Binance asked to pay $86m in Indian Goods and Services Tax

Binance has received a show cause letter from the Directorate General of GST Intelligence, Ahmedabad, requesting payment of INR 722 crore (approximately US$86 million) as goods and services tax.

According to the Times of India, DGGI, an agency under the Indian Ministry of Finance that combats tax evasion, claims that Binance is liable to pay GST because it collects fees from Indian citizens who use its platform.

Binance also reportedly failed to register under the GST framework, leading to the recent scrutiny.

GST is a comprehensive indirect tax imposed on the production, sale and consumption of goods and services at the national level. Foreign entities operating in India are required to pay this tax if they offer their services to Indians and are registered under the GST framework.

A source speaking to the Times of India claimed that Binance earned at least Rs 4,000 crore, or approximately $476 million, from transaction fees.

Investigations by DGGI revealed that the fees were deposited into an account controlled by Seychelles-based Binance subsidiary Nest Services Limited.

In addition, DGGI has also contacted other companies in the Binance group operating in the Cayman Islands and Switzerland.

It was reported that Binance appointed a representative to contact the institution to resolve the issue.

For DGGI, this was the first instance of it issuing a show-cause document of this nature to a cryptocurrency firm, although the agency has previously cracked down on local cryptocurrency exchanges to crack down on tax evasion.

In its 2022 investigation, DGGI found that various cryptocurrency exchanges were responsible for evading taxes to the tune of Rs 70 crore, or approximately $8.34 million.

Binance, meanwhile, is considering a second major payout to Indian regulators. In June, the country’s Financial Intelligence Unit fined the exchange $2.25 million for failing to record its operations.

Sources claimed that despite the fine, the exchange is considering returning to India as a compliant platform and is ready to pay the fine.

The exchange was banned in January but largely dominated the Indian market before that. When India imposed a 30% capital gains tax and 1% TDS on crypto profits and transactions, investors flocked to the platform to bypass the additional costs.

Binance had initially forayed into India by acquiring local cryptocurrency exchange WazirX, but later distanced itself by claiming that the acquisition was not completed, soon after the Indian ED initiated a money laundering investigation against WazirX.