The government is working on FAQs regarding taxation on cryptocurrencies. This will clear things up about levying Income Tax and GST on digital assets. The draft FAQ will be reviewed by the Law Ministry.
The government is working on a Frequently Asked Questions (FAQ) on taxation on cryptocurrencies. An official said the FAQ would clarify things about levying income tax and GST on virtual digital assets. The official said the draft of the FAQ is being prepared by the Department of Economic Affairs (DEA), the Reserve Bank and the Revenue Department. It will be reviewed by the Law Ministry.
“Frequently asked questions regarding taxes on cryptocurrencies and virtual digital assets are in the works,” the official said. Though the FAQs are for informational purposes and have no legal validity, the opinion of the Law Ministry is being sought to ensure that there are no loopholes.
The official said that the DEA, the revenue department and the Reserve Bank are working to ensure that the taxation aspect is clear to the field tax offices and those dealing in cryptocurrencies and other digital currencies. Things have been clarified regarding the imposition of income tax on crypto assets in the budget for FY 2022-23.
With effect from April 1, such transactions will attract income tax, cess and surcharge of 30 per cent in the same manner as for horse racing or other betting transactions. From the GST point of view, the FAQ will make it clear whether cryptocurrency is a commodity or a service. Currently, services provided by crypto exchanges attract 18 per cent GST and are classified as financial services.
Recently, in the Rajya Sabha, BJP leader Sushil Kumar Modi had said that the proposal made in the budget to impose 30 percent tax on cryptocurrency is insufficient. The imposition of more taxes on cryptocurrencies should be considered. Along with this, the BJP leader had also suggested changes in the IT Act from the Center to curb online gaming, online landing.
