The term NFT stands for "non-fungible token". NFTs is basically digitalised
asset which epitomize original works as stated under section 2(y) of the
Copyright Act, 1957 and hereafter mentioned as "Work/s" such as music,
painting, meme etc. in a digital form. There is really no restraint on what
physical commodities or assets can be transformed and sold as an NFT.
NFT is unchangeable and different and can't be replaced or divided. NFTs are
braced by meta data and algorithm, which are inclined to set it separately from
other alike NFTs already in existence. If someone owns an NFT, then the person
is likely to be the only person globally with that unique token on the
Copyright and Protection
NFTs are not likely to enjoy copyright as they just represent certain work on
the blockchain technology. This will not classify as derivative works or
original works under intellectual property laws whereas the works on which a
NFTs are formed will relish copyright protections. The right in such Works are
seized by the assignee/author, as stated below. The ownership of the copyright
in the Works delivers the exclusive right to the owners as stated in section 14
of the Copyright Act, 1957.
This includes the rights to mint the NFTs of the Work. The owners of the
copyright in the Works can transfers the whole copyright in the Works to an
individual by assignments or provide the individual with convinced right over
the Works such as the rights to mint the NFTs by mode of a license. For minting
an NFT, one must own the rights of communication of the Work and imitation of
the Work to the public. Without such rights, minting a NFT of the Works will
lead to a breach of copyright.
NFTs derives their worth from the Works which they denote. However, the market
force such as demands and the hype formed for some particular NFTs eventually
determines the worth of such NFT. As already stated hereinabove, when an NFT is
bought, the purchaser is actually purchasing the metadata in the Works and not
obtaining the underlying Works allied with the NFTs or its associated right.
When NFT is bought, the purchasers become the owner of the NFT and a
non-exclusive license is granted to present the NFT in their e-wallet. However,
the extent of these rights is for personal uses only and the purchaser cannot
commercialize on these rights by showing Works in any third-party websites.
Most of the sales of the NFTs do not generally involve transmission of
copyright, but there are cases wherein the sellers offer to turn the token into
an actual transmission of copyright ownership of the original Works, thereby
transferring all the copyright in the artistic work as stated under section
14(c) of the Copyright Act, 1957.
Such transmission of right should be set out in the terms and condition or in a
separate license/assignment agreement between the NFT sellers and buyers. The
buyer's usage of the underlying Works can sometime be with the minimal
restrictions. However, seeing the nature of right attached to an NFT, it is
tremendously restrictive depending on what the owners of the right choose to
The difficulties under Indian laws is that even if seller wants to assign the
copyright in the underlying Works of the NFT to the purchaser via a smart
contract, it is not permitted as Section 19(1) of Copyright Act, 1957
evidently mentions, "No assignment of the copyright in any work shall be valid
unless it is in writing signed by the assignor or by his duly authorised agent."
Therefore, in order of the transmission of the copyright in the underlying Works
of an NFT, the party must have a fully effective license agreement or assignment
yielding the purchaser either the copyrights in the Works or certain rights over
At every single stage of transfer or sale of the NFT, unless the purchaser has
attained the copyright to the NFT through a written agreement from the seller
(assuming the seller owns the copyright to the NFT), the purchaser does not
acquires the right to exploit the NFT through any means he want such as
exhibiting or merchandising photo of the NFT for commercial purposes.
An alternate policy suggestion is that a new code should be formed for
Blockchain which would not only solve the issue of NFT's but would also cover
other socio-legal aspects such as Tax, Merger & Acquisition. This idea is taken
from the Insolvency and Bankruptcy Code, 2016 as it is an additional law to
company law, tax law, mergers & acquisitions and competition law in India but
isn't a full-fledged law.
Purchasing of NFTs forms a taxable event when they are generally bought using
cryptocurrency whereas when the NFT's are bought using fiat money, then it
creates taxable events only when the NFT's are sold. Under section 1(a)(9) of
the Commodities Exchange Act (CEA), most non fungible tokens are possibly stated
as commodities. As a collectible, NFTs are subjected to long-term or short-term
capital gain tax.
One of the most prevalent usages of NFT is artwork and even India has engaged to
its markets quite well. In this scenario, if sellers are registered suppliers
under the Central Goods and Service Tax Act, 2017, then the sale of these
NFT's are considered as supply of good and will be eligible to CGST. Under
Section 2 (52) of the CGST Act.
If the asset is an artwork, then it falls under the definition of goods and
consequently sale of these goods will be classified as "supply" as per section 7
of the same Act. As now stated by apex court in several cases that "goods" under
this Act can be classified as tangible or intangible property, so intangible
nature of NFT's should not be considered for not including it in the definition
of "goods". Also, individual who is unregistered in term of the regulations
subjected to the CGST Act, will be able to sell the artwork as NFT and in
these scenarios the transaction will not be subjected to CGST.
There are no laws to explicitly control the NFTs market space and therefore,
there occurs a lot of ambiguity with regard to the right relished by NFT's owner
and the degree to which they can exploit the NFT which they buy. If there is a
method for smart contract to be easily understood by the purchaser of the NFT in
order to understand the agreement contained in them, then it would significantly
decrease the risk of infringing upon another's copyrights by explicitly putting
down the space of use of the NFT. Further, standard terms and condition must be
recognized to guarantee that the terms of usage of the NFTs are put out in an
Open issues and the way forward, NFTs are progressively becoming a globally
recognized development in the arena of blockchain technologies and individual as
well as companies are gradually trading in the same. With acceptance of NFTS,
regulatory bodies are also captivating this up for planning. There are no
restricted laws for the NFTs.
To regulate any infringements, there must be a formation of global accord or
protocols in the near future. There must be a lawful outline globally which
enforces all the rights and obligations of the buyer and original creators.
- The Copyrights Act, 1957, S2, No. 14, Acts of Parliament, 1957 (India)
- Bianca Lessard, NFTs, Minting and Copyright: what you should know as an
artist, RENNO&CO, https://www.rennoco.com/post/nfts-minting-and-copyright-what-you-should-know-as-an-
- Farah Muqaddam, NFTs and Intellectual Property Rights, NORTON ROSE
FULBRIGHT (2021),, https://www.nortonrosefulbright.com/en/knowledge/publications/1a1abb9f/nfts-andintellectual-property-rights,
- The Copyrights Act, 1957, S14, No.14, Acts of Parliament, 1957 (India)
- The Copyrights Act, 1957, S17, No.14, Acts of Parliament, 1957 (India)
- Medhansh Kumar, Million Dollar Meme: Non-Fungible Tokens and their
Regulation, SCC ONLINE BLOG, OP EDS OP. ED., (2022, https://www.scconline.com/blog/post/2022/01/12/non-fungible-tokens-and-their-regulation/
- Ross Chalmers, Footprint: Do You Own Copyright While Buying an NFT?,
YAHOO FINANCE (2021), https://finance.yahoo.com/news/footprint-own-copyright-buying-nft,
- Utkarsh raj and Vaibhav Kashyap, Legal Implications of Non-Fungible
Tokens in India 2021 SCC Online Blog OpEd 175,
- The Central Goods and Service Tax Act, 2017. No.12, Acts of Parliament
- supra note 10.
- Mahwash Fatima* and Lakshmi Ratna Kancherla, Non-Fungible Tokens
,Implications under GST Decoded, 2022 SCC OnLine Blog OpEd,
Please Drop Your Comments