Topic: Government to impose 18% GST on bitcoin trading (Read 138 times)

But if we are talking this way technically there can be no Indirect Tax on something you cannot consume. Because the burden of tax goes on the end customer and here there is no end customer? Hmm. Interesting. Things are much more complicated than they look. But I don't think there would be a separate collection mechanism, especially for cryptocurrencies. It would be like making new types of indirect taxes by the name of Goods and Service tax. Wasn't this the very purpose of GST to remove all other Indirect Taxes? I think imposing any kind of tax would be like killing the market as a whole. It's a foolish plan altogether designed to crush this speculative market but most of the people will just shift their trading to foreign exchanges outside the jurisdiction of India you can't levy GST on that obviously.

The whole purpose of ITC is to avoid the double counting problem. The process makes sure that the tax is only levied on the value-addition at each step of production. But it would be insanity to apply the same system on economic activities like trading. Unlike the normal production of goods and services, trading doesn't have fixed production cycle. The supply goes on and on from one trader to another continuously. No new value will be added in most of the transactions. If the average price of bitcoin remains constant throughout the year, the government will end up with nothing but Avg. Price of Bitcoin * No. of bitcoins on Indian Exchanges * 18% less ITC Liability remaining with buyers which I think would be much-much less than Rs. 7200cr.

And what if I inject new supply to the Exchange? Unlike stocks, cryptocurrencies can be easily traded P2P. If I just buy bitcoin off-exchange, deposit it to exchange, sell it on exchange, buyer pays the GST and claims ITC, I am out without any GST implications and government ends with zero revenue (lol). It would be much simpler to ask trader to simply deposit periodical GST on the profits made as per profit report provided by the Exchange rather than having thousands (or even millions) of buy/sell transactions to be reported on portal regularly (that would be hell of the reporting), when both systems would result in roughly same GST collection for the government.

On the side note, imagine if government failed to apply GST on trading of stocks and shares (which are very well traded on official platforms), how in the world it thought that it would be nice idea to collect GST on cryptocurrency trading, lol.

Haha I would have said this if it was any other government. But this government has a bit different approach to thing which no one likes. This government just creates a law and then thinks about it's implementation. GST law in itself was framed in haphazard manner and it's proper implementation is still a far fetched story. Same is the case with any other law introduced by this government. So I think in this case too we will see a similar thing. They will just introduce the law and let the market think about it's implementation.

So you mean Government will tax bitcoin just like how other goods are taxed in the current market. Well then it would be a long debate before this one actually becomes a law.
So I guess we have a lot of time before this law is implemented in the market. 

Actually no it won't work this way. It would be like you are a metals trader trading in metals. Now if you buy 10k INR worth Metal you pay a GST of 1.8K @18% to the person you are buying it from taking your total cost to 11.8K this will be called your ITC. but when you sell it for 12K you will collect 18% GST from the purchaser which means 2.16K INR. But now you will have to deposit 2.16k - 1.8K(which you paid on purchase) = 0.36K to the government. Therefore net you are paying an 18% tax on the profit you made but the mechanism works that you collect tax and deposit it to government after claiming ITC
But that cannot be said as GST. GST is charged on "Supply of goods and services" withdrawing funds to your bank account isn't a supply so it would become pretty easy to challenge such a thing in courts. They won't make this easy of a law.

It doesn't make any sense to charge 18% GST on the whole amount bitcoin purchase. Imagine a person buying 10k INR worth bitcoin and selling it at 12k INR which means 20% profit but if he would pay 18% to the Government then it would make any sense to earn those profits. Another scenario is what if he buys and sells in a loss. Adding 18% to it would create a huge impact to his loss.
So taxing the whole bitcoin amount is out of the scope here.


What I think is that the Government is planning to tax the profits made on every/sell. In this case the buyer and seller wouldn't have separate taxes levied on every purchase but rather the tax would be levied on the cumulative profits. Further more, I think that the tax would be levied when we withdraw the profits to bank. This way the exchanges wouldn't have to collect the tax. It would be the user who would have to apy the taxes.
It could be the other way around but I guess it would be better this way.


That is the one and only good thing that we can portray out of this news.

I don't think it's going be this fancy they are just going to classify it as intangible asset and just like you have a business of purchasing and selling softwares or other intangibles you will have to collect and pay GST to the government @18%. Talking about the rate the Bitcoin industry isn't that large at the moment that it could lobby or leverage itself with the government and neither does it directly affects the lives of the common man. So I am thankful they are keeping it at 18% and not 28%. They don't care about the market they anyway wanted to stop it.


I don't think ITC can be applied here. Since, the proposal is about charging the GST on profits, the buyer won't know how much GST is to be charged on the trade. So, the logical step would be that the seller bears the burden of GST by paying off the percentage of GST from his earned margin.  

---