Infosys mulls appeal against ₹32,403 crore GST demand

2 Aug 2024 , 12:10 PM

According to news reports, IT behemoth Infosys is contemplating fighting the notice of ₹32,403 Crore for unpaid Integrated Goods and Services Tax under the reverse charge system for services purportedly obtained from abroad operations.

The Directorate General of GST Intelligence (DGGI) Bengaluru branch has sent a pre-showcause notice to the company.

Tax authorities stated that Infosys was sent a pre-showcause notice in accordance with the rules of the current legislation and that it is still open for the business to reply, oppose, and explain the notice.

“It is a pre-showcause notice sent and the company will get enough time to respond to the notice, explain its position, and contest it,” said a top official, according to ET.

Up till the point of going to print, Infosys did not respond to emails.

The notice stated that the corporation failed to pay IGST on services obtained from abroad branches under RCM for the period of July 2017 to July 2021–2022.

“As per the IGST law, services provided by the overseas branches are considered imports, according to Section 2(11) of the IGST Act, 2017 and require companies to pay tax under the RCM mechanism,” said the official. The RCM system requires that the tax be paid by the one who receives the products or services, not the one who provides them.

According to the official, the GST council has provided clarifications about bank branches abroad; however, these are sector-specific and not industry-wide.

The sector argues that since there was no service import and no service consumption in the destination nation, there was no tax burden. According to an industry expert, tax authorities should recognize that the entire business has been operating under this model since the days of service taxes.

“Recent media reports claiming that the GST demand exceeds ₹320 billion demonstrate a lack of knowledge of the business model used by this industry. The industry association Nasscom said in a statement that “many companies are facing avoidable litigation, uncertainty, and concerns from investors and customers.” This is a widespread issue confronting the sector.

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