Finally, clarity coming soon on GST on crypto

Clarity on applying goods and services tax (GST) on crypto or virtual digital assets appears to be around the corner, with the Central Board of Indirect Taxes and Customs (CBIC) working on an agenda paper on the topic. The board has been interacting with the industry to decide on the GST rate for crypto assets and identify whether they should be classified as ‘goods’ or a ‘service’, besides related issues.

The move is expected to offer some relief to the crypto industry, which has complained about tax notices seeking GST on the gross value of the crypto asset, as against the service fees or the commission.

The agenda paper will likely be presented to the fitment panel of GST and then to the GST Council. CBIC, under the department of revenue in the ministry of finance, is the nodal department for GST.

“CBIC has been asked to prepare an agenda paper on GST on crypto assets… While currently GST is being levied on the commission charged by exchanges, it may be getting interpreted differently in some cases… So we will have to fix whether it is goods or services and finalize the rates based on that,” said a government official.

While the government is of the view that GST will apply only on the margin or service fees and not on the entire value chain or the gross value of the asset, issues like tax treatment of certain transactions like mining or ‘airdropped crypto tokens’ are also being examined by the Centre.

According to industry executives, while the understanding with the government is that GST will only be levied on the commission or the service fees, some tax officers interpret that GST should be levied on the total value of the crypto asset on a gross basis, requiring clarification. Guidance on past transactions may also be necessary to avoid disputes.

Source from - https://www.livemint.com/market/cryptocurrency/clarity-on-crypto-gst-tax-treatment-soon-11668108576289.html