Indian authorities demand $86 million in taxes from Binance
Date: 2024-08-21 Author: Oliver Abernathy Categories: IN WORLD
Binance is facing an $86 million tax demand from Indian authorities under the Goods and Services Tax (GST). This comes as the cryptocurrency exchange seeks to re-establish its presence in the country.
Binance’s return to India comes after India’s anti-money laundering (AML) agencies gave Binance the green light to resume operations.
On August 15, 2024, on India’s 78th Independence Day, Binance announced its return to the Indian market. The company sees this as a fresh start for crypto adoption in India, a rapidly growing digital economy. However, this fresh start is complicated by past issues.
The origins of this tax dispute can be traced back to December 2023, when India’s Financial Intelligence Unit (FIU) issued notices to several offshore cryptocurrency exchanges, including Binance, KuCoin, Bittrex, Gate.io, and OKX, for operating illegally in the country.
The main issue was the requirement for these exchanges to be registered as “reporting entities” in India, as they allegedly failed to file the usual reports with the Indian Income Tax Department.
The regulatory conflict resulted in the removal of the Binance mobile app from the Google Play Store and Apple’s App Store in India.
The non-compliance meant that many Indian users were able to circumvent the country’s tax laws, such as the 1% tax deductible at source (TDS) and a flat 30% tax on all cryptocurrency transactions and digital asset transfers.
However, Binance has taken various steps to rectify its regulatory position and re-establish its presence in the Indian market.
In April 2024, the exchange paid a fine of approximately $2.25 million to the FIU for violating the country’s anti-money laundering (AML) regulations.
Binance also assured Indian authorities that it will continue to comply with all required tax reporting processes while maintaining robust anti-money laundering and counter-terrorist financing measures.
In addition, Binance has committed to facilitating the establishment of an industry-leading financial crimes compliance unit.
The unit will be designed to assist Indian law enforcement agencies in investigating crypto-related crimes and contribute to capacity-building efforts to strengthen the collaborative security aspect of the ecosystem.
Binance CEO Richard Teng highlighted the importance of the exchange’s FIU-IND registration, calling it a major milestone in their efforts to tailor their services to the needs of Indian users
Binance’s re-entry into the Indian market is crucial as the Indian government mulls a sustainable, long-term regulatory framework for the cryptocurrency sector.
The implementation of the already formulated 30% crypto tax and 1% TDS has severely impacted trading volumes on local exchanges, with platforms like CoinDCX and WazirX recording a decline in users of over 90% since late 2023.
Authorities are now actively pursuing offshore crypto exchanges that were previously operating without registering under India’s GST system.
The Indian GST system consists of four-tiered tax slabs ranging from 5% to 28%, and also includes a unique levy known as the “sess.”
The tax is aimed at creating dedicated funds for the development and improvement of social services in the country.
Governments often use tax revenues to fund initiatives and programs that improve education and healthcare infrastructure, providing greater access and affordability to citizens.
In the context of cryptocurrency taxation in India, authorities are expected to apply a similar tax on top of the standard GST rates levied on foreign cryptocurrency exchanges.
This additional tax burden reflects the government’s intention to direct resources towards social welfare even as it seeks to regulate the digital asset ecosystem.
As Binance faces a tax levy, similar tax demands are expected to be imposed on other international cryptocurrency exchanges, including Huobi, Kraken, Gate.io, KuCoin, Bitstamp, MEXC Global, Bittrex, and Bitfinex.
However, Binance’s compliance with Indian regulations could set a precedent for other global cryptocurrency platforms operating in the country, potentially leading to a more balanced approach to cryptocurrency oversight.
