July 31st 2024.
In a recent development, the GST authorities have issued a notice to Infosys, one of India's leading IT companies, demanding a payment of Rs 32,403 crores for services availed from their overseas branches over the span of five years, starting from 2017. In response, Infosys has filed a stock exchange notice, labeling the notice as a 'pre-show cause' and stating their belief that GST should not be applicable on these expenses.
The notice was issued by the Karnataka State GST authorities, and Infosys has promptly responded to the pre-show cause notice. Additionally, the company has also received a similar notice from the Director General of GST Intelligence, and they are currently working on providing a response for that as well.
Infosys has based their argument on the recent circular issued by the Central Board of Indirect Taxes and Customs, in line with the recommendations of the GST Council, stating that services provided by overseas branches to Indian entities are not subject to GST. They have also pointed out that they have paid all their GST dues and are in full compliance with central and state regulations.
According to reports, the document sent to Infosys by the GST authorities claims that the company did not pay the Integrated-GST on the import of services as a recipient of services. It further alleges that Infosys set up branch offices outside India and included the expenses incurred towards these as part of their export invoice.
The demand made by the authorities is a staggering Rs 32,403 crores, which is more than a year's profit for Infosys. This has caused quite a stir as just last quarter, the company's net profit rose by 7.1% and their revenue from operations increased by 3.6% from the previous year. It is also noteworthy that Infosys manages the Goods and Services Tax Network portal, making this demand even more significant.
In 2015, Infosys had won a contract of Rs 1,380 crores to build the technology platform for the Goods and Services Tax, making this notice even more interesting. As of now, the company is fully confident that they have paid all their GST dues and are in compliance with all regulations, and they are working towards resolving this issue with the authorities.
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