Binance is opposing a nearly $86 million tax-casualty notice filed against it by India’s Directorate General of Goods and Services Tax Intelligence (DGGI).

This notification is considered the first official step taken by the official when violation of tax rules is suspected.

This notification, sent by DGGI’s western branch in Ahmedabad, covers the period from July 2017 to March 2024 and claims that Binance collected transaction fees from its Indian customers.

Although DGGI has previously taken various steps against cryptocurrency exchanges in India, the fact that it has made such a notification against an international crypto exchange increases the importance of the situation.

DGGI is tasked with collecting, compiling and disseminating intelligence regarding indirect tax evasion, and these operations are under the supervision of the Ministry of Finance. This notification is considered the first official step taken by the authorities to determine whether tax rules are being followed and is considered as part of the tax audit process.

“We are currently reviewing the reporting details and are fully cooperating with the Indian tax authorities,” a Binance spokesperson said. In June 2024, Binance was fined nearly $2.2 million for serving Indian customers without complying with the country’s anti-money laundering rules.

During this process, the exchange received approval as a registered entity by the Financial Intelligence Unit (FIU). However, the investigation carried out by DGGI is being conducted independently of the FIU.

It is important to note that such notifications do not always lead to financial penalties. For example, earlier this month, DGGI withdrew some of its allegations against technology company Infosys, based in Bengaluru, India.

Infosys had opposed such demands of DGGI and managed to invalidate some of the demands. This illustrates why inquiry notices do not always result in financial penalties.

According to the Economic Times, it is stated that Binance earned $476 million (40 billion rupees) from transaction fees and these fees were transferred to the Seychelles-based Binance Group company called Nest Services.

The company spokesperson stated, “Binance is always committed to complying with local regulations applicable to us,” and emphasized that the company will continue to act in compliance with local laws.

The services provided by Binance fall under the Online Information and Database Access or Retrieval Services (OIDAR) category. These services are offered via the internet and received by the recipient online, so they do not require a physical interface.

This categorization has been made to prevent international service providers from gaining an unfair advantage over Indian service providers.

This process is considered as a process that tests whether global cryptocurrency exchanges comply with local tax regulations and constitutes an important indicator of whether similar situations will occur in the future.