Infosys, India's second-largest IT services company, received a goods and services tax (GST) demand of ₹32,403 crore. This demand is related to services availed by Infosys from its overseas branches over a five-year period starting in 2017, claimed a Reuters report.
The tax document details that Infosys paid consideration to its overseas branches in the form of expenses. Consequently, Infosys is deemed liable to pay Integrated Goods and Services Tax (IGST) under the Reverse Charge Mechanism (RCM) on these supplies, amounting to Rs 32,403.46 crore from July 2017 to 2021-22.
The RCM system mandates that the recipient of goods or services, rather than the supplier, pays the tax.
In an exchange filing, Infosys stated that it has settled all dues and maintained that GST is not applicable to the expenses claimed by the DGGI. "Infosys has paid all its GST dues and is fully compliant with central and state regulations on this matter," the company asserted.
"The Company believes that, as per regulations, GST is not applicable on these expenses. Additionally, as per a recent Circular (circular number 210/4/2024 dated June 26, 2024) issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by the overseas branches to the Indian entity are not subject to GST.
It is also important to note that the GST payments are eligible for credit or refund against the export of IT services.
The document had reportedly outlined that Infosys included expenses incurred by its overseas branches as part of their export invoices from India. Based on these export values, the company calculated the eligible refund. The intelligence gathered by Bengaluru's Directorate General of GST Intelligence (DGGI) officers indicated that Infosys had not paid IGST under RCM on the import of services from its overseas branches. "If this notice is correct, it's outrageous—a case of tax terrorism at its worst. Service exports from India are not subject to GST. Can officials interpret anything they want?" former Infosys CFO Mohandas Pai had written in a post in X.
For the quarter ending June 30, Infosys reported a 7.1 percent increase in net profit year-on-year to Rs 6,368 crore, while consolidated revenue from operations rose by 3.6 percent to Rs 39,315 crore. This isn't the first such instance between Infosys and the GST Department. In April, the Odisha GST Authority fined Infosys Rs 1.46 lakh for availing ineligible input tax credit.