The tax treatment on cryptos varies across jurisdictions. In Australia, prior to July 1, 2017, sales and purchases of digital currencies attracted GST. But this was rolled back as consumers who used digital currencies were effectively taxed twice – once on the purchase of the digital currency and again on its use in exchange for other goods and services (that attracted GST). However, any business in relation to digital currency could attract GST. India, with an estimated 15-20 million crypto investors with holdings of over ₹15,000 crore, must avoid any flip-flop on the tax treatment of cryptos.
Countries are also drafting new tax laws to support (or pressure) the crypto mining industry. Crypto mining requires computers with special software specifically designed to solve cryptographic mathematical equations. The prospect of gaining newly minted crypto coins makes mining a huge draw. But RBI continues to voice serious concerns around private cryptos saying these could cause financial instability. GoI, keen to encourage fintech innovation, must give proper legal backing to cryptos and let RBI regulate them. A clear GST framework can follow.