Excerpt from Bitcoinist Article, Published on Aug 07, 2024.
Binance, one of the largest crypto exchanges globally, is facing significant regulatory scrutiny in India. Recently, India’s Directorate General of GST Intelligence (DGGI) issued a show-cause notice demanding Binance to pay Rs 722 crore (approximately $86 million) for alleged Goods and Services Tax (GST) evasion from June 2017 to March 2024. This move comes just two months after Binance paid a $2 million fine to the Financial Intelligence Unit (FIU) of India.
The DGGI’s investigation suggests that Binance collected substantial transaction fees from Indian customers trading virtual digital assets (VDAs) without being registered under the Indian GST framework. The crypto exchange allegedly earned over Rs 4,000 crore (around $476.7 million) in transaction fees in India, which were credited to Binance’s accounts in Seychelles. Despite attempts to contact Binance’s group companies in Seychelles, the Cayman Islands, and Switzerland for compliance discussions, no response was received.
In response to the notice, Binance has appointed a local counsel to mediate with the Indian tax authorities, marking the beginning of efforts to resolve this significant tax compliance issue. This situation highlights India’s stringent regulatory approach towards the rapidly growing crypto sector, aimed at combating financial crime and protecting investors’ interests.
India’s GST rules mandate foreign service providers to pay taxes for services provided to Indian customers, especially those categorized under online information database access or retrieval (OIDAR) services. As the investigation continues, other crypto exchanges operating both overseas and within India could also face similar scrutiny from the DGGI.
Previously, India’s FIU had issued show-cause notices to nine overseas crypto exchanges for allegedly operating illegally within the country. In June, Binance paid a $2 million penalty to re-establish its operations in India, emphasizing the importance of adhering to anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations.
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