- Allegations and Non-Compliance
- Efforts to Comply and Ongoing Issues
- OIDAR Classification and Financial Implications
The Ahmedabad zonal unit of the Directorate General of GST Intelligence (DGGI) has issued a show-cause notice to Binance, the world’s largest cryptocurrency exchange, demanding a Goods and Services Tax (GST) payment of Rs 722 crore, equivalent to $86 million.
Allegations and Non-Compliance
The tax recovery notice alleges that Binance collected fees from Indian customers trading in virtual digital assets (VDAs) on their platform without registering under the Indian GST framework. This move follows a broader regulatory push in India to ensure that all financial activities, including those involving digital currencies, comply with national tax laws.
Efforts to Comply and Ongoing Issues
Despite these commitments, Binance has previously been criticized for a casual approach to Indian regulations, leading to significant tax leakage and its initial ban. Reports indicate that Binance's non-compliance with the 1% tax deducted at source (TDS) on registered exchanges gave it an undue advantage over competitors. The current investigation by the DGGI, independent from the FIU, focuses on the platform's failure to adhere to GST registration requirements.
OIDAR Classification and Financial Implications
The DGGI's notice categorizes the services provided by Binance as Online Information and Database Access or Retrieval Services (OIDAR). OIDAR services are delivered via the internet and received by the recipient online, without any physical interface with the supplier. According to reports, Binance earned more than $476 million (approximately Rs 4,000 crore) in transaction fees, transferred to a Binance Group Company, Nest Services Limited, based in Seychelles.
This marks the first time the DGGI has taken such action against a cryptocurrency firm, setting a significant precedent in India's efforts to regulate the rapidly growing virtual currency market.
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