Indian Authorities Demand $86 Million in Unpaid Taxes from Binance Amidst Regulatory Crackdown

Indian law enforcement agencies have issued a substantial tax demand to Binance, seeking 722 crore Indian rupees ($86 million) under the Goods and Services Tax (GST). This marks a significant development in the ongoing regulatory scrutiny of offshore crypto exchanges operating in India.

Binance, along with other offshore crypto exchanges, was banned in India in January 2024 due to noncompliance with local regulations. Despite the ban, Binance expressed its intention to resume operations in the region in April 2024, contingent upon settling outstanding tax obligations.

On August 6, the Directorate General of Goods and Service Tax Intelligence (DGGI), an Indian law enforcement agency, formally demanded the $86 million payment from Binance. According to The Times of India, the DGGI’s investigation revealed that Binance had earned approximately ₹4,000 crore from transaction fees charged to Indian customers. These earnings were reportedly credited to Nest Services Limited, a Binance Group company based in Seychelles.

First Tax Demand from the Indian Government

The DGGI’s notice to Binance represents the first tax demand issued by the Indian government against any crypto exchange. Prior to this, Indian authorities had sent email notices to Binance offices in Seychelles, the Cayman Islands, and Switzerland, which were initially ignored. Binance has since appointed a local counsel to address and resolve its tax obligations.

Indian law mandates that all crypto service providers and investors pay a 1% tax deducted at source (TDS) on every crypto transaction, regardless of its value. Additionally, profits from crypto investments are subject to a 30% tax. While domestic exchanges such as WazirX and CoinDCX have established systems to manage these tax requirements, offshore exchanges like Binance had not enforced these regulations at the time.

Binance initially planned to settle with a $2 million fine for noncompliance and restore its services in India. However, the imposed $86 million fine aims to recover the transaction fees collected from Indian users while Binance was operational in the country.

India’s Approach to Crypto Taxation and Money Laundering Prevention

Indian tax authorities are targeting offshore crypto exchanges that have operated without registering under India’s GST framework. The Indian GST system features four tax slabs: 5%, 12%, 18%, and 28%, with certain sectors subject to an additional cess.

It is anticipated that Indian authorities will extend similar tax obligations to other foreign crypto exchanges, including Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex, among others.

In addition to the tax dispute in India, Binance is also facing legal challenges related to tax evasion in other regions, including Nigeria. As the regulatory landscape for cryptocurrencies continues to evolve, Binance’s global operations are under increasing scrutiny from various governments.

This development underscores the growing pressure on offshore crypto exchanges to comply with local regulations and tax requirements as global regulatory frameworks become more stringent.