Binance, one of the world’s largest cryptocurrency exchanges, faces an $86 million tax demand from Indian authorities under the Goods and Services Tax (GST) framework. Despite this financial setback, Binance has recently reentered the Indian market, following approval from anti-money laundering agencies. This move, announced on India’s Independence Day, marks a fresh start for cryptocurrency adoption in the rapidly growing Indian digital economy. However, the company’s return is complicated by past regulatory issues that led to its removal from the Google Play Store and Apple’s App Store in India.
The origin of the tax dispute dates back to December 2023 when India’s Financial Intelligence Unit issued notices to several offshore exchanges, including Binance, for allegedly operating illegally. These exchanges were required to register as “reporting entities” and comply with Indian tax laws, such as the 1% Tax Deducted at Source levy and a 30% tax on all crypto transactions. Binance has taken steps to rectify its regulatory standing, including paying a fine for violating AML regulations and committing to compliance with tax reporting processes and AML controls. Additionally, Binance plans to establish a Financial Crimes Compliance unit to assist Indian enforcement agencies in investigating crypto-related crimes.
Binance’s reentry into the Indian market has broader implications for crypto regulation in the country as the government considers a sustainable regulatory framework. The implementation of a 30% crypto tax and 1% TDS has already impacted local exchange trading volumes, with some platforms seeing a decline of over 90% in users. Authorities are now targeting offshore exchanges that have operated without registering under India’s GST framework, which includes four-tier tax slabs and a unique levy known as “cess” for specific goods and services. This additional tax burden reflects the government’s commitment to funding social welfare initiatives and improving access to education and healthcare for citizens.
With Binance facing a hefty tax levy, other international crypto exchanges like Huobi, Kraken, and KuCoin may also be subject to similar demands in India. However, Binance’s compliance with Indian regulations could set a precedent for other global platforms to operate in the country, potentially leading to a more balanced approach to crypto oversight. As the government seeks to regulate the digital asset ecosystem while generating revenue for social welfare programs, crypto exchanges must navigate the complex regulatory landscape to continue serving Indian users and contributing to the country’s growing digital economy.
