GST authorities have slapped a ₹32,403 crore notice on Infosys for services availed by the company from its overseas branches for five years starting 2017.
Infosys, in a stock exchange filing, called the notice a ‘pre-show cause’ notice and said it believes the GST is not applicable on these expenses.
The Bengaluru-headquartered IT firm said Karnataka State GST authorities have issued a pre-show cause notice for payment of GST of ₹32,403 crores for the period July 2017 to March 2022 towards the expenses incurred by overseas branch offices of Infosys Limited, and added that the company has responded to the pre-show cause notice.
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“…the Company has also received a pre-show cause notice from Director General of GST Intelligence on the same matter and the Company is in the process of responding to the same,” the filing said.
The company believes that as per regulations, GST is not applicable on such expenses.
“Additionally, as per a recent Circular…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.
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Infosys argued that 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,” the company contended.
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 ₹32,403.46 crores for the period 2017-18 (July 2017 onwards) to 2021-22.”
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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.
The demand – at a staggering ₹32,403 crore – is more than a year’s profit for Infosys. For the June quarter, Infosys’ net profit rose 7.1 per cent year-on-year to ₹6,368 crore, and revenue from operations stood at ₹39,315 crore, an increase of 3.6 per cent from a year ago.
The GST demand is also bound to evoke interest as Infosys manages the Goods and Services Tax Network (GSTN) portal. In 2015, Infosys had bagged ₹1,380 crore contract to build the technology platform for Goods and Services Tax (GST).