Crypto GST 2.0: How New Tax Rules Could Reshape Web3 Business Models
Khushi V Rangdhol Sep 21, 2025 00:00
In 2025, India implemented GST on crypto platform fees, adding an 18% tax on top of existing income taxes, reshaping Web3 business models and compliance strategies.
India didn’t legalise or ban crypto in 2025—it priced it. And the price signal is clear: profits are taxed hard, and platform services now fall squarely inside GST.
The tax stack as it stands
- Income tax on gains: Since April 1, 2022, profit from transferring “virtual digital assets” (VDAs) is taxed at a flat 30%, with no offset of losses against other income. A 1% TDS applies on consideration at sale (thresholds ₹50,000/₹10,000). These rules remain in force in 2025.
- Policy stance: The government’s September 2025 paper reiterated there is no full crypto framework yet; existing tax laws serve as a deterrent to speculation.
What changed in 2025: GST comes to the front door
Through mid-2025, exchanges increasingly disclosed that GST at 18% applies to platform/service fees charged to Indian users (spot, derivatives, copy trading, staking/withdrawal fees, etc.). Indian platforms and tax firms now present this as the operative position post-July 7, 2025—that GST is on fees, over and above 30% gains tax and 1% TDS on transfers. This follows a longer enforcement arc in which authorities pursued GST registration and dues from offshore and domestic exchanges (e.g., DGGI show-cause actions in 2024).
In short: Crypto trading profits are still in the income-tax net (30% + 1% TDS), while platform operations have been pulled explicitly under GST at 18% on the fees they charge.
What “GST 2.0” means in the background
India’s broader GST 2.0 revamp (rolled out in late September 2025) simplifies slabs for the economy at large—primarily 5% and 18%, with a 40% sin/luxury tier—part of a push to streamline compliance and cut friction. While these are economy-wide changes, they set the rate context for digital services such as exchange fees, which sit at 18%.
Business-model impacts you can price in
1) Take-rate arithmetic changes.
An exchange’s effective take rate now includes: (i) fee charged to the user, plus 18% GST on that fee; (ii) user-level 30% tax on gains; (iii) 1% TDS at transfer. For active traders, the all-in wedge is materially larger than in 2022—platforms competing on low fees may need to absorb some GST or bundle pricing more transparently.
2) Product menu repricing.
Derivatives, copy-trading, staking service charges and fiat ramps that carry explicit service fees are squarely in scope for 18% GST—pushing firms to rethink subscriptions, maker-taker spreads, or tiered bundles that minimise invoice clutter while staying compliant.
3) Onshore vs offshore incentives.
Past enforcement shows authorities will pursue GST obligations from offshore platforms offering services to Indian users. That reduces the historic arbitrage of “operating from abroad” and nudges serious businesses toward onshore registrations or geo-fencing.
4) Compliance as product.
With income-tax and GST layers coexisting, record-keeping and invoicing become a competitive feature: clean GST invoices for fees, accurate Section 194S TDS reporting, and user dashboards that reconcile both. (Mainstream tax portals emphasise these compliance points in 2025 guidance.)
What hasn’t happened (and why that matters)
India has not announced a special 28–40% GST category for crypto assets themselves, nor a rule to levy GST on the entire traded value of coins. The centre of gravity is 18% on platform/service fees, not on the asset value. Debates about whether crypto is “goods,” “services,” or “money” for GST continue in legal commentary, but 2025 practice is coalescing around fees-based GST.
Strategic responses for Web3 companies
- Price inclusive of GST on fees and disclose clearly; opaque add-ons invite churn.
- Re-engineer fee design (membership tiers, netting, maker rebates) to soften the visible tax wedge while remaining compliant.
- Double-down on compliance UX: automated GST invoices, TDS reports, and export-of-services documentation where applicable.
- Assess onshore presence: with enforcement narrowing the offshore route, a registered entity plus airtight KYC/AML may be the lower-risk path to scale.
The bigger picture
India’s approach in 2025 mirrors its wider stance on crypto: guardrails first, innovation if it fits. The 30% + 1% TDS regime was meant to curb speculative froth; the 18% GST on platform fees brings exchanges into the ordinary machinery of indirect tax. Put together, they don’t ban Web3—but they force it to become a real business, where margins, compliance and product design matter more than momentum.
Sources: Budget 2022: 30% VDA gains tax; 1% TDS under Section 194S (still in force in 2025). Reuters+1, 2025 policy stance: Government paper resisting a full crypto framework; taxes seen as deterrent to speculation. Reuters, GST on platform/service fees (2025): Platform and tax-advisory updates noting 18% GST from July 7, 2025. CoinDCX+1, Enforcement backdrop: DGGI actions and notices to offshore exchanges in 2024 regarding GST obligations. The Times of India+1, GST 2.0 context (slab simplification): Media coverage of the September 2025 reform and rate structure. The Times of India
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