The GST Council is likely to defer the issue of taxability on activities related with virtual digital assets (VDAs) or cryptocurrency. The meeting is scheduled to take place next week in Chandigarh.

If deferred, it will give some relief, to crypto-investors at least for the time being. These investors took to the micro-blogging site twitter on Thursday to express their anger on Income Tax Department’s June 22 notification for compliance of TDS (Tax Deducted at Source) with effect from July 1.

A senior government official confirmed to BusinessLine about a proposal before the council “to clarify the nature and applicability of GST on various supplies related with crypto.” Besides identifying all supplies, proposal also aims to determine activities whether they are goods or services, and accordingly finalise rate of GST. Activities related with crypto include mining, exchange services, wallet services, payment processing, barter system, and other different transactions etc. Now, it has to be decided which one would be good and which one would be services.

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The official said that issue was discussed in the Fitment Committee meeting which suggested for more in depth study. “Haryana and Karnataka are likely to study all the aspects and submit the report to Fitment Committee. Accordingly, Committee will finalise the recommendations for the Council. This means matter could be deferred by the Council,” he said.

The issue of GST on crypto got more importance after Union Budget for Fiscal Year 2022-23 coined the coined the term Virtual Digital Assets or VDA for different types of cryptos.  It said VDA would include any information or code or number or token (not being Indian currency or foreign currency), generated through cryptographic means, a non-fungible token or any other token of similar nature and any other digital asset, to be notified later.

As on date, earning from VDAs attract income tax at the rate of 30 per cent. Loss from transfer of VDA cannot be set off against any other income. Gift of VDA is being taxed in the hands of the recipient. And, from July 1, TDS (Tax Deducted at Source) on payment made in relation to transfer of VDA at the rate of 1 per cent of such consideration above a monetary threshold.

On the indirect tax front, in an interview to BusinessLine, Chairman of Central Board of Indirect Taxes & Custom (CBIC) had said: “Our interpretation is that there is clarity in the law and the commission paid to the operator or an exchange, which is providing a platform for transaction in digital currency, is in a view of service he provides to the users of that platform and, therefore, it is the supply of service which is chargeable to GST. Further, “in case of exchanges that are located abroad, the provision is that the place of supply of service would be India because the recipient of service is in India and, therefore, he will be liable to pay GST on reverse charge basis,” he said.

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