The government is working on classification of cryptocurrency as goods or services under the ambit of Goods & Services Tax (GST), so that tax can be levied on the entire value of transactions. Currently, Crypto exchanges are taxed at 18% slab of GST on services provided to users under the financial services category.
GST officers are of the view that cryptos, by nature, are similar to lottery, casinos, betting, gambling, horse racing, which have 28 per cent of GST on the entire value. Besides, GST at 3 per cent is levied on the entire transaction value in case of gold. Discussions are in a nascent stage on the rate of tax, whether it would be 0.1 per cent or 1 per cent. First a decision on classification will have to be finalised and then rate will be discussed.
The GST law does not clearly state about classification of cryptocurrency and in the absence of a law on regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies it as actionable claim. An actionable claim is a claim which can be made by a creditor, for any type of debt other than a debt secured by mortgage of immovable property.
