Key Takeaways
- GST Demand: India’s DGGI demands $86 million from Binance for unpaid GST on fees from Indian users.
- Investigation Findings: Binance earned $476 million in transaction fees, managed by a subsidiary in Seychelles.
- Regulatory Scrutiny: This is the first DGGI notice to a crypto firm; Binance previously fined $2.25 million for registration issues.
Binance, a leading cryptocurrency exchange, has been asked by the Directorate General of GST Intelligence (DGGI) in India to pay approximately $86 million (INR 722 crores). The DGGI, part of India’s Ministry of Finance, issued a notice to Binance for allegedly not paying Goods and Services Tax (GST) on the fees it collected from Indian users.
GST is a tax applied to the sale and consumption of goods and services across India. Indian law mandates that foreign companies providing services to Indian residents must register under the GST framework and pay this tax. According to the DGGI, Binance did not comply with this requirement.
The DGGI’s investigation revealed that Binance earned around $476 million (INR 4,000 crores) from transaction fees. These fees were deposited into an account managed by Nest Services Limited, a Binance subsidiary based in Seychelles. The DGGI is also investigating other Binance-related companies in the Cayman Islands and Switzerland.
This notice marks the first time the DGGI has targeted a cryptocurrency company in this manner. Previously, the agency discovered that some Indian crypto exchanges had evaded taxes amounting to $8.34 million (INR 70 crores).
In June, Binance was fined $2.25 million by India’s Financial Intelligence Unit for not registering its operations. Despite these regulatory challenges, Binance is considering re-entering the Indian market as a fully compliant platform. The exchange was previously banned in January but remained popular among Indian investors seeking to avoid high taxes on crypto profits. Binance initially entered the Indian market by acquiring the local exchange WazirX but later distanced itself due to legal issues involving WazirX.
Additionally, Binance is facing scrutiny from the DGGI’s Ahmedabad zonal unit, which has contacted Binance group companies in Seychelles, the Cayman Islands, and Switzerland. In response, Binance has appointed local counsel in India to address the tax compliance issues.
Earlier this year, Binance received approval from India’s Financial Intelligence Unit to register as a virtual asset service provider. However, the company had to pay a fine of INR 18 crore (~$2.2 million) for failing to comply with anti-money laundering regulations.
