While regulatory uncertainty around cryptocurrencies continues, the tax department might be getting ready to tap into this new area. Here’s what crypto and NFT investors need to know about taxation
Bhaswar Kumar |
Last Updated at November 10, 2021 08:15 IST
The government is again examining a proposal to tax the blockchain ecosystem, which includes cryptocurrencies and NFTs. In fact, the tax department wants the framework for taxing the use of blockchain for commercial purposes to be implemented even before legislation on cryptocurrencies is brought in. As it finalises legislation that is to be introduced in the upcoming winter session of Parliament, the government is reportedly considering a middle path on cryptocurrencies. A government official, who did not wish to be named, told Business Standard that even when they are not regulated, the use of virtual currencies and NFTs is prevalent, and this is leading to a loss of revenue for the government. However, the official clarified that taxing such assets would not mean that trading in them would be legitimised. Instead, it would only be a step to tax such transactions, which are currently slipping past the tax net. A similar plan to tax cryptocurrencies was considered in 2018.
The official said that the framework for taxing blockchain would stay even if the government decides to ban assets such as cryptocurrencies because blockchain can be used in many areas. With that in mind, a framework for taxing the use of blockchain in other areas and sectors is likely to be drawn up. So, what exactly are the details of the proposal under consideration?
- Proposal to impose GST on cryptocurrencies, NFTs being examined by Tax Research Unit to plug revenue loss
- Transfer, storage, supply, exchange, management, trade and creation may be treated as services
- Exchanges might pass on tax liability to customers
- GST rate of 18% might apply
- Framework to tax the use of blockchain also likely to be drawn up
According to broker discovery and comparison platform BrokerChooser, India has the highest number of crypto owners in the world at 10.07 crore. And India’s cryptocurrency market reportedly grew 641% over the past year. The push also comes against the backdrop of the endorsement of NFTs by Bollywood actors such as Amitabh Bachchan and Salman Khan.
First Published: Wed, November 10 2021. 08:15 IST