Binance challenges India's $86 million tax notice

The Indian tax authority issued Binance a tax notice of nearly $86 million last week. The notice is the first step taken by authorities when tax evasion is suspected. Binance has challenged the notice, covering the period from June 2017 to March 2024.

Binance, the world's largest cryptocurrency exchange, is challenging a nearly $86 million tax notice issued by India's Goods and Services Tax Intelligence Agency (DGGI). According to a person familiar with the matter, DGGI, from the city of Ahmadabad, sent the notice last week, accusing Binance of collecting fees from Indian customers for transactions on its platform, and related to the period from July 2017 to March 2024.

While DGGI has previously taken action against local cryptocurrency exchanges in India, this may be the first time it has issued a notice against international cryptocurrency exchanges. DGGI is responsible for "collecting, collating and disseminating intelligence on indirect tax evasion" and operates under the authority of the Ministry of Finance.

"We are reviewing the details of the notice and are fully cooperating with the Indian tax authorities," a Binance spokesperson told CoinDesk via email.

In June, Binance was fined about $2.2 million for not complying with India's anti-money laundering regulations to serve Indian customers. The process also allowed the exchange to obtain approval from the Financial Intelligence Unit (FIU) to become a registered entity. The DGGI investigation is independent of the work of the FIU.

It is important to note that tax notices do not always result in penalties. Earlier this month, DGGI dropped some of its charges against Bangalor-based Infosys, a global technology company that had challenged such a request.

According to sources quoted by the Economic Times, Binance is alleged to have made more than $476 million (about Rs 4,000 crore) in revenue through transaction fees, which were transferred to Nest Services, a Seychal company owned by Binance Group.

"Binance, as always, is committed to complying with the relevant domestic laws that apply to us," a spokesperson for Binance said.

The services offered fall under the category of "Online Information and database access or retrieval services" (OIDAR), which are delivered over the Internet and received online by the recipient without any physical contact with the service provider, according to people familiar with the situation. The purpose of this classification is to avoid giving overseas service providers an unfair advantage over Indian service providers.