Last week, Binance, the world’s largest cryptocurrency exchange, received a tax showcause notice from India’s Directorate General of Goods and Services Tax Intelligence (DGGI), marking the first formal action by the authority when it suspects tax evasion. This notice, issued by DGGI’s Ahmedabad chapter, alleges that Binance collected fees from Indian customers trading on its platform between July 2017 and March 2024. The DGGI operates under the Ministry of Finance and is responsible for gathering and disseminating intelligence related to indirect tax evasion.

Binance, challenging the nearly $86 million notice, stated that it is reviewing the notice details and is fully cooperating with the Indian tax authorities. The DGGI did not respond to CoinDesk’s request for comment. This is a significant development as it is possibly the first time the DGGI has targeted an international crypto exchange with a showcause notice.

In June 2024, Binance was fined approximately $2.2 million for providing services to Indian clients without complying with anti-money laundering regulations, though it subsequently gained approval from the Financial Intelligence Unit (FIU) as a registered entity. The current investigation by the DGGI is separate from the FIU’s approval process.

Showcause notices do not necessarily lead to monetary penalties. For instance, earlier this month, the DGGI dropped some allegations against Infosys, a global tech company based in Bengaluru, after it contested similar demands. According to the Economic Times, Binance reportedly earned over $476 million (40 billion rupees) in transaction fees that were transferred to Seychelles-based Nest Services, a Binance Group company.

Binance emphasized its commitment to adhering to applicable domestic laws. The services in question are classified under Online Information and Database Access or Retrieval Services (OIDAR), which are provided via the internet and accessed by users online without physical interaction with the service provider. This classification aims to prevent overseas service providers from gaining an unfair advantage over Indian providers.

In summary, Binance is currently dealing with a significant tax showcause notice from India’s DGGI, a notable first step in addressing suspected tax rule violations involving an international cryptocurrency exchange. The outcome of this notice and subsequent proceedings will be closely watched in the crypto industry.

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