Cryptocurrencies have drawn the attention of the tax authorities primarily because of the high rates at which they have been sold on exchanges in India and around the world. Its taxation regulatory framework must be determined in the current legal landscape.
Article 246 and 265 would apply here as Article 246 gives the power to levy taxes and Article 256 says that no tax can be collected without the power of law. Under Article 246A, exclusive powers are imposed on the parliament to make laws about interstate trade and commerce. Thus, from two points of view - revenue and expenditure - any transaction involving cryptocurrency can be examined. If it can be taxable under the Income Tax Act, 1961, or the Central Goods and Services Tax Act, 2017, and other rules will determine the essence of the transaction and the parties to the transaction. The current law is still slightly unclear and so the taxation of cryptocurrencies can be seen from two viewpoints that are either as goods or currency or both.
The treatment of cryptocurrencies under the direct tax regime is regulated primarily by India's Income Tax Act. Cryptocurrency would not be susceptible to tax under the IT Act if cryptocurrency were treated as 'currency'. The first explanation is that the concept of 'income' is an inclusive one under the Act, which includes not only the 'natural' sense but also the things referred to in Sec 2(24) of the IT Act. Secondly, as a mode of consideration, the tax incidence would not be on the currency but the transaction. If cryptocurrency is treated as goods/property, on the other hand, then it will be protected either in the 'Profit and Gains from Business and Profession' or' Income from Capital Gains' charging clause.
Under the Indirect Tax regime, Cryptocurrency's treatment as goods/property means that bitcoin supply is a 'taxable supply' and therefore subject to GST. Technically, as bartering is essentially an exchange of one good for another, a supply of cryptocurrency as products or property in exchange for other virtual/real goods should fall within the scope of the 'barter trade.' An approach where cryptocurrencies are treated as goods implies that such transactions will be taxed twice, first on supply (otherwise exempted for a money transaction) and, secondly, on consideration, unnecessarily resulting in higher taxes. This higher incidence of taxes places a major limitation on companies investing in cryptocurrencies, which also decreases their buying ability. Although the Supreme Court struck down the RBI ban last year, in addition to being hard to grasp, cryptocurrency legislation is still prohibitory. Cryptocurrencies are not legal tender in India, and the government has made it very difficult for them to operate while exchanges are legal. Bitcoin will take time to be generally accepted as a currency or means of exchange in India, given the uncertainties associated with Bitcoin and the relatively nascent state of its growth. This would contribute to the usual reaction of these exchanges, moving the base outside India, and the eventual loss of enormous potential tax revenues. If the government were to legalize the trade of these currencies, the treatment for bitcoins would be optimal.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
