GST may get applied on crypto transactions

The tax department is probing on how exchanges that allow trading in India manage their cryptocurrency float, and whether there is any element or any transaction where Goods and Services Tax (GST) could apply.

In order to determine whether GST can be imposed on cryptocurrency transactions, the department is currently examining how cryptocurrency exchanges, both Indian and foreign, conduct their transactions in the country.

Some of the large exchanges also have holding entities outside India. As those entities hold a sizable part of the crypto asset, they transfer the assets to their Indian entities before any Indian buyer could procure them.

The tax department is also looking over whether transactions between two exchanges that are recorded as transfer, could also attract additional GST. Currently, several exchanges operate in India but only a handful of them tend to have actual cryptocurrencies on their books to be bought or sold by Indian traders and investors.

The government is discussing with stakeholders whether cryptocurrencies should be completely banned or whether they should be allowed in a limited way where the Reserve Bank of India (RBI) will primarily regulate them.