As a seasoned analyst with a background in global financial regulations and a particular interest in the digital asset space, I find myself intrigued by the ongoing saga of Binance, the world-renowned cryptocurrency exchange. The latest development, a show-cause notice from India’s Directorate General of Goods and Services Tax Intelligence (DGGI), is yet another chapter in this captivating tale.
India’s Directorate General of Goods and Services Tax Intelligence (DGGI) has issued a demand notice to Binance, alleging that they owe approximately $86 million (or Rupees 722 crores) in unpaid Goods and Services Tax (GST). The agency claims that the exchange collected fees from users in India but failed to pay any taxes on these transactions between July 2017 and March 2024.
For the first time, the DGGI is pursuing action against a digital currency trading platform, specifically Binance, due to non-compliance with the nation’s Goods and Services Tax (GST) regulations. Binance’s substantial tax liability arises from their failure to register within the country’s GST system, a mandatory rule for both domestic and international businesses operating within the country.
An article published by The Times of India disclosed a remark from a trusted insider, stating that Binance allegedly garnered at least 40 billion Indian rupees through fees on transactions made by Indian clients. Further examination uncovered that the revenue generated from these transaction fees was transferred to an account belonging to a Binance Group firm, specifically Nest Services Limited, which is stationed in Seychelles.
In simpler terms, Binance’s digital currency trading platform is classified as Online Information and Database Access or Retrieval Services (OIDAR). This category ensures that foreign online businesses can’t have an edge over Indian ones by operating with less tax obligation. So, service providers like Binance are required to comply with the same tax regulations as any local business in India.
In addition to the current regulatory issues facing Binance in India, it has also faced trouble earlier this year. The exchange, along with other offshore crypto platforms, was prohibited from operating due to a lack of registration with the Financial Intelligence Unit – India (FIU-IND), the nation’s financial intelligence agency. In June, Binance was fined approximately $2.2 million for failing to register and potentially breaching anti-money laundering (AML) laws. Following the resolution of this matter, Binance was permitted to register with FIU-IND and resume operations.
In a separate development, the recent notification issued by DGGI isn’t connected to any prior regulatory actions taken against Binance. However, it’s important to note that Binance is currently facing tax-related accusations in other regions such as Nigeria.
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2024-08-08 15:27