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The Crypto - GST Love Affair

Tldr; There is still time for the final nail in the coffin. 28% GST on crypto still under talks

The 47th Goods and Services Tax (GST) council meeting 2022 was scheduled for, 28 June and 29 June in Chandigarh. The agenda was to debate a wide range of topics during the two-day meeting, including a method for compensating states for revenue loss, changes to specific commodities' tax rates, and loosened registration requirements for small online suppliers.

While the Indian crypto community was still adjusting to the effects of the income tax, media sources have suggested that the government was considering imposing a GST at a rate of 28% on crypto activity. These ‘activities’ include - Buying and selling cryptocurrency tokens on different exchanges, storing them in central and decentralized wallets, staking them on different platforms, and mining (producing) cryptocurrency.

On June 22, 2022, the Central Board of Direct Taxes (CBDT) published a circular outlining the tax deduction process for transfers of virtual digital assets (VDA) and cryptocurrencies. Beginning on July 1, 2022, new TDS regulations regarding VDA and crypto were to be in place.

July 1st, 2022

CA Girish Chandmani has summed up the new changes to be applicable from July 1st.

Any person (BUYER) making payment to the resident individual (SELLER) at the time of buying crypto, VDA, or NFT will be required to deduct TDS on the amount paid

The Rates

A) Buyer has to deduct TDS @1%

B) Further, if an individual has not filed his/her income tax return, then TDS will be deducted at a higher rate of 5% (as against the normal rate of 1%), if the payer is not a specified person.

C) Further, If the PAN of the deductee (buyer) is not available, then the tax at the time of transfer of VDA will be deducted at the rate of 20%.

The Applicability

A) If the amount paid (single or on an aggregate basis) by the ‘SPECIFIED PERSON ’ (buyer) exceeds Rs 50,000 during the financial year.

B) The amount paid (single or on an aggregate basis) by any other person/buyer (other than ‘SPECIFIED PERSON’ as mentioned above) exceeds Rs 10,000 during the financial year.

Who are The Specified Persons

A) An individual or Hindu Undivided Family (HUF) who does not have any income under the head ‘profit and gains from business and profession’ and Advertisement.

B) An individual or HUF having income under the head ‘profit and gains from business and profession’ whose total sales/gross receipts/turnover from business does not exceed Rs 1 crore or in the case of the profession does not exceed Rs 50 lakh.

The Crypto Tax

As a rule, a tax of 30% on your annual profits will apply every year, at the end of each financial year, while the 1% TDS will come into effect from 1 July on all sales and NFTs.

Keep one thing in mind though, If you haven't filed an ITR for two years, 5 percent TDS will be applied in place of the standard 1 percent TDS.

TDS is calculated on the “Total Amount” to be paid after excluding GST/fees collected by the Exchange. Any TDS collected in Cryptocurrencies will be converted to INR and the received INR value will be updated based on the respective transactions.

To make things more transparent, the inferred TDS will be indicated on the order details page immediately after the transaction is made. In the event that TDS is deducted as a crypto asset, the corresponding crypto value will be converted to the main cryptocurrency and the corresponding INR value of the deducted TDS can be found in the report.

Till now the Finance minister or GST council hasn't made a final verdict about the ‘28% GST tax’ but they plan to on July 15, 2022. Taxing cryptocurrencies is a positive step by the government since it signals the government's formal acknowledgment of technology. However, projections of a 28 percent GST would further deepen the industry's panic.


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