KEYTAKEAWAYS
- Indian tax authority demands $86 million in GST from Binance for unregistered online services.
- Binance reportedly earned $476 million from transaction fees charged to Indian customers.
CONTENT
The Directorate General of GST Intelligence issues unprecedented show cause notice to the crypto giant, citing unregistered online services and substantial earnings from Indian customers.
In a landmark move, India’s Directorate General of GST Intelligence (DGGI) has issued a show cause notice to Binance, the world’s largest cryptocurrency exchange, demanding a Goods and Services Tax (GST) payment of approximately $86 million (INR 722 crore). This unprecedented action marks the first time the DGGI has targeted a major crypto firm, setting a significant precedent in the regulatory landscape.
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The notice pertains to fees collected from Indian customers trading virtual digital assets (VDAs) on Binance’s platform. These transactions fall under the category of online information database access or retrieval (OIDAR) services, according to Indian tax regulations.
Despite its extensive global operations spanning over 150 countries and commanding at least 40% of the market share, Binance had not registered under the Indian GST framework. This oversight has brought the crypto giant under intense scrutiny from Indian tax authorities.
A source cited by the Times of India revealed that Binance reportedly earned at least $476 million (INR 4,000 crore) from transaction fees charged to Indian customers. The company boasts a global user base of 90 million, including a substantial number from India. Further investigation disclosed that these earnings were credited to Nest Services Limited, a Binance Group Company based in Seychelles.
In response to this tax compliance issue, Binance has appointed local counsel in India. The DGGI’s Ahmedabad zonal unit has also reached out to Binance group companies in Seychelles, the Cayman Islands, and Switzerland.
This tax demand comes on the heels of other regulatory challenges for Binance in India. Earlier this year, the company received approval from India’s Financial Intelligence Unit (FIU) to register as a virtual asset service provider (VASP). However, this approval came with a $2.2 million (INR 18 crore) fine for non-compliance with anti-money laundering (AML) regulations.
The FIU emphasized that Binance must enhance its compliance measures in accordance with the Prevention of Money Laundering Act (PMLA). The Director of FIU-India confirmed the charges against the firm after a comprehensive review of the evidence and Binance’s submissions.
This increased scrutiny of Binance aligns with a global trend of stricter regulatory standards for crypto exchanges. In a similar vein, the Nigerian Federal Government formally charged Binance with tax evasion in March 2024, accusing the company of evading Value-Added Tax (VAT) and Company Income Tax.
As regulatory pressures mount worldwide, cryptocurrency exchanges like Binance face growing challenges in navigating complex tax and compliance landscapes across different jurisdictions.
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