The panel, comprising federal and states' finance ministers, is seeking to broaden the tax net to track dealings in virtual digital assets in a more effective manner, as per the report. The GST panel is meeting for two days starting Tuesday, June 28, 2022 in Chandigarh, and is unlikely to finalize a rate in the upcoming meeting but discussions may be held on placing cryptocurrency in the highest tax slab of 28%, the report added.

Meanwhile, the Central Board of Direct Taxes (CBDT) issued an FAQ on the TDS provisions on virtual digital assets (VDA) or cryptocurrencies, which was introduced in 2022-23 Budget and will be effective from July 1.

The income tax department on Wednesday said the 1% TDS on transfer of virtual digital assets would be levied on net transaction value and the onus of deducting the tax would primarily be on the exchanges.

The frequently asked questions (FAQ) said in a peer-to-peer (direct buyer to seller) transaction, the buyer paying the consideration will be required to deduct the tax deducted at source (TDS).

However, in case the transaction is taking place through an exchange, the onus of deducting TDS will be on the exchange which is crediting or making payment to the seller. The FAQ further said for transfer of VDAs owned by the exchanges, the buyer or his/her broker would be required to deduct the tax.

Earlier this year, Finance Minister Nirmala Sitharaman imposed a levy of 30% on income from transfer of virtual assets and a 1% tax at source on all crypto transactions in a bid to assess the size of crypto market in the country and track users. The move was seen as removing uncertainty about the legal status of crypto transactions.

Digital assets have been selling off all year along with other risky holdings as global central banks have shifted to hiking interest rates to quell soaring inflation.