Bengaluru: The Directorate General of Goods and Service Tax Intelligence (DGGI) is probing Infosys for allegedly evading over Rs 32,000 crore in integrated Goods and Services Tax (IGST) over five years, according to a report by The Economic Times.
Infosys, based in Bengaluru, responded in a stock exchange filing, stating it had received a "pre-show cause" notice from the law enforcement agency and maintained that GST was not applicable to the expenses in question, as reported by The Indian Express.
The DGGI alleged in its Tuesday notice that Infosys failed to pay IGST on the import of services from July 2017 to March 2022. The agency, which operates under the Union Ministry of Finance, is responsible for investigating tax evasion.
According to the DGGI, Infosys established overseas branches to service clients, with these branches and the company considered "distinct persons" under the Integrated GST Act. The Act mandates the collection of tax on the inter-state supply of goods or services.
The notice claimed that Infosys paid its overseas branches for supplies received, making it liable to pay GST under the reverse charge mechanism, where the recipient of goods or services pays the tax instead of the supplier.
Infosys stated that the Karnataka GST authorities had issued a "pre-show cause notice" for a tax claim of Rs 32,403 crore on expenses incurred by its overseas branches during the period in question. Infosys has responded to this notice and is also addressing the DGGI's notice.
The company asserted that GST does not apply to the listed expenses under current regulations. Infosys cited a recent circular from the Central Board of Indirect Taxes and Customs (CBIC), issued on the GST Council's recommendations, which clarified that services provided by overseas branches to the Indian entity are not subject to GST.
Infosys emphasized that its GST payments are eligible for credit or refund against the export of its IT services and that it has fully complied with central and state regulations.
In a related matter, Infosys was fined Rs 1.46 lakh by the Odisha GST authorities in April for availing ineligible input tax credit, The Economic Times reported.