A day after it received a GST demand of ₹32,403 crore, Infosys clarified on Thursday that the 'pre-show cause' notice issued by the Karnataka state authorities to the Company has since been withdrawn. Instead, Infosys has been asked to give further replies to the Directorate General of GST Intelligence pertaining to the matter.
The country's second-largest IT company made headlines on Wednesday when GST authorities issued a notice of ₹ 32,403 crore for services the company availed from its overseas branches for a five-year period starting in 2017. Infosys explained that this is a 'pre-show cause' notice and reiterated that GST should not be applied to these expenses.
Infosys in a late-evening filing on Thursday said: "Company has received communication from Karnataka State authorities, whereby it has withdrawn the pre-show cause notice and directed the company to submit further response to the DGGI central authority on this matter."
The Bengaluru-based company had on Wednesday disclosed that the Karnataka State GST authorities issued a pre-show cause notice demanding GST payment of ₹ 32,403 crore for expenses incurred by Infosys' overseas branches from July 2017 to March 2022. It is in respect of a notice received from the Company.
Further, Infosys added that it has also received a similar pre-show cause notice from the Director General of GST Intelligence, to which it is replying. The Company firmly believes that the expenditure incurred in this regard does not come within the purview of the regulations under GST.
"Services provided by overseas branches to the Indian entity are not subject to GST, according to a recent circular by the Central Board of Indirect Taxes and Customs, based on GST Council recommendations," Infosys said.
Infosys has argued that it was entitled to avail credit or refund of the payment of GST against the export of IT services. "Infosys has paid all of its dues related to GST and complied fully with regulations of Centre and state concerned," the company contended.
Reports suggest that the communication from the GST authorities to Infosys said, "For supplies taken from overseas branch offices, Infosys paid consideration in the form of overseas branch expenses. The same therefore, Infosys Ltd, Bengaluru, is liable to pay IGST under the reverse charge mechanism on supplies received from branches outside India amounting to ₹32,403.46 crores for the period from July 2017 to March 2022."
That makes it a demand of a whalloping ₹32,403 crore, much more than Infosys' annual profit. Infosys had reported a 7.1 per cent year-on-year rise in net profit to ₹6,368 crore in the just-ended quarter, while revenue from operations rose by 3.6 per cent to ₹39,315 crore.
Nasscom, the umbrella body for the information technology industry, on Thursday said the latest tax demand belies a misapprehension of how the industry's operating model is and points to a sector-wide problem of multiple companies facing unnecessary litigation and uncertainty.
In a detailed statement, which came out a day after Infosys' BSE filing on the GST 'pre-show cause' notice, Nasscom said government circulars based on GST Council recommendations should be respected in enforcement actions. This is so such notices do not create uncertainty and negatively impact perceptions about India's ease of doing business.
Read also | Infosys Faces Rs 32,403 Crore GST Demand Notice from Authorities
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