After 30% crypto tax, Centre mulling GST on mining of digital tokens

 







The Centre is exploring ways of levying GST on the mining of cryptocurrencies, reports suggest. Cryptocurrencies can be either mined (created/generated) or directly bought from crypto exchange platforms like Coinbase, Binance, Coinswitch, Bitfinex, WazirX, etc.\


When can one expect a decision?


"There are several aspects of the operation which intersect with GST as a tax," he said in an interview to ET.


The issue of the supply of cryptocurrencies requires a more detailed examination. As for the expected time that the CBIC may require to reach a decision, it could take 2-3 months, according to Johri.


Mining is key to VDA transaction. The Government is now thinking of how to tax such a thing. First, a call is to be taken as whether to treat mining as goods or service and then, secondly, place it accordingly in a category from the GST point of view,” a senior government official told The Hindu Business Line.


The Union Budget 2022-23 proposed a steep 30 percent tax on the trading of all virtual digital currencies. The proposed GST on transactions of virtual digital assets or VDAs will result in an overall increase in the incidence of tax on cryptocurrencies.


According to Kanwal Prakash Singh, Head of Quant with CoinDCX, any platform that provides infrastructure for the mining of cryptocurrencies should be considered as a standard service provider.


Miners provide a service of “verifying and processing the transactions” by solving “cryptographic puzzles.” The miner then gets rewarded with a token that can be any cryptocurrency like Bitcoin (BTC), Ethereum (ETH), etc. This reward for miners should be treated as a service fee and it may be considered for GST, Singh told The Hindu Business Line.


But in the case of non-fungible tokens (NFTs), the platforms that allow buying and selling of NFTs should be treated as service providers and the commission earned for listing NFTs should be considered for GST.


“Any sale of NFT may be treated as a ‘good,’ after all NFT is similar to a virtual good,” he said.


Sathvik Vishwanath, Co-Founder of Unocoin, said crypto mining is not a worthwhile job in India on a day-to-day basis due to higher electricity, internet charges, and rent.


India will not have more than 1 percent of the crypto miners in the world. Indian exchanges do not play a role in mining, Vishwanath said.


Anyone with a computer, an internet connection and electricity can technically mine cryptocurrencies, but the process is highly resource-intensive and requires huge amounts of energy, expertise in complex algorithms and technical upkeeping. Thus, around the world, only large firms dominate the cryptocurrency mining industry.

Levying GST on crypto mining shall be difficult as there shall be points equivalent to what worth it was mined at and liquidated at

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