect Today!

Main: (678) 403-2565
Sales: (770) 757-9100