Binance Challenges $86M Indian Tax Showcause Notice: Source

Binance, the world’s largest cryptocurrency exchange, challenged a nearly $86 million tax showcause notice from India’s Directorate General of Goods and Services Tax Intelligence (DGGI), a person directly involved with the matter told CoinDesk.

DGGI’s chapter from the western city of Ahmedabad issued the notice – a first formal step taken by the authority when it suspects a violation of tax rules – last week. It alleges Binance collected fees from Indian customers trading on its platform, the person said, and relates to the period July 2017-March 2024.

While DGGI has previously taken action against Indian crypto exchanges, this may be the first time it has issued a showcause notice to an international crypto exchange. The DGGI is entrusted with “collection, collation and dissemination of intelligence relating to evasion of indirect tax” and functions under the purview of the Ministry of Finance.

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

DGGI did not immediately respond to a CoinDesk request for comment.

In June 2024, Binance was fined about $2.2 million for providing services to Indian clients without adhering to the nation’s anti-money laundering rules. The process also saw the exchange winning Financial Intelligence Unit (FIU) approval as a registered entity. The DGGI’s investigation is independent from the FIU.

It’s worth noting that showcause notices do not always result in monetary penalties. Earlier this month, the DGGI dropped part of its allegations against Bengaluru, India-based Infosys after the global tech company challenged such a demand.

Read More: The Inside Story of How India’s Crypto Exchanges Were ‘Inspected’ by Tax Agencies

Binance is said to have earned more than $476 million (40 billion rupees) in transaction fees that were transferred to a Binance Group company, the Seychelles-based Nest Services, the Economic Times reported citing a source privy to the development.

“Binance is, and has always been, committed to adhering to relevant domestic legislations applicable to us,” the company spokesperson said.

The services provided fall under the category of Online Information and Database Access or Retrieval Services (OIDAR), the person familiar said. These are services provided through the internet and received by the recipient online without having any physical interface with the service supplier. The categorization exists to avoid giving an unfair advantage to overseas service providers over an Indian service provider.

UPDATE (Aug. 6, 07:20 UTC): Adds context and more information throughout.

UPDATE (Aug. 6, 07:26 UTC): Adds comment from Binance spokesperson.

UPDATE (Aug. 6, 08:15 UTC): Restructures story, adds definition of showcause in second paragraph.