Infosys shares in focus as Rs 32,403 crore Karnataka GST notice withdrawn

Shares of Infosys Ltd are in focus on Friday morning after Karnataka State authorities withdrew a pre-show cause notice for payment of Rs 32,403 crore GST and directed the IT major to submit further response on the matter to DGGI central authority. The notice pertained to GST demand for the period July 2017 to March 2022 towards the expenses incurred by Infosys' overseas branch offices.  

The Directorate General of GST Intelligence in Bengaluru believes Infosys did not pay the Integrated-GST (IGST) on the import of services as a recipient of services. It alleges that Infosys set up branch offices outside India and included the expenses it incurred towards these as part of its export invoice.

On Thursday, Infosys shares settled 0.84 per cent lower at Rs 1852.30 on BSE.

In an exchange filing earlier, Infosys said it believes that as per regulations, GST was not applicable on such expenses. Additionally, as per a recent circular dated June 26 issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by the overseas branches to Indian entity are not subject to GST, Infosys said.

"It is also important to note that the GST payments are eligible for credit or refund against export of IT services. Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter," Infosys said earlier. 

The Rs 32,403 crore tax demand is more than a year's profit for Infosys. The IT major reported a profit of Rs 26,233 crore in FY24. 

As per reports, the document sent to Infosys by GST authorities says: "In lieu of receipt of supplies from overseas branch offices, the company has paid consideration to the branch offices in the form of overseas branch expense. Hence, M/s Infosys Ltd, Bengaluru is liable to pay IGST under reverse charge mechanism on supplies received from branches located outside India to the tune of Rs 32,403.46 crores for the period 2017-18 (July 2017 onwards) to 2021-22."