GST on Supply of Crypto or Digital Assets

Crypto or digital assets are growing fast, and so is the need to understand GST implications. It is important because these transactions are classified as the sale of goods and fall within GST rules. This article explains how GST applies, the 18% rate on transactions, and compliance for crypto exchanges.

Key Takeaways

• Crypto is treated as goods under GST.
• The applicable GST rate is 18%.
• Crypto exchanges must follow strict registration and record‑keeping rules.
• Input tax credit (ITC) can be claimed for business use.
• Advance rulings provide legal clarity on GST for crypto.

Meaning of Crypto or Digital Assets Under GST

The GST Act does not define crypto or digital assets. Instead, we refer to the definition derived from the Income Tax Act. A virtual digital asset is any form of digitally generated information, code, number, or token that represents value, which can be exchanged in financial transactions and stored or transferred electronically. This definition explicitly excludes Indian or foreign currencies.

It also covers non-fungible tokens and any other digital asset that the Central Government may specify. Additionally, it includes crypto-assets that utilise a cryptographically secured distributed ledger or similar technology to validate and secure transactions, whether or not they fall under the previous categories.

Classification of Crypto Under GST

Under GST, goods are defined as movable property, actionable claims, crops, or items that must be severed from land before sale, explicitly excluding money and securities. 

Money includes legal tender, foreign currency, cheques, and other instruments recognised by the RBI for settling obligations; securities cover shares, bonds, debentures, derivatives, and similar instruments. Since crypto assets do not fit into either category, they are treated as goods.

Applicability of GST on Crypto Transactions

With no exemption in Schedule III or any contrary notifications, the sale or transfer of crypto or digital assets is fully taxable under GST. Whether acquired through exchanges or mining (self-generation), these transactions are treated as taxable supplies.

GST applies to fees such as:

• Trading fees charged by the platform
• Withdrawal fees, if levied
• Conversion charges (e.g., crypto-to-crypto swaps)
• Service fees on futures trading or copy trading

However, GST does not apply to the crypto purchase value itself or to transfers made to self-wallets without any service charges.

GST Rate on Cryptocurrency

Currently, there is no dedicated HSN code or a specific rate uniquely set aside for crypto or digital assets. In practice, these transactions are classified under HSN code 960899, labelled as “other miscellaneous articles,” which attracts a GST rate of 18%. 

Keep in mind that as regulatory clarifications evolve, this interpretation may be subject to future updates.

GST Compliance for Crypto Exchanges

Services provided by a cryptocurrency exchange to Indian users are classified as an Online Information and Database Access or Retrieval (OIDAR) service under GST, subject to an 18% tax on transaction or service fees. This classification applies uniformly to both offshore and domestic platforms. Consequently, exchanges are mandatorily required to register for GST and collect tax from Indian users irrespective of whether their turnover exceeds the Rs. 20 lakh threshold.

Key compliance points include:

• Charging GST on their service fees or commissions.
• Collecting and remitting the correct amount to the government.
• Maintaining transparent and detailed transaction records for audit and compliance purposes.

ITC Claims for GST on Crypto or Digital Assets

Under the GST Law, the input tax credit can only be availed if the goods or services are used for business purposes. 

Businesses dealing with crypto or digital assets can claim input tax credit (ITC) on the GST paid on the purchase of crypto or any other goods or services used for dealing in crypto or digital assets. 

This means that costs such as broker commissions, consultancy services, software subscriptions, and mining-related expenses may be eligible for ITC if used for business purposes.

Advance Rulings in Implementing GST on Crypto

Advance rulings have emerged as a valuable tool for crypto exchanges seeking clarity on GST obligations. These rulings provide a legal interpretation of how GST should be applied, ensuring consistent compliance across the industry. As a result, investors and exchanges benefit from a more predictable regulatory environment, even as the market rapidly evolves.

Conclusion

Understanding GST on crypto or digital assets is crucial as the digital economy evolves. With crypto classified as goods and an 18% GST rate currently in practice, exchanges and traders must adhere to strict compliance and record‑keeping standards. Continued clarification through advance rulings ensures that market participants remain informed and compliant in a dynamic regulatory landscape.