Infosys to Settle ₹32,403.46 Crore IGST for 2017-18 to 2021-22
Infosys is required to pay Integrated Goods and Services Tax (IGST) of ₹32,403.46 crore for the period from July 2017 onwards up to 2021-22 under the reverse charge mechanism. This payment is related to services received from its branches located outside India.
DGGI’s Allegations Against Infosys
The Directorate General of Goods and Services Tax Intelligence (DGGI) has alleged that Infosys evaded GST amounting to ₹32,403.46 crore and has issued an incident report on the matter. According to DGGI, Infosys received services from its overseas branches but failed to pay IGST under the reverse charge mechanism (RCM) for these imported services.
DGGI’s Claims in Detail
– Receipt of Services: Infosys is alleged to have received services from its overseas branches, which should be treated as imports of services under Section 2(11) of the IGST Act, 2017. The company reportedly did not pay the required IGST for these imports.
– Branch Offices as Distinct Entities: The DGGI claims that Infosys has established branch offices abroad to carry out on-site project-related work. According to Explanation 1 to Section 8 of the IGST Act, 2017, these branch offices are considered separate entities in their respective foreign countries. Consequently, Infosys and its overseas branches are treated as distinct persons for tax purposes.
– Payment for Services: In exchange for the services received from its overseas branches, Infosys reportedly made payments categorized as overseas branch expenses, which has led to the claims of IGST evasion.
Infosys Issues Clarification on ₹32,403 Crore IGST Payment
Infosys Statement:
– Infosys has clarified recent news reports claiming it hasn’t paid GST for expenses from its overseas branches.
– Karnataka State GST authorities have issued a pre-show cause notice regarding a GST payment of ₹32,403 crore.
– This notice pertains to the period from July 2017 to March 2022.
– The notice concerns expenses incurred by Infosys’s overseas branch offices.
– Infosys has responded to this pre-show cause notice.
– Following the news reports, Infosys also received a pre-show cause notice from the Directorate General of GST Intelligence regarding the same matter.
– The company is preparing a response to this notice and believes that GST should not apply to these expenses according to the regulations.
– Infosys states that it has paid all its GST dues and is fully compliant with both central and state regulations.
Mohandas Pai, a former Infosys board member and Chief Financial Officer, has criticized the Rs 32,000 crore Goods and Services Tax (GST) demand issued to the software company, calling it the worst example of ‘tax terrorism.’ The demand from the Bengaluru GST office has caused a stir, given Infosys’ reputation as one of India’s most well-governed companies.
Update
Indian tax authorities may soon issue notices to more major IT firms following Infosys being hit with a $4 billion tax demand for alleged evasion of tax on services provided by its overseas offices. The government accused Infosys of avoiding taxes on these services and demanded 320 billion rupees, nearly its entire revenue for the quarter ending June 30. This is reportedly part of a broader industry-wide scrutiny.
Update
Infosys has announced that the Karnataka GST authority has withdrawn the pre-show cause notice and instructed Infosys to address the Central GST authority, DGGI.
Stay informed with our financial updates, stocks, bonds, commodities. Get global & political insights. Follow us & enable notifications for the latest updates.
