Cryptocurrency exchange Binance has challenged a substantial $86 million tax show cause notice by India's tax authorities, Coindesk reported, citing sources familiar with the matter. This notice, a preliminary step in suspected tax evasion cases, marks a significant move by India's Directorate General of Goods and Services Tax Intelligence (DGGI) against the crypto exchange giant.
Background of the Notice
India's DGGI, particularly the Ahmedabad chapter, issued the show cause notice to Binance last week. This action signified the authority's first formal accusation against Binance, alleging the collection of fees from Indian customers trading on its platform between July 2017 and March 2024.
DGGI's actions previously targeted domestic crypto exchanges, making this an unprecedented move against a global entity. A spokesperson for Binance stated that the company is reviewing the details of the notice and is fully cooperating with the Indian tax authorities.
This isn't the first time Binance has clashed with Indian regulators. In June 2024, the company faced a $2.2 million fine for providing services to Indian clients without adhering to anti-money laundering regulations.
This fine came alongside the Financial Intelligence Unit's (FIU) approval of Binance as a registered entity. However, the ongoing DGGI investigation operates independently from the FIU's oversight.
Potential Outcomes
Earlier this month, similar allegations against Infosys were partially dropped after the company challenged the demand. Binance's case could follow a similar trajectory depending on the forthcoming legal proceedings and the company's defense.
According to The Economic Times, Binance is reported to have earned over $476 million (40 billion rupees) in transaction fees, which were allegedly transferred to a Binance Group company, Seychelles-based Nest Services. These earnings are central to the DGGI's claim of tax evasion.
The fees in question fall under Online Information and Database Access or Retrieval Services (OIDAR), which are services provided through the Internet without physical interaction between the provider and recipient. Despite these challenges, Binance vowed to continue complying with the domestic laws.
In June, the exchange announced plans to re-enter India after the Financial Intelligence Unit fined it an estimated $2.25 million for allegedly breaching anti-money laundering laws. Binance was one of nine major global crypto exchanges blocked by FIU in an order mandating Apple and Google to remove local access to the platforms.
