India’s Regulators Target Binance with $86 Million Tax Demand
India’s Directorate General of Goods and Services Tax Intelligence (DGGI) has issued a show-cause notice to Binance, demanding Rs 722 million in goods and services tax (GST), which amounts to approximately $86.047 million. This marks the first time the Indian Revenue Service has taken aim at a major cryptocurrency company, signaling a significant shift in regulatory enforcement.
The Basis for the $86 Million Demand
According to reports from the Times of India, the notice from DGGI revolves around the fees imposed on Indian customers utilizing Binance’s platform for virtual digital asset (VDA) trading. These fees are categorized as Online Information Database Access or Retrieval (OIDAR) services. Despite Binance’s widespread operations across 150 countries with a substantial market share, the company had not registered under India’s GST framework, leading to heightened scrutiny from the country’s tax authorities.
Additionally, it was revealed that Binance generated a significant amount of revenue from Indian customers through trading fees. The funds were directed to an account belonging to Nest Services Limited, a Binance Group entity based in Seychelles. Following a thorough investigation, DGGI reached out to Binance Group companies in various locations, including the Seychelles, Cayman Islands, and Switzerland.
Binance’s Steps towards Compliance
In response to the tax compliance issue, Binance engaged local legal counsel in India to address the situation. Earlier in the year, Binance obtained approval from India’s Financial Intelligence Unit (FIU) to register as a Virtual Asset Service Provider (VASP) but faced a penalty of 180,000 rupees for non-compliance with anti-money laundering (AML) regulations. The FIU emphasized the need for Binance to enhance its compliance measures under the Prevention of Money Laundering Act (PMLA).
Moreover, amidst global trends of tightening regulations on cryptocurrency exchanges, Binance found itself in a similar situation in Nigeria, where the government accused the company of tax evasion. The Nigeria Federal Inland Revenue Service (FIRS) alleged Binance of evading value-added tax (VAT) and corporate income tax.
In conclusion, regulatory scrutiny on cryptocurrency exchanges is intensifying globally, with authorities focusing on compliance and tax obligations. Binance’s encounter with Indian regulators underscores the importance of adhering to regulatory frameworks in each jurisdiction to ensure sustainable operations within the cryptocurrency industry.
