Infosys recently received a significant notice from GST authorities. The notice demands Rs 32,403 crore. This is for services used by Infosys from its overseas branches from 2017 to 2022. As Infosys receives RS 32000 crore GST demand notice they have responded to it.
Infosys Addresses the GST Demand Notice
Infosys described this as a “pre-show cause” notice in a stock exchange filing as the company believes GST does not apply to these expenses. Karnataka State GST authorities issued the notice and it covers the period from July 2017 to March 2022 for expenses of Infosys’ overseas branches.
Infosys has responded to the demand notice and the company says it has followed all GST rules. It also received a similar notice from the Director General of GST Intelligence and Infosys is currently preparing a response to this notice as well.
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Financial Impact and Previous Incidents
The GST notice states Infosys paid its overseas branches as part of export invoices. The Directorate General of GST Intelligence in Bengaluru claims Infosys did not pay the required IGST. They say Infosys owes Rs 32,403 crore under the reverse charge mechanism for services from its overseas branches. The demanded amount is more than Infosys’ annual profit. In the June quarter, Infosys reported a net profit of Rs 6,368 crore. Their revenue from operations was Rs 39,315 crore.
Infosys manages the GST Network portal. They built this platform in 2015 under a Rs 1,380 crore contract. The company insists it has paid all GST dues. Infosys argues that GST is not applicable to the expenses claimed in the notice. They believe they have followed all central and state regulations.
GST intelligence officers allege Infosys did not pay IGST on services from its overseas branches. They claim Infosys included these expenses in their export invoices from India. Former Infosys CFO Mohandas Pai criticized the notice. He called it an example of “tax terrorism.” Earlier, in April, Infosys was fined Rs 1.46 lakh by the Odisha GST Authority. This was for availing ineligible input tax credit. Infosys continues to assert its compliance. The company believes the GST notice is not justified. They are preparing to respond fully to the authorities.
