Gain from “Cryptocurrency” is taxable under GST

Since income from whatever source derived is included in the Income Tax Act, 1961, and supply of any service, if not specifically exempted, is taxable under Goods and Services Tax (GST), the gains from cryptocurrency (crypto) trading and services by crypto exchanges are liable to be taxable as per the government.

Irrespective of the nature of business, the total income for taxation shall include all income from whatever source derived, the gains arising from the transfer of cryptocurrencies or assets is liable to tax under a head of income. Likewise, “supply of any service, if not specifically exempted, is taxable under GST and no service related to cryptocurrency exchange has been exempted.”

However, there is no data maintained by the government on crypto earnings as there is no provision in the IT return to capture data on such earnings. The Central Board of Indirect Taxes and Customs (CBIC) issues unique Services Accounting Codes (SAC) to classify each service under GST. Thakur said that since there is no specific SAC for cryptocurrencies, the GST collections specific to cryptocurrencies are not available with the government.

The clarifications have come amid the government’s move earlier this week to possibly regulate cryptocurrencies in India. The Corporate Affairs Ministry has now made it mandatory for companies dealing with virtual currencies to disclose profit or loss incurred on crypto transactions, the amount of cryptos they hold and deposits or advances from any person for the purpose of trading or investing in cryptocurrency in their balance sheets. In a notification issued on Wednesday, the ministry announced the amendments made in schedule III of the Companies Act with effect from 1st April 2021. In a written reply to a question in the Rajya Sabha on Tuesday, Thakur had said that the government will be taking a decision on the recommendations made by the Inter-Ministerial Committee (IMC) on cryptocurrencies in India. Accordingly, a legislative proposal, if any, would be brought before the Parliament.

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