Introduction:
The objective of this article is to keep it short and sweet. This is solely based on my understanding of GST legislation. If you differ with me for any reason, please let me know the reasons. Since the topic is debatable, multiple viewpoints are possible.
Whether Bitcoin is a good or service under GST?
Bitcoin is a “service”. This is because goods are defined in CGST act as any movable property and exclude money and securities. Money for this purpose is Indian legal tender – which bitcoin is not. “Service” includes anything other than goods and excludes money and securities. A combined reading of both the terms makes it evident that bitcoin and cryptocurrency is a service. I know you cannot digest this – neither can I.
What happens when you purchase bitcoin from the wallet?
That depends on the intermediary through which you buy. You never know who the seller of bitcoin is. Consequently, it is not possible to find out the place of the supplier of bitcoin. However, you know the place of the intermediary – like coin secure India. It must be appreciated that supplier includes agent acting on behalf of such supplier under CGST Act. Consequently, when you buy bitcoin through Indian agent, it means it is a local supply. No implications are there for you at this stage. However, when you buy bitcoin through foreign agent, it is not a local supply. In such cases, you have to pay GST as reverse charge!!!.
What happens when you sell bitcoin through wallet?
Again this depends on whether the intermediary is Indian or foreign. If the intermediary is Indian, you are liable for GST since the agent’s place of business is deemed to be receiver’s place of business. However, since you cannot pass on GST to the buyer, you have to pay GST out of your pocket and this erodes your margin!!! However, this can be claimed as a tax deduction for the purpose of capital gains. I will explain this in a different section.
When you sell through the foreign agent, then it becomes an export. You will get a refund of the GST paid on the reverse charge, provided you get registered and file the relevant forms in a timely manner.
Conclusion (in my opinion)
Your margins may take a hit if you deal in bitcoin through the Indian intermediary. However, your margins will not be hit if you deal through a foreign intermediary. However, your working capital can take a hit.