Binance, the world’s largest cryptocurrency exchange, is contesting an $86 million tax showcause notice issued by India’s Directorate General of Goods and Services Tax Intelligence (DGGI). The notice, covering the period from June 2017 to March 2024, marks the first formal step by Indian authorities when they suspect a violation of tax regulations.
Background and Allegations
The DGGI’s Ahmedabad chapter issued the notice last week, alleging that Binance collected fees from Indian customers trading on its platform without adhering to local tax rules. The DGGI, under India’s Ministry of Finance, is responsible for gathering intelligence on indirect tax evasion. This notice marks a significant step, as it’s reportedly the first time an international crypto exchange has been targeted in such a manner by the DGGI.
A Binance spokesperson confirmed that the company is reviewing the details of the notice and is cooperating fully with Indian tax authorities. However, the DGGI did not immediately respond to requests for comment.
Previous Actions and Context
This is not Binance’s first encounter with Indian regulatory authorities. In June 2024, the exchange was fined approximately $2.2 million for offering services to Indian clients without complying with the country’s anti-money laundering regulations. During this process, Binance gained approval from the Financial Intelligence Unit (FIU) as a registered entity. The current investigation by the DGGI is separate from the FIU’s oversight.
It’s important to note that showcause notices do not always lead to financial penalties. For instance, earlier this month, the DGGI withdrew some allegations against the global tech company Infosys after it challenged a similar notice.
Financial Implications and Compliance
According to a report from the Economic Times, Binance allegedly earned more than $476 million (40 billion rupees) in transaction fees, which were transferred to a Binance Group company based in Seychelles, Nest Services. The services provided by Binance fall under the category of Online Information and Database Access or Retrieval Services (OIDAR). This classification is designed to prevent overseas service providers from gaining an unfair advantage over Indian service providers.
In response, a Binance spokesperson reiterated the company’s commitment to complying with relevant domestic laws, emphasizing their adherence to local regulations.
