For the first time, the Ahmedabad zonal unit of the Directorate General of GST Intelligence (DGGI) has served a show cause notice to Binance- the largest crypto exchange globally, demanding Rs 722 crore GST. It comes as a big step by DGGI to regulate the new growing market of virtual currencies in India.
Some reports have revealed that the notice was sent to Binance for charging fees from the customers in India involved in virtual digital assets (VDAs) trading on their platform which falls under online information database access or retrieval (OIDAR) services.
Binance got the nod from the Financial Intelligence Unit (FIU) in India to undertake activities of a virtual asset service provider (VASP) earlier this year. The company received a penalty of Rs 18 crore from the FIU last month for failure to abide by anti-money laundering (AML) norms.
Though it is one of the significant players in the global cryptocurrency market holding at least 40% market share and presence in over 150 countries, Binance failed to register under the Indian GST. This lapse of judgment has now put the company in the observing eyes of Indian tax authorities.
According to reports, Binance made at least Rs 4,000 crore from transaction fees that were levied on Indian consumers. The company has 90 million users across the globe and it also includes a few customers from India.
Further probing showed that the revenue generated from these fees was being deposited into the account of a Binance Group Company – Nest Services Limited that is located in Seychelles. However, Binance seems to be involved in a trial held in a Nigerian court regarding tax fraud charges observed after a crackdown on cryptocurrencies in Nigeria.
In order to make Binance compliant with the GST regulations, the DGGI Ahmedabad zonal unit also communicated with the Binance group companies in Seychelles, the Cayman Island, and Switzerland via email but could not get a reply. To address this budding tax issue for Binance, the company hired a local counsel in India to begin negotiations with the DGGI.
Further sources affirmed that DGGI is scrutinizing the operations and financial dealings of online gaming sites and marketplaces for the commission of tax fraud. The Indian GST system requires foreign sellers to collect GST on services rendered to the Indian residents, especially falling under OIDAR. As the probe progresses, other exchanges of the cryptocurrency, including those from overseas and local ones, will also come under pressure from tax officers.
