Infosys Faces ₹32,403 Crore GST Notice for Overseas Expenses: Company Disputes Applicability
News Mania Desk/Agnibeena Ghosh/1st August 2024
Infosys is currently grappling with a substantial ₹32,403 crore GST notice issued by authorities regarding services obtained from its overseas branches over the past five years. The notice, described by Infosys as a ‘pre-show cause’ notice, concerns the period from July 2017 to March 2022 and involves the company’s expenses related to its international operations.
In its response, Infosys has asserted that the GST is not applicable to these expenses. The Bengaluru-based IT giant disclosed that Karnataka State GST authorities have issued the notice, demanding the payment of GST for the specified period. The company has formally responded to this pre-show cause notice and is also addressing a similar notice from the Director General of GST Intelligence.
Infosys maintains that, according to recent guidelines issued by the Central Board of Indirect Taxes and Customs, services provided by overseas branches to an Indian entity are not subject to GST. The company further argues that GST payments related to these transactions are eligible for credit or refund against IT service exports, reinforcing its stance on compliance with GST regulations.
The notice claims that Infosys is liable to pay Integrated-GST (IGST) under the reverse charge mechanism for supplies received from its international branches. This demand, amounting to ₹32,403.46 crore, covers the period from 2017-18 to 2021-22. The Directorate General of GST Intelligence in Bengaluru believes that Infosys failed to pay IGST on the import of services as a recipient.
The GST authorities allege that Infosys included the expenses from its overseas branch offices as part of its export invoices, which they claim should be subject to IGST. The magnitude of the demand—₹32,403 crore—far exceeds Infosys’s annual profit, highlighting the gravity of the situation. For the June quarter, Infosys reported a net profit of ₹6,368 crore, reflecting a 7.1% increase year-on-year, with revenue from operations at ₹39,315 crore, a 3.6% rise from the previous year.
The high-profile nature of this case is further amplified by Infosys’s role in managing the Goods and Services Tax Network (GSTN) portal. In 2015, Infosys secured a ₹1,380 crore contract to develop the technology platform for GST, adding another layer of significance to the current dispute.
As Infosys navigates this significant GST notice, the outcome will likely influence both its financial standing and its role in the broader GST ecosystem. The company’s ongoing compliance efforts and the final resolution of this issue will be closely watched by stakeholders and industry observers alike.
