Binance, a prominent cryptocurrency exchange, is facing a significant tax demand from Indian authorities. The Directorate General of GST Intelligence of Ahmedabad has issued a show-cause letter to Binance, requesting payment of INR 722 crores, equivalent to around $86 million USD, as goods and services tax.
The agency alleges that Binance is obligated to pay GST as it has collected fees from Indian users on its platform. Furthermore, Binance failed to register under the GST framework, leading to the current investigation.
The Goods and Services Tax (GST) is an indirect tax imposed on the production, sale, and consumption of goods and services at the national level. Foreign companies operating in India must pay this tax if they provide services to Indian customers and register under the GST framework.
According to reports, Binance has earned approximately $476 million from transaction fees, with a significant portion deposited in an account managed by Nest Services Limited, a Binance subsidiary based in Seychelles. The DGGI has also contacted other entities within the Binance group in locations such as the Cayman Islands and Switzerland.
In response to the tax demand, Binance has appointed a representative to engage with the agency and address the issue. This marks the first time the DGGI has taken such action against a cryptocurrency firm, although it has previously targeted domestic crypto exchanges to combat tax evasion.
In a separate development, the Financial Intelligence Unit of India imposed a $2.25 million fine on Binance in June for operating without proper registration. Despite this penalty, sources suggest that Binance is considering reentering the Indian market as a compliant platform and is prepared to pay the fine.
Binance initially entered the Indian market by acquiring local exchange WazirX but distanced itself when the Enforcement Directorate launched a money laundering investigation into WazirX. The exchange was banned in January, but prior to that, it held a significant market share in India as investors sought to avoid higher taxes on crypto profits.
The ongoing tax dispute and regulatory challenges highlight the complexities faced by cryptocurrency exchanges operating in India. As the industry continues to evolve, compliance with tax laws and regulations will be essential for companies like Binance to navigate the Indian market successfully.