The Directorate General of GST Investigation (DGGI) has issued a show cause notice to crypto assets exchange Binance for over ₹700 crore.
Sources confirmed to businessline about the issuance of notice for collecting fees from customers here dealing in virtual digital assets (VDAs) on their platform. This service has been categorised under the online information database access or retrieval (OIDAR). The notice is for the period starting fiscal year 2017-18. Despite being a major player in the global cryptocurrency market, with operations across more than 150 countries, Binance had not registered under the Indian GST framework. This oversight has now brought the company under the scrutiny of Indian tax authorities. Its website says: “Binance is the world’s leading blockchain ecosystem, with a product suite that includes the largest digital asset exchange.
A spokesperson for Binance told businessline, “We are aware of certain media reports circulating regarding tax notices being issued by Indian GST authorities to global crypto platforms. We would like to clarify that Binance is, and has always been, committed to adhering to relevant domestic legislations applicable to us. We are fully cooperating with the Indian authorities to address any concerns. Binance remains dedicated to maintaining the highest standards of compliance and transparency in the industry.”
This is the exchange’s second face-off with an Indian authority. Earlier, in June, FIU said Binance by virtue of operating as a Virtual Digital Asset Service Provider and carrying on designated business under the Prevention of Money Laundering Act (PMLA), is a Reporting Entity (RE). Consequently, due to Binance’s ongoing provision of services to Indian clients and operations within India without adhering to its statutory obligations under the PMLA, a notice dated December 28, 2023, was issued to the exchange for dereliction of duties under PMLA, despite its status as a RE.
After considering the written and oral submissions of Binance, Director, FIU-IND, FIU found that the charges against Binance were substantiated. Consequently, the agency, in its order order dated June 19, imposed a total penalty of over ₹18.82 crore. Furthermore, specific directions have also been issued to Binance to ensure diligent compliance with the obligations outlined in PMLA in conjunction with the PMLA Maintenance of Record Rules (PMLA Rules) of 2005 for prevention of money laundering activities and combating the financing of terrorism (AMLCFT), FIU said in the order.
India has been attracting global players as a 2023 global report on crypto by Chainalysis says, notwithstanding 30 per cent tax on gains and TDS (Tax Deducted at Source) at the rate of 1 per cent, India remains among the top crypto markets in the world. According to the report, India leads the world in grassroots adaptation as measured by the Global Crypto Adoption Index, but even more impressively has become the second largest crypto market in the world by raw estimated transaction volume, beating out several wealthier nations.” The US leads the table. The report pegged transactions in India at over $260 billion.
India does not use the term crypto currency and as of now, there is no regulation for this. However, the Indian Tax Administration uses the term ‘Virtual Digital Asset (VDA)’ for cryptocurrency and NFT. Effective April 1, 2022, any income from transfer of VDAs is taxable at the rate of 30 per cent (plus surcharge and cess). The government also introduced TDS on VDA with effect from July 1, 2022. The rate would be 1 per cent and would be deducted by any individual/HUF while buying any VDA.