An NFT is a digital asset that represents real-world objects like Artwork, fashion, lifestyle, music, or things that cannot be interchangeable. Anything that can be converted into digital form can be NFT. When we take the example of money then money will come under the ambit of fungible because we can exchange Rs 100 for another Rs 100 and the value of the money will be the same. But, when we talk about the Non-fungible asset then these are not interchangeable. For example, the painting of Leonardo da Vinci cannot be interchanged with something else. However, if it can be bartered then the value cannot be the same because the painting of Vinci is unique and a masterpiece.
Day by day the ambit of the NFT is increasing. Some iconic tweets, art, music, literature, real state, painting, and many things that can get online come under the ambit of NFT. Basically, NFT is a type of digital asset that exists on the blockchain.
Jack Dorsey, Twitter founder whose first tweet sold for 2.9 million dollars because the tweet of Jack was unique and a masterpiece.
A few days back the recording of the Madhushala poem recited by Amitabh Bachchan was sold on NFT for a sum of INR 7,18,00,000. Day by day the NFT market is increasing rapidly.
Taxability of NFT under GST Law
NFT is taxable under GST law. From the GST perspective, since GST is applicable to the supply of goods and services, thereby NFT could be classified under the purview of services. Section 9 of the CGST Act, talks about the supply of goods and services. Buying and selling of NFTs attract GST. So, if a person buys and sells NFT then he will be liable to pay 18% GST. However, NFTs are classified into different correspondents and we have to analyze whether they fall under the ambit of Goods and services.
It is pertinent to mention here that, a marketplace engaged in NFT trading fall under the definition of e-commerce under the Finance Act, 2020 then 2% levy will be charged, however at the time of budget 2022, Finance Minister announced that income earned from transacting in digital assets will attract a capital gains tax of 30% and Tax deducted at source at 1%.
Examples of the NFT
Following are the examples of NFT, which have been sold recently:
An online auction was held n Sotheby’s website where the source code of the early versions of the World Wide Web was sold for USD 5,400.000.
Recently Amitabh Bachchan sold his father’s famous poem Madhushala which has been recited in Amitabh Bachchan’s voice for a sum of Rs. 7,18,00.000
Huddles membership NFT
Michal Jordan who is an NBA player recently launched an NFT collection where he gave access to the buyers to ask question and answer sessions, buy merchandise and have access to discord chats among other things with athletes.
Artwork is the most common thing which comes under the ambit of NFT. There are different kinds of Artwork like painting, digital, and designs. Today several artists sold their artwork as NFT. So if the seller is a registered person under section 22 of the CGST Act, then in such conditions NFT will be classified as the supply of Goods and taxable under the GST Act. Painting is defined under section 2(52)3 of the CGST Act. it is pertinent to mention that the sale of the artwork is classified as a supply under section 7 of the CGST Act, that’s why it attracts 18% of the GST.
However, if a person who is not registered under the CGST Act, or who is not fulfilling the criteria of threshold limit that is 20 lakhs then in such condition transaction may not be subjected to CGST.
FASHION AND LIFESTYLE
We all are well aware of the fashion shows then many artists launched their fashion themes in the name of NFT. Recently Manish Malhotra organize a fashion show where he sold their collection for Rs 2.8 lakh which comes under the ambit of goods and will attract 18% GST.
ANY SIMILARITY BETWEEN NFT AND CRYPTOCURRENCY?
Cryptocurrency and NFT are two different things and they are different from each other. Cryptocurrency is fungible in nature. If you hold one crypto then you can get the same value of one crypto, which means crypto is interchangeable in nature. Currently, cryptocurrency is categorized as a financial service in India, and an 18% GST is levied on transactions on exchanges but, NFT are not fungible in nature which means each art has a different value, and each one is non-fungible and unique in nature. So, cryptocurrency and NFT are different from each other.