Going ahead, social media giants such as Meta or dating apps like Gleeden or even gaming apps could face a 1% tax deducted at source as these would be covered under the government’s broad definition of virtual digital assets.
Meta’s Facebook platform, for instance, sells “stars” that can be gifted to content creators while Gleeden offers credit packs to unlock chatting and gifting facilities to users — both of these will now fall under the broad definition of virtual digital assets and attract 1% TDS, experts say.
Not just that, several gaming apps that allow users to buy guns, bullets and other upgrades will now face the tax as well, say experts. Meta and Gleeden did not respond to emails seeking comments till the time of going to press. Twitter, which made its foray into the digital space through a June 30 NFT drop last year, did not specifically respond to queries around taxation on digital assets and how it might impact its plans for future NFT drops, but said there was nothing planned for another NFT drop currently.
“The government has deliberately kept the definition of virtual digital assets broad due to the ever-changing landscape. As it stands today, these in-app purchases or reward points, some of them hosted on blockchain, will face 1% TDS but the burden to comply will be on the buyer,” said Gaurav Mehta, founder, Catax, a cryptocurrency tax and audit firm.
The finance minister last week introduced a 30% income tax on returns from digital currencies.
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The government also introduced a 1% TDS, on digital assets. The government has however not used the word “cryptocurrency” in the guidelines announced in the budget but virtual digital assets.
Tax experts claim that this would not just impact the points, coins or any other purchases made within an application but even impact the metaverse.
Metaverse events where rock concerts or marriages are taking place and users can buy clothing or other virtual gifts will get impacted and may have to cough up TDS and 30% tax on those receiving the gifts.
“We are consulting tax experts as there is no clarity on the implementation side. Many users reached out to us and we have many users who are not Indian citizens but are trying to know about their stand,” said Rajat Ojha, the CEO of Hyderabad-based Gamitronics, that launched the PartyNite platform on January 26 with India’s first Metaverse concert featuring Indian artist Daler Mehndi.
Selected NFTs were also dropped during the event.
India recently had a first metaverse event where a couple from Tamil Nadu got married on a 3D metaverse where around 500 guests attended. If any of the guests gifted either a crypto asset, or anything that could be bought or converted or valued in money, a 30% tax would be applicable.
Prashant Puri, the CEO of digital marketing firm AdLift, said implementing the 1% TDS across Apple, Android and the entire app ecosystem would be a mammoth task.
“The entire app ecosystem works around tokens and digital money. Digital assets are a very grey area,” he said. The head of a digital media and live entertainment company said the new laws were being ‘looked into’.
Some tax experts are also questioning how the 1% TDS will be calculated.
“So, if I buy bullets on metaverse or in a game, should 1% be levied every time I buy the bullet? Or 1% is applied on every game?” asked Rahul Garg, managing partner of tax and regulatory consultants Asire Consulting.
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