The government may soon impose Goods and Services Tax (GST) on Bitcoin transactions at 18%. It is estimated that the move will fetch an annual revenue of Rs.7,200 crore to the government.
A Finance Ministry wing, known as the Central Economic Intelligence Bureau (CEIB) is its think tank. It has tabled a proposal before the Central Board of Indirect Taxes and Customs (CBIC) to levy GST on Bitcoins transactions. Currently, its annual trade value in India is approximately Rs.40,000 crore.
The Bitcoins can be classified as intangible assets. GST could be levied on the margins made in the trading transactions undertaken on Bitcoins. The Bitcoins are cryptocurrencies which are current assets.
Currently, there is no government regulation or regulator for cryptocurrency transactions, miners and its exchanges. The Supreme Court also lifted the Reserve Bank of India’s ban for two years on banks and financial institutions to deal with the digital currencies. These developments have increased the speculations that this form of currency is being used for money laundering, thereby threatening the real value of legal currencies.
The Authority for Advance Ruling (AAR) has been approached by members of India’s top seven Bitcoin exchanges, including Unocoin, Zebpay, Btcx-India and CoinSecure since their very presence is uncertain.
As per the GST Council proposal, cryptocurrency ‘mining’ would be viewed as a supply of service because it produces cryptocurrency and provides incentives and transaction fees. The miner will have to pay tax on transaction fees or remuneration received. If the incentive amount exceeds Rs.20 lakh, individual miners may have to register themselves under GST.
Bitcoin refers to a digital currency created after the housing market collapse in January 2009 and has gained popularity over the years. It follows the ideas set out by the enigmatic and pseudonymous Satoshi Nakamoto in a whitepaper. The identity of persons who built the program is still a mystery.
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Annapoorna, popularly known as Anna, is an aspiring Chartered Accountant with a flair for GST. She spends most of her day Singing hymns to the tune of jee-es-tee! Well, not most of her day, just now and then.