As a seasoned crypto investor with a keen interest in global market trends and regulations, I find myself increasingly concerned about the ongoing issues surrounding Binance. The latest show-cause letter issued by India’s Directorate General of GST Intelligence demanding approximately $86 million USD is yet another blow to the exchange’s reputation.
Binance, in a turn of events, was served with a notice by the Ahmedabad branch of the GST (Goods and Services Tax) Directorate General, demanding a sum of around INR 722 crores, which is equivalent to approximately $86 million USD, as back taxes.
Based on a report by The Times of India, the Directorate General of GST Intelligence (DGGI), a department under India’s Ministry of Finance responsible for preventing tax evasion, claims that Binance may owe Goods and Services Tax (GST) because it collected fees from Indian users on its platform.
According to reports, Binance may not have registered under the Goods and Services Tax (GST) framework, leading to the current examination of its practices.
At the country level, the Goods and Services Tax (GST) is a wide-ranging indirect tax applied to the production, distribution, and usage of products and services. If foreign entities provide services within India to its residents, they are expected to pay this tax and must register under the GST system.
According to a source who spoke with the Times of India, Binance is reported to have generated over 4,000 crores, which equates to around $476 million, in fees from transactions.
The DGGI’s investigation found that the fees were transferred into an account managed by Nest Services Limited, a branch of Binance located in Seychelles.
Additionally, the DGGI has extended its reach to other businesses within the Binance conglomerate, such as those based in the Cayman Islands and Switzerland.
As an analyst, I can share that I’ve taken the initiative to liaise with the relevant agency on behalf of Binance, aiming to address and resolve the current issue at hand.
In an unprecedented move, the DGGI (Directorate General of GST Intelligence) served a unique show cause notice to a cryptocurrency company for the first time. While this was a novel action, it’s important to note that the agency has taken action against domestic cryptocurrency exchanges in the past with the aim of preventing tax evasion.
In the course of the 2022 probe, it was uncovered by the DGGI that certain cryptocurrency platforms had been involved in around 70 crores (equivalent to approximately $8.34 million) worth of tax avoidance activities.
Currently, Binance is considering another significant payment towards Indian regulatory bodies due to an earlier fine of approximately $2.25 million imposed by the country’s Financial Intelligence Unit in June. The penalty was issued because Binance had not properly registered its business operations.
Reports indicated that the exchange might be planning to re-enter the Indian market, positioning itself as a compliant entity, even if it meant paying any applicable fines.
The exchange was banned in January but largely dominated the Indian market prior to that. When India implemented a 30% capital gains tax and a 1% TDS on crypto profits and trades, investors rushed to the platform to bypass the added costs.
Initially, Binance entered the Indian market through the purchase of a local cryptocurrency exchange called WazirX. Later, Binance appeared to distance itself from WazirX, stating that the acquisition had not been finalized, following the initiation of a money laundering investigation by India’s Enforcement Directorate against WazirX.
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2024-08-06 12:20