GST Council to consider levying 28% tax on bitcoin, other cryptocurrencies: Report

GST Council to consider levying 28% tax on bitcoin, other cryptocurrencies: Report

The government’s view is to keep cryptocurrencies at par with lotteries, casinos, racecourses, and betting

FPJ Web DeskUpdated: Monday, May 09, 2022, 12:11 PM IST
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Union Finance minister Nirmala Sitharaman, said instead of banning crypto opted to levy taxes, thereby legitimizing virtual currencies in the country./ Representative image | File

During its next meeting, the GST Council dis likely to consider levying a 28 percent goods and services tax on cryptocurrencies, sources told CNBC-TV18.

The government’s view is to keep cryptocurrencies at par with lotteries, casinos, racecourses, and betting, they said.

A GST Council-nominated law committee, whose view will be tabled before the GST Council for formal approval, will take up the proposal to levy 28 percent GST on services and all activities related to cryptocurrencies soon, the sources said.

The proposal is likely to be tabled in next GST Council meet, whose date has not been finalised yet.

New framework for cryptocurrencies in Budget proposal

The Union government has proposed a new framework for cryptocurrencies in the annual Budget, levying a flat tax of 30 percent, in an apparent attempt to legitimise their trading in cryptocurrencies, NFTs, and other digital assets.

The government, in line with its plan to have a fiat digital currency, also proposed to issue a digital rupee or Central Bank Digital Currency (CBDC) in fiscal 2022-23.

Risk of money laundering, terror funding

Fnance Minister Nirmala Sitharaman on April 19 had made a strong case for regulating cryprocurrencies at a global level to mitigate the risk of money laundering and terror funding.

''The risk which worries me more on the non-governmental domain is essentially you're looking at unhosted wallets across the borders, across the globe... So, regulation cannot be done by a single country within its terrain through some effective method and for doing it across the borders, technology doesn't have a solution which will be acceptable to various sovereigns at the same time applicable within each of the territory,'' she said.

The risks involved will have to be differentially approached, because for each user case, the risks can also be different, depending on the economy, she said during a panel discussion on the topic 'Money at a Crossroad: Public or Private Digital Money?'

Citing an example, Sitharaman said application of regulation and risk involved for Nigeria would be different from a tourism or investment rich Bahamas.

Stressing that regulation using technology will have to be so adept and nimble that it should not be behind the curve. It has to be ahead and this is not possible if any one country thinks that it can handle it, she said.

Pointing out that unless there's going to be a global approach at regulating and understanding of the technology on cryptocurrencies there is a risk of money laundering.

''I harp on that very much because I think the biggest risk for all countries across the board will be on the money laundering aspect, and also on the aspect of currency being used for financing terror,'' she said.

With regard to taxing income generated from transactions in crypto assets, Sitharaman said it is a means to check the source and trail but not to legitimise them.

''We haven't said that this is currency. We haven't said that this has intrinsic value, but certain operations are taxable for the sovereign and that is why we have taxed,'' she said.

(With inputs from PTI)

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