GST on Bitcoin? Cryptocurrency trade may get taxed 18%
It seems that the Modi government's distrust of cryptocurrencies is surpassed only by its keenness to tax that gravy boat. Last April, the RBI had directed banks to wrap up all dealings with virtual currency players within three months. But before that, in February, the Income Tax Department had issued about one lakh notices to people who had invested in cryptocurrencies like Bitcoin without declaring it in their income tax returns - just days after Finance Minister Arun Jaitley announced that the government did not consider cryptocurrencies as legal tender. And now, the buzz is that the government may bring cryptocurrency trading within the ambit of the Goods and Services Tax (GST).The government may levy an 18 per cent GST after classifying cryptocurrencies as intangible goods on par with software, and that the proposal will be tabled before the GST Council after the Central Board of Indirect Taxes and Customs evaluates it.
Interestingly, these moves to tax cryptocurrencies come even as India is yet to take a firm call on its legal status. Earlier this month, the Special Investigation Team (SIT) on black money asked probe agencies to curb the use of cryptocurrencies as it reviewed their links to shady offshore transactions. For instance, as pointed out by the Narcotics Control Bureau, about four cryptocurrency-fuelled drugs smuggling transactions had been unearthed in the country in the past two years. The government's fear of cryptocurrencies being used to fund such illegal activities is what had led to its clampdown. But the Department of Economic Affairs reportedly does not want to ban cryptocurrencies, only regulate them.
In the bargain, despite holding an estimated 10 per cent of the virtual currencies in the world, the country still lacks a legal framework to govern the same. The government had previously set up a committee led by department of economic affairs secretary Subhash Chandra Garg to come out with recommendations by March-end. But there has been no update so far but the decision to implement GST will depend on this report. Of course, the government will then have to look at other laws to control the more nefarious aspects of this trade.