Singaporean taxation body, the Inland Revenue Authority Of Singapore (IRAS) has suggested that the Goods and Services Tax (GST) must be lifted on all cryptocurrencies used as a medium of exchange. It published an e-draft titled “Digital Payment Tokens,” which asks the government to exempt cryptocurrencies from taxation.
In the draft, IRAS says,
“From 1 Jan 2020, to better reflect the characteristics of digital payment tokens, the following changes will take effect:
(i) The use of digital payment tokens as payment for goods or services will not give rise to a supply of those tokens; and
(ii) The exchange of digital payment tokens for fiat currency or other digital payment tokens will be exempt from GST.”
The ultimate aim behind the creation of cryptocurrencies was to use it as a substitute for fiat currencies for daily transactions. However, increasing use of crypto as investment assets led to many countries imposing blanket taxes on crypto trade.
Eventually, as authorities study the difference between the use for daily transactions, and as investment assets, they shall realize that crypto, like fiat, can truly be a daily driver. Taxes like GST are imposed on goods or services which create value before changing hands, like consumer durables, stock, gold, etc. However, as using Bitcoin, for instance, to pay for medicines or luxury goods, must lead to GST on the product, not Bitcoin itself.
At a time when global regulators are tightening their grip on crypto trade, liberating it from GST is an extremely positive move, and authorities from other countries can definitely learn a thing or two from IRAS.