- Binance faces $86M tax demand from India for GST liabilities.
- India’s new regulatory move sets a precedent for cryptocurrency firms.
Amidst ongoing legal struggles, Binance, the largest cryptocurrency exchange globally, is now confronted with another challenge.
Indian authorities knock on Binance’s door
On the 6th of August, the Directorate General of Goods and Service Tax Intelligence (DGGI), an Indian regulatory body, demanded $86 million from Binance concerning Goods and Services Tax (GST) liabilities.
This new development, first reported by The Times of India, further complicated the company’s already complex legal situation.
A top source close to development stated,
“Binance reportedly earned at least Rs 4,000 crore from transaction fees charged to Indian customers. Detailed investigation revealed that the earnings of these fees were credited to the account of a Binance Group Company — Nest Services Limited — based in Seychelles.”
This is the first time the DGGI has issued such a demand to a cryptocurrency firm. This scenario has also set a significant precedent in India’s regulatory approach to the rapidly growing digital currency sector.
Binance’s relations with India
According to sources, the notice was issued to Binance to charge fees to Indian users trading in virtual digital assets (VDAs) on their platform, which falls under the category of online information and database access services.
Responding to the same, a Binance spokesperson told a publication,
“We are currently reviewing the details of the notice and are fully cooperating with the Indian tax authorities.”
This development is crucial, as Binance, among other offshore crypto exchanges, was prohibited from operating in India starting January 2024 due to failure to meet the Indian tax law.
For those unfamiliar with Indian law, a 1% Tax Deducted at Source (TDS) applies to all cryptocurrency transactions, and a 30% tax is levied on profits from crypto investments.
While domestic exchanges such as WazirX and CoinDCX adjusted their systems to comply with these regulations, offshore platforms like Binance did not.
Despite this setback, Binance expressed its commitment to re-enter the Indian market in April, planning to resume trading activities after addressing outstanding tax obligations.
The crypto exchange initially sought to address the issue with a $2 million fine.
However, an additional $86 million penalty has been imposed on them to recover transaction fees earned from Indian customers during its previous operations.
India’s crypto ecosystem
In the meantime, Indian crypto exchange CoinDCX launched an investor protection fund to cover rare but significant losses, like security breaches.
Starting with around $6 million funded entirely from the company’s profits, the initiative aims to support user security.
Interestingly, this development followed a major hack at WazirX that saw $230 million, or 45% of the funds in a single wallet, stolen.