Binance, the preeminent cryptocurrency exchange globally, is contesting a nearly $86 million tax showcause notice issued by India’s Directorate General of Goods and Services Tax Intelligence (DGGI), according to an insider familiar with the situation.

The DGGI’s Ahmedabad chapter issued the notice last week, marking the initial formal step when the authority suspects a breach of tax regulations. The notice alleges that Binance accrued fees from Indian clients transacting on its platform, covering the period from July 2017 to March 2024.

Though the DGGI has previously targeted Indian crypto exchanges, this instance may represent the first showcause notice issued to an international cryptocurrency exchange. The DGGI, operating under the Ministry of Finance, is tasked with the “collection, collation, and dissemination of intelligence related to evasion of indirect taxes.”

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“We are meticulously reviewing the notice’s particulars and are fully cooperating with Indian tax authorities,” a Binance spokesperson communicated via email to CoinDesk.

DGGI did not immediately reply to a request for comment from CoinDesk.

In June 2024, Binance faced a fine of approximately $2.2 million for offering services to Indian customers without adhering to the country’s anti-money laundering regulations. This process culminated in Binance securing Financial Intelligence Unit (FIU) approval as a registered entity. The DGGI’s inquiry operates independently from the FIU.

It’s essential to note that showcause notices do not invariably lead to financial penalties. Earlier this month, the DGGI dropped part of its allegations against Infosys, a Bengaluru-based global tech firm, after the company contested such a demand.

According to a source cited by the Economic Times, Binance purportedly generated over $476 million (40 billion rupees) in transaction fees, which were transferred to a Binance Group entity, Seychelles-based Nest Services.

“Binance is, and has always been, steadfast in complying with relevant domestic laws applicable to us,” asserted the company spokesperson.

The services provided are categorized under Online Information and Database Access or Retrieval Services (OIDAR), explained the insider. These services, delivered via the internet and received by the recipient online without any physical interaction with the service supplier, are categorized to prevent giving an unfair advantage to overseas service providers over Indian service providers.