The Indian government is working to determine whether cryptocurrencies can be classified as goods or services, of which they can impose a different taxation scheme on digital assets.
Government officials believe crypto trading is similar to gambling and lottery, which have a 28% Goods and Services Tax (GST).
Currently, cryptocurrency is categorized as a financial service in India, and an 18% GST is levied on transactions on exchanges.
In her February budget speech, The Finance Minister, Nirmala Sitharaman announced plans for a 30% tax on crypto income as well as a 1% tax deducted at source (TDS) on every transaction.
Since then, the Reserve Bank of India, India’s Central Bank, has warned against crypto transactions, with the deputy governor even suggesting an outright ban.
Currently, the government is working on cryptocurrency legislation as the industry awaits further clarity.
The Goods and Services Tax (GST) law does not clearly state about classification of cryptocurrency and in the absence of a law on regulating such virtual digital currencies, the classification has to take into account whether the legal framework classifies it as actionable claim.
An actionable claim is a claim which can be made by a creditor, for any type of debt other than a debt secured by mortgage of immovable property.