The government is weighing a proposal to impose 18% goods and services tax (GST) on bitcoin transactions, estimated to be around Rs 40,000 crore annually.
The Central Economic Intelligence Bureau (CEIB), an arm of the finance ministry, has put forward the proposal to the Central Board of Indirect Taxes & Customs (CBIC), suggesting that the government could potentially receive Rs 7,200 crore annually on bitcoins trading in the country. The CEIB acts as a think tank of the ministry and has conducted a study on levying of GST on cryptocurrencies.
According to finance ministry sources, CEIB has suggested that bitcoins can be categorised under ‘intangible assets’ class and a GST levy could be imposed on all transactions. The board has suggested that the cryptocurrency can be treated as current assets and GST charged on the margins made in its trading.
The unregulated cryptocurrency exchanges and its trading has posed a bigger challenge before the government, particularly after the Supreme Court lifted a two-year ban imposed by the RBI on banks and financial institutions to deal with digital currencies.
Currently, there is no regulator for cryptocurrency and hence there is also fear of it being used for big-time money laundering and undermining of legitimate currencies. On December 11, the ED arrested a cryptocurrency trader in Gujarat for his alleged involvement in money laundering on behalf of banned Chinese betting apps operating in the country.