Infosys said in a regulatory filing to the stock exchanges that the Karnataka GST authority has withdrawn the pre-show-cause notice against the IT giant.
Infosys said in a regulatory filing to the stock exchanges that the Karnataka GST authority has withdrawn the pre-show-cause notice against the IT giant.
Infosys announced in a regulatory filing to the stock exchanges on Thursday, August 1, that the Karnataka state GST watchdog has withdrawn the pre-show-cause notice against the company for alleged tax evasion. The tax authority has directed the software services company to submit further responses to the Directorate General of GST Intelligence (DGGI) central authority.
''The company has received a communication from Karnataka state authorities, withdrawing the pre-show cause notice and has directed the company to submit further response to DGGI central authority on this matter,'' said Infosys in its stock exchange filing on Thursday.
Taxman puts Infosys on notice for ₹32,403 crore
Tax authorities on Wednesday flagged indirect tax evasion of ₹32,403 crore at Bengaluru-based Infosys Ltd over services provided by its overseas branches, in one of the largest cases since the debut of the goods and services tax (GST) regime more than seven years ago. India's second-largest information technology (IT) major believes the tax does not apply to the services.
A DGGI note said it is investigating the technology blue chip for evading integrated goods and services tax (IGST) over a five-year period until FY22. The IT giant set up branch offices abroad to conduct business and included the expenses it incurred for these overseas branches as part of its export invoice from India.
Distinct persons under IGST Act
As Infosys creates overseas branches to service clients as part of its agreement with the clients, those branches and the company are each treated as 'distinct persons' under the IGST Act, DGGI said, adding Infosys is being investigated for 'non-payment of IGST on import of services as a recipient of services.'
'GST not applicable'
"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," it said.
Infosys said GST payments are eligible for credit or refund against the export of IT services and that it has responded to the notice. "Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter," it said.