Nikolas Sargeant
Indian tax authorities have issued a demand for 722 crore Indian rupees ($86 million) in unpaid Goods and Services Tax (GST) from cryptocurrency exchange Binance. This action comes as Binance attempts to restart its operations in India following a ban imposed in January 2024 due to regulatory noncompliance.
The Directorate General of Goods and Service Tax Intelligence (DGGI), an Indian law enforcement agency, issued the demand on August 6, according to The Times of India. A local source revealed that Binance reportedly earned at least 4,000 crore rupees from transaction fees charged to Indian customers, with these earnings credited to Nest Services Limited, a Binance Group Company based in Seychelles.
This tax demand marks the first such action by the Indian government against a crypto exchange. Previously, Binance had ignored notices sent to its offices in Seychelles, the Cayman Islands, and Switzerland. The company has now appointed local counsel to address its tax obligations.
Crypto Tax Requirements in India
Indian law mandates a 1% tax deducted at source (TDS) on all crypto transactions, regardless of value. Additionally, profits from crypto investments are subject to a 30% tax. While domestic exchanges like WazirX and CoinDCX implemented systems to facilitate these tax obligations, offshore exchanges failed to comply.
Binance had initially planned to pay a $2 million fine for noncompliance to resume services in India. However, the current $86 million demand aims to recover the fees Binance collected from Indian users during its operational period in the country.
India's Broader Crackdown on Offshore Crypto Exchanges
Indian authorities are targeting offshore crypto exchanges that previously operated without registering under the country's GST framework. The GST system in India consists of four tax slabs: 5%, 12%, 18%, and 28%, with certain services attracting an additional cess.
Similar tax demands are expected to be imposed on other foreign crypto exchanges, including Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex. This action is part of India's efforts to prevent money laundering and ensure compliance with local tax regulations in the cryptocurrency sector.
Binance's tax issues in India add to its ongoing legal challenges related to tax evasion in other countries, including Nigeria.
