GST Council will debate the sales tax on cryptocurrencies next week

23 Jun 2022 , 02:44 PM

People with knowledge of the situation indicated that an Indian cabinet panel will meet next week to talk about imposing a goods and services tax on crypto transactions.

The council, made up of the finance ministers of the federal government and the states, is looking to expand the tax net in order to more effectively track transactions involving virtual digital assets, according to the persons, who declined to be named due to restrictions on speaking with the media. Beginning on June 28, the panel will convene for two days in Chandigarh, in northern India.

The panel is unlikely to finalize a rate in the upcoming meeting but discussions may be held on placing it in the highest tax slab of 28%, the people said.

A finance ministry spokesperson did not immediately respond to calls seeking comments.

In an effort to gauge the extent of the local cryptocurrency market and keep track of users, Finance Minister Nirmala Sitharaman levied a 30 percent tax on revenue from the transfer of virtual assets and a 1 percent source tax on all cryptocurrency transactions earlier this year. The action was perceived as resolving doubt over the legality of cryptocurrency transactions.

Due to the ambiguity around whether digital currencies should be treated as products or services and the absence of a legal framework, there is still uncertainty over the implementation of a sales tax on them.

Bloomberg previously reported that the federal government is already working on legislation to either regulate or strengthen regulations, however it is envisaged that this would only happen until a worldwide agreement on the regulation of such assets emerges.

As global central banks have started to raise interest rates to rein in growing inflation, digital currencies and other risky assets have been under attack all year. This year, Bitcoin has decreased by almost 50%, while Ether has decreased by 70%.