Crypto, GST, and Taxation – A Complete Guide for Chartered Accountants

Cryptocurrency is no longer a speculative asset class—it has evolved into a full-fledged investment category. Governments worldwide, including India, are now regulating crypto transactions through taxation and compliance laws. As a Chartered Accountant (CA), staying updated on crypto taxation is essential to ensure clients remain compliant and avoid penalties.

This guide covers GST, TDS, income tax, and international taxation on crypto transactions to help you navigate the evolving regulatory landscape.

1. Crypto Taxation in India: An Overview

The Indian government has clarified its stance on cryptocurrency taxation through the Union Budget 2022, categorizing crypto as Virtual Digital Assets (VDAs) under Section 115BBH of the Income Tax Act.

Key Highlights of Crypto Taxation in India:

• A flat 30% tax is levied on profits from crypto trading, with no deductions except for the cost of acquisition.

• 1% TDS on crypto transactions exceeding ₹50,000 (₹10,000 in certain cases) as per Section 194S.

• GST implications on crypto transactions are still evolving, but businesses accepting crypto payments may be liable to pay GST.

• Losses from crypto transactions cannot be offset against other income sources.

2. GST on Cryptocurrency Transactions

One of the biggest uncertainties surrounding crypto taxation is whether GST applies to cryptocurrency transactions. While the government has not issued definitive guidelines, here’s what we currently know:

When Does GST Apply to Crypto?

• Crypto exchanges charge transaction fees, which are subject to 18% GST.

• If a business accepts crypto as payment, it may be required to pay GST on the transaction value (similar to a barter system).

• If a company provides crypto-related services, such as consulting or development, GST applies to the service charges.

When Does GST Not Apply?

• If a crypto investor is simply buying and holding, no GST is applicable.

• P2P transactions without intermediaries may not be subject to GST directly, but users must comply with income tax and TDS rules.

Challenges in GST Compliance for Crypto

Since cryptocurrencies are not classified as goods or services under GST law, determining GST applicability remains ambiguous. However, CAs must advise clients to maintain proper records of all crypto-related transactions to avoid scrutiny.

3. TDS on Crypto Transactions: What Every CA Must Know

The introduction of Section 194S in the Income Tax Act brought TDS obligations for crypto transactions, effective from July 1, 2022.

Who Needs to Deduct TDS?

• Crypto exchanges are required to deduct 1% TDS before processing payments.

• If trading on foreign exchanges or in P2P transactions, the buyer must deduct TDS before making payments.

Key TDS Rules for Crypto:

• 1% TDS applies on transactions exceeding ₹50,000 (₹10,000 for individuals in some cases).

• TDS must be deposited with the government and reported in the TDS return (Form 26Q).

• Failure to deduct or deposit TDS on time may result in penalties and interest.

Impact of TDS on Crypto Traders

The TDS rule has significantly impacted crypto trading volumes in India, as frequent traders find it difficult to manage cash flow with every transaction being taxed. CAs must educate clients about how TDS deductions affect their trading strategy and overall tax liability.

4. Income Tax on Crypto Gains: Short-Term vs. Long-Term Impact

The Income Tax Act does not differentiate between short-term and long-term crypto gains. Instead, all gains are taxed at a flat 30% rate under Section 115BBH.

How Crypto Gains Are Taxed in India

Type of Transaction	Tax Rate	Deductions Allowed?
Selling crypto for INR	30% on profits	No, except acquisition cost
Trading one crypto for another	30% on profits	No
Mining crypto	30% on profits	No depreciation benefits
Receiving crypto as salary/payment	Taxed as salary/business income	No

Can Crypto Losses Be Adjusted?

• Losses from crypto cannot be offset against other income (such as salary, business income, or stock market gains).

• Losses cannot be carried forward to the next financial year.

This makes tax planning for crypto investments more complex compared to traditional investments.

5. International Crypto Investments: Cross-Border Taxation Challenges

With crypto being a global asset, many Indian investors trade on foreign exchanges like Binance, Coinbase, and Kraken. However, cross-border transactions come with additional tax obligations.

Key Considerations for International Crypto Taxation:

• Foreign crypto holdings must be reported under the Liberalized Remittance Scheme (LRS).

• Gains from foreign exchanges may be taxed in both India and the foreign jurisdiction.

• Double Taxation Avoidance Agreements (DTAA) may help in avoiding double taxation.

CAs must advise clients on proper reporting of foreign crypto assets in ITR filings to avoid penalties under the Black Money Act.

6. How CAs Can Help Clients with Crypto Taxation & Compliance

As crypto regulations evolve, Chartered Accountants must provide accurate advisory services to ensure their clients remain compliant.

How CAs Can Add Value:

✅ Educate clients about TDS, GST, and income tax on crypto transactions. 

✅ Ensure proper tax filings for crypto traders and businesses. 

✅ Help businesses accepting crypto structure their transactions correctly. 

✅ Advise on foreign exchange laws for cross-border crypto investments. 

✅ Keep up with evolving RBI and SEBI regulations on digital assets.

7. The Future of Crypto Taxation in India

While India has introduced strict tax policies on crypto, the legal framework is still evolving. Potential future developments include:

• Clarification on GST for crypto transactions.

• Changes in TDS rates based on trading volumes.

• Recognition of crypto as an asset class under SEBI regulations.

CAs must stay updated on regulatory changes and help clients navigate the complexities of crypto taxation efficiently.

Final Thoughts: Is Your Practice Ready for Crypto Advisory?

With the Indian government tightening regulations on digital assets, crypto taxation will become a specialized area for CAs. By staying informed and providing comprehensive tax and compliance solutions, CAs can position themselves as trusted advisors in the digital finance space.

If you’re a CA looking to expand your expertise in crypto taxation, now is the time to develop a structured approach for advisory services.