Blog

The Central Board of Indirect Taxes and Customs (CBIC) is reportedly conducting an in-depth research into bringing more cryptocurrency activities under the tax net.

The goods and services tax (GST) policy wing of the CBIC is mulling taxing more avenues such as crypto mining platforms and the usage of virtual digital assets (VDAs) as a medium of exchange in purchases, sources told the Financial Express. 

The CBIC is working on a policy paper and it would be submitted to the law committee of the GST Council once it is ready.

People familiar with the matter said that the GST Council may take up the issue later this year, likely post its September meeting. 

“We are still examining some of the issues such as what is the nature of the transactions/ business, how they happen, which are the entities involved, is it always consumer-to-consumer or business-to-consumer, is there a system of registration, could there be onshore and offshore transactions. Also, there needs to be clarity whether certain transactions are goods or services,” a senior official was quoted as saying. 

The move will add to the growing taxation of the crypto space. It all began in February this year when Finance Minister Nirmala Sitharaman, in her Budget speech, announced that all income from transfer of VDAs would be taxed at 30%.

Close on the heels of that, the government also imposed a 1% tax deducted at source (TDS) on all VDA transactions. As if this was not enough, it was previously also reported that the Centre was mulling levying a 28% GST on cryptocurrencies at par with lottery and betting.

This follows Sitharaman’s statement earlier this year when she stated that the finance ministry saw the possibility of tax generation from digital assets. “Many Indians have seen a future in crypto, therefore, I see a possibility of revenue in it,” the minister had said then.

While the government has been measured on its response on cryptocurrencies, the top brass of the Reserve Bank of India (RBI) has not shied away from terse criticism of cryptocurrencies. While RBI Governor Shaktikanta Das has called cryptocurrencies a ‘clear danger’ to the country, deputy governor T Rabi Sankar termed cryptos a ‘threat to financial sovereignty.’

In what was the clearest statement on the matter, Sitharaman last month informed the Parliament that the RBI has sought a ban on cryptocurrencies citing their ‘destabilising effect’ on the monetary and fiscal stability of the country.

Meanwhile, the industry continues to be marred by events that have put the spotlight on crypto exchanges. Last month, crypto exchange Vauld suspended its operations. In addition, CoinSwitch Kuber and CoinDCX have also disabled crypto as well as fiat withdrawals in the last year or so. 

Barely a week ago, the Enforcement Directorate (ED) raided the premises of WazirX and froze assets worth INR 64.67 Cr. Since then, Binance, which announced acquisition of WazirX in 2019, and Zanmai Labs, which apparently ‘co-operates WazirX’, have been pinning the blame on each other and evading oversight by Indian regulatory agencies.