Infosys faces pre-show cause notice for alleged Rs. 32,400-crore GST evasion
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IT services giant Infosys has been issued a pre-show cause notice by Karnataka GST authorities for alleged evasion of ₹ 32,403 crore in goods and services tax (GST) for the period from July 2017 to March 2022.
In a recent BSE filing, Bengaluru-based Infosys disclosed that the Karnataka GST authorities have flagged expenses incurred by its overseas branch offices as the basis for the massive GST claim. The company has responded to the pre-show cause notice and is preparing to address a similar notice from the Director General of GST Intelligence.
Infosys maintains that GST is not applicable to such expenses, citing regulations and a recent circular from the Central Board of Indirect Taxes and Customs (CBIC) recommended by the GST Council. The circular clarifies that services provided by overseas branches to the Indian entity are not subject to GST.
Additionally, Infosys highlighted that GST payments are eligible for credit or refund against the export of IT services, affirming that it has paid all its GST dues and is fully compliant with both central and state regulations.
However, sources indicate that under the Integrated Goods and Services Tax (IGST) Act, Infosys’ offices outside India are considered distinct entities from the parent company. As a result, all services provided by these branch offices are classified as import of services and thus subject to GST.
This development adds to the scrutiny on Infosys and underscores the complexities of GST compliance for multinational companies operating in India.
