Shares of Infosys Ltd are under the spotlight this Friday morning after Karnataka State authorities retracted a pre-show cause notice demanding Rs 32,403 crore in GST payments. Instead, the IT major has been instructed to provide a further response to the Directorate General of GST Intelligence (DGGI) central authority.
The notice was related to a GST demand covering July 2017 to March 2022 for expenses incurred by Infosys’ overseas branch offices. The Directorate General of GST Intelligence in Bengaluru alleged that Infosys did not pay Integrated-GST (IGST) on services imported as a recipient. The agency contends that Infosys included these overseas branch expenses in its export invoices. On Thursday, Infosys shares closed 0.84% lower at Rs 1852.30 on the BSE.
In a recent exchange filing, Infosys argued that GST was not applicable to these expenses based on existing regulations. The company also referenced a circular dated June 26 from the Central Board of Indirect Taxes and Customs, which, following the GST Council’s recommendations, exempts services provided by overseas branches to an Indian entity from GST.
Infosys further clarified that GST payments are eligible for credit or refund against IT service exports. The company emphasized that it has settled all GST dues and remains compliant with central and state regulations. Notably, the Rs 32,403 crore tax demand exceeds Infosys’ annual profit, which was Rs 26,233 crore for FY24.
The document from GST authorities noted that: “In lieu of receiving supplies from overseas branch offices, the company has paid consideration to these branches in the form of overseas branch expenses. Therefore, M/s Infosys Ltd, Bengaluru is liable to pay IGST under the reverse charge mechanism on supplies received from branches located outside India, amounting to Rs 32,403.46 crore for the period from July 2017 to March 2022.” This version maintains the key points and flow while enhancing readability and SEO with optimized headings and relevant keywords.