In a significant move, the Ahmedabad zonal unit of the Directorate General of GST Intelligence (DGGI) India has issued a show-cause notice to Binance. It has demanded Goods and Services Tax (GST) payment of Rs 722 crore equivalent to almost 86 Million USD. This marks the first time the DGGI has issued such a notice to a cryptocurrency firm. It sets a significant example in India’s efforts to regulate the rapidly growing virtual currency market.

Binance Faces GST Notice for Charging Indian VDA Fees

According to media sources, the notice was served to Binance for charging fees from the Indian customers dealing in virtual digital assets (VDAs) on its platform. These services fall under the category of online information database access or retrieval (OIDAR) services. In the first half of this year, Binance was approved by the FIU in India to formally become a VASP. However, the company received a Rs 18 crore penalty from the FIU last month for violation of AML norms.

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Binance despite having business operations in over 150 countries and dominating at least 40% of the global cryptocurrency market, has not registered under Indian GST. This oversight has now exposed the company to the Indian tax authorities. One insider said, for instance, that Binance made a least Rs 4,000 crore in transaction fees collected from Indian users. Currently, the company has 90 million users across the globe, which comprises many users from India.

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For effective compliance with GST regulation, the DGGI Ahmedabad zonal unit also sent emails Binance group companies in Seychelles, the Cayman Islands, and Switzerland, which did not get response. In the case of Binance, the exchange has worked to engage local legal representation in India to engage with the DGGI in order to address this major tax compliance matter.

The Indian GST regime requires foreign service providers to pay GST on services supplied to Indian residents, especially under OIDAR. As the investigation continues, more cryptocurrency exchanges operating in other countries and within India are also likely to come under pressure from tax authorities. Furthermore, Binance has been accused of tax evasion and could be tried in Nigerian court after a crackdown on cryptos in Nigeria.