Infosys, India’s second-largest IT services company, has been issued a ‘pre-show cause’ notice for alleged GST evasion. The Karnataka State GST authorities have demanded payment of Rs 32,403 crore in GST for the period between July 2017 and March 2022. This demand stems from the expenses incurred by Infosys’ overseas branch offices. The Bengaluru-headquartered firm has confirmed receiving the notice and has already responded to it.
The notice highlights expenses incurred by Infosys’ overseas branch offices, which the GST authorities believe should be subject to GST. However, Infosys argues that according to regulations, GST is not applicable on these expenses. The company further cites a recent circular issued by the Central Board of Indirect Taxes and Customs, which, based on the recommendations of the GST Council, states that services provided by overseas branches to Indian entities are not subject to GST.
Infosys has also received a similar pre-show cause notice from the Director General of GST Intelligence regarding the same matter. The company is currently in the process of responding to this notice as well. The company maintains that any GST payments made are eligible for credit or refund against the export of IT services. Infosys asserts that it has fully complied with all central and state regulations regarding GST and has paid all its dues.
As of July 31, Infosys has a market capitalization of Rs 7.74 lakh crore. This recent development concerning GST evasion allegations is a significant event for the company and the IT sector in India. The outcome of this matter could have substantial financial implications for Infosys.
