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Will India levy goods and services tax on bitcoin (BTC)?

Will India levy goods and services tax on bitcoin (BTC)?

In India, a ministerial committee is expected to meet over the next week to discuss the issue of the Goods and Services Tax (GST) to be applied to bitcoin (BTC) and other cryptocurrencies. At the same time, withholding tax (TDS) for crypto-asset transactions in the country will start from July 1st.

India is trying to enrich its tax basket using cryptocurrencies

According to a recent publication with Bloomberg, the finance ministers of the federal government of India and its federal states are invited to an assembly to discuss the tax regime of cryptocurrencies. The working group will be held for two days from June 28 in Chandigarh, a city located in the north of the country.

The purpose of this meeting is to diversify sources of taxation, with a strong emphasis on cryptocurrencies. In addition, it also aims to identify ways to strengthen control over transactions involving digital assets.

According to informants de Bloomberg, the Commission will certainly not set a tax quota at this stage of consideration. However, it is very likely to reach the maximum range of 28%. As a reminder, earlier this year, the Goods and Services Tax Council of India recommended setting the tax rate for crypto assets at this percentage.

Withholding tax on cryptocurrency transactions

New Indian financial law provides for direct deduction of taxes when cryptocurrencies are transferred. This guidance is presented in subsection 194S of the Income Tax Act which will come into force on July 1, 2022.

It specifies that any entity, which is responsible for exchanging digital assets for fiat currency, is required to deduct for income tax an amount equal to 1% of the total sale amount. In addition, this tax levy must be applied when the amount is credited to the seller’s account.

Like many countries, India is currently developing its regulatory framework to reap tax benefits from the sale of cryptocurrencies. These revenues allow the state coffers to be replenished and can be used to develop the economy of the country. This supports the idea that they should be controlled, rather than denied, as their use could benefit many.

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Junie MAFFOCK avatar

Junie MAFFOCK

I came across a blockchain out of curiosity and stayed with it out of passion. I was amazed at the possibilities it offers through its various use cases. With my pen, I hope to help democratize this technology and show how it can help make the world a better place.

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