Before Going to the topic you should know about Cryptocurrency and NFT
Cryptocurrency
A cryptocurrency, crypto-currency, or crypto is a collection of binary data which is designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger which is a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership. Cryptocurrencies are generally fiat currencies, as they are not backed by or convertible into a commodity. Some crypto schemes use validators to maintain the cryptocurrency. In a proof-of-stake model, owners put up their tokens as collateral. In return, they get authority over the token in proportion to the amount they stake. Generally, these token stakers get additional ownership in the token over time via network fees, newly minted tokens or other such reward mechanisms.Cryptocurrency does not exist in physical form (like paper money) and is typically not issued by a central authority. Cryptocurrencies typically use decentralized control as opposed to a central bank digital currency (CBDC).
NFT
A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a digital ledger (blockchain). NFTs can be used to represent easily-reproducible items such as photos, videos, audio, and other types of digital files as unique items (analogous to a certificate of authenticity), and use blockchain technology to establish a verified and public proof of ownership. Copies of the original file are not restricted to the owner of the NFT, and can be copied and shared like any file. The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin.
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Cryptocurrency and NFT in the tax net: GST etc. will apply (India)
With the spread of cryptocurrency and NFT, the government again began to try to bring the blockchain system into the tax net.
Consideration is now being given to taxing blockchain transactions for commercial purposes. The government is considering a bill to regulate transactions in cryptocurrencies and to introduce digital currency in the country.
The new bill is expected to be introduced in the winter session of Parliament. In addition to levying GST on cryptocurrencies, the tax research unit has been tasked to study the NFTs to ensure that there is no loss of revenue.
Transfer, storage, distribution and transaction can all be treated as services under GST. As the cryptocurrency transaction became more widespread, it was thought to take advantage of similar tax possibilities in 2018.
A large segment of the country, including the youth, is already investing in cryptocurrencies. It is reported that a transaction of Rs 6 lakh crore is taking place in this sector.
NFT is data stored in a digital ledger using blockchain technology. NFTs of art value (certified) will be claimed by the owner only. Therefore cannot be transferred. NFT tokens can convert a variety of digital files, such as photo, video, and audio.
The unique feature is that such artwork stored in the blockchain can be converted into NFT tokens to secure ownership. Although intrinsically valuable, NFTs cannot be traded like cryptocurrencies.
Source of
Data : Wikipedia and Mathrubhumi
Title image : Gettyimages
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