Binance Tries to Head off Indian $86 Million Penalty

By Mark Hunter

6 days agoWed Aug 07 2024 08:03:12

Reading Time: 2 minutes

• Binance is contesting an $86 million tax showcause notice from India’s DGGI issued last week
• The notice pertains to fees collected from Indian customers from July 2017 to March 2024
• Binance has recently accepted a $2.2 million fine for unregistered access by Indian users

Binance is contesting an $86 million tax showcause notice issued by India’s Directorate General of Goods and Services Tax Intelligence (DGGI). The notice, issued last week, acts as a potential prelude to action, with the amount relating to fees collected from Indian customers trading on its platform from July 2017 to March 2024. Binance recently accepted a $2.2 million fine for allowing access to Indian users without registration, but it seems it won’t take this tax bill lying down.

Binance “Fully Cooperating” With Investigation

The DGGI’s Ahmedabad chapter issued the notice to the exchange last week, the first formal step taken by the authority when it suspects a violation of tax regulations. A Binance spokesperson told Coindesk that the exchange is “currently reviewing the details of the notice and are fully cooperating with the Indian tax authorities,” adding that the company “is, and has always been, committed to adhering to relevant domestic legislations applicable to us.”

Showcause notices do not always culminate in monetary penalties, in the same way that Wells Notices issued by the US Securities nad Exchange Commission don’t always result in action. They are, however, an indication that the agency in question feels that there might be enough to carry its case forward.

According to the Economic Times , Binance reportedly earned over $476 million (40 billion rupees) in transaction fees during the affected period, which were transferred to a Binance Group company, Seychelles-based Nest Services. The notice pertains to services categorized as Online Information and Database Access or Retrieval Services (OIDAR). 

These services are provided over the Internet without any physical interaction between the service provider and the recipient, designed to prevent an unfair advantage for overseas providers over their Indian counterparts.

Second Time Unlucky for Binance?

This is not the first encounter Binance has had with Indian regulatory bodies. In June 2024, the exchange was fined approximately $2.2 million for providing services to Indian clients without complying with anti-money laundering regulations. Despite this, Binance secured Financial Intelligence Unit (FIU) approval as a registered entity. However, the DGGI’s current investigation is independent of the FIU.

This case could set a precedent for how international cryptocurrency exchanges are regulated and taxed in India, highlighting the ongoing efforts of Indian authorities to bring greater compliance and oversight to the burgeoning crypto market.