Taxman are reportedly examining the taxation of non-fungible tokens or NFTs, as first reported by Economic Times. NFT purchase or sale may soon be subject to the Goods and Services Tax (GST) under indirect tax law and equalisation levy under direct tax law. Equalisation levy is applicable to foreign corporations doing e-commerce transactions with Indian residents. Currently, the government levies 2% towards equalisation tax on e-commerce transactions. While the Indian exchanges have been voluntarily paying 18% GST i.e., the same rate currently applicable to stock brokers.
Recently, the Finance Minister, Nirmala Sitharaman clarified in the Parliament that “equalisation levy is imposed on e-commerce operators, not on the investors.”
NFTs would become dearer if double taxation (GST and equalisation levy) is indeed implemented. Indians primiarly rely on foreign exchanges to purchase and sell NFTs. Indian exchange WazirX, recently launced an NFT market place with Indie pop icon Ritviz and visual artist Santanu Hazarika selling their collaboration for $391.80 and TV host and actor Vishal Malhotra selling his NFT for $5,500.
Reports on taxation of crypto trades have been circulating since last December. The finance ministry’s Central Economic Intelligence Bureau (CEIB) recommended to the Central Board of Indirect taxes and Customs (CBIC) to collect 18% GST from crypto exchanges as per a report on The Block.
The Indian government has been sitting on the fence on clarifying the status of cryptocurrencies, ever since the Supreme Court has struck down the RBI Circular that effectively banned crypto transactions. A bill to regulate cryptocurrencies is reportedly under consideration by the Central Government.