Infosys charged with GST evasion of Rs 32k cr, firm says all dues paid

The IT firm Infosys has responded to charges of non-payment of the Goods and Service Tax (GST) saying it has paid “all its GST dues and is fully in compliance with the central and state regulations on this matter”. The clarification came in a stock filing on Wednesday, whereby the company said it was replying to a pre-show cause notice issued by the Karnataka State GST authorities for payment of GST worth Rs 32,403.46 crore from July 2017 to March 2022 for expenses incurred by its overseas branches.

The allegation of GST non-payment levelled on Infosys, India’s second-largest IT services firm, is that the company’s overseas branches received consideration in form of expenses, as an outcome of which Infosys is liable to pay Integrated Goods and Services Tax (IGST) as part of Reverse Charge Mechanism (RCM) on such supplies. Under RCM, the tax is to be paid by the party that receives goods and services, and not the supplier.

On its part, Infosys said in the stock filing: “The Company would like to clarify on this matter: Karnataka State GST authorities have issued a pre-show cause notice for payment of GST of Rs. 32,403 crores for the period July 2017 to March 2022 towards the expenses incurred by overseas branch offices of Infosys Limited. The Company has responded to the pre-show cause notice.”

The IT firm also pointed out that, according to existing rules, GST cannot be applied on the expenses mentioned, adding that services provided by its overseas branches to Indian counterparts are not subject to GST.

“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 Indian entity are not subject to GST,” the Infosys filing stated.

This is the second time this year Infosys has run into GST problems. Earlier in April, the Odisha GST Authority fined Infosys Rs 1.46 lakh for taking advantage of ineligible input tax credit.