Infosys' ₹32,403 Crore GST Case Closed by GST Authority

Infosys on Friday announced that the Directorate General of GST Intelligence (DGGI) has closed the pre-show cause notice proceedings against the IT services giant. The company had received a ₹32,403 crore GST demand notice in July 2024 from the Karnataka State GST authorities and the DGGI.

The notice pertained to the period from July 2017 to March 2022 and alleged that Infosys had not paid Integrated GST (IGST) under the reverse charge mechanism for services availed from its overseas branches. Tax authorities contended that expenses incurred by Infosys' foreign branches constituted 'import of services' and were therefore liable for IGST under the reverse charge mechanism. The case had triggered concern across the IT industry.

At the time, Infosys disputed the pre-show cause notice, asserting that GST was not applicable to these expenses. The company maintained that, as per regulations, services provided by its overseas branches to the Indian entity should not attract GST.

The IT industry body NASSCOM also criticised the tax demand, arguing that it reflected a misunderstanding of the industry's operating model and India’s policy of not taxing services exports.

"Recent media reports of a GST demand of over ₹320 billion (₹32,403 crore) reflect a lack of understanding of the industry's operating model. This is an industry-wide issue, and multiple companies are facing avoidable litigation, uncertainty, and concerns from investors and customers," NASSCOM had said, without naming Infosys.

"This is not a new problem, and courts have been ruling in favour of the industry in these cases. This issue was even addressed under the erstwhile service tax law, where favourable judgments were delivered by the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT)," the body added.

In August 2024, the Karnataka State GST authorities withdrew the pre-show cause notice. Now, on June 6, the DGGI has also officially closed the proceedings.

"The company had, on August 3, 2024, received a communication from DGGI closing the pre-show cause notice proceedings for the financial year 2017–2018. With the receipt of today’s communication from DGGI, this matter stands closed," Infosys said in an exchange filing.

On June 6, shares of Infosys Ltd ended at ₹1,564.05, up ₹9.70 or 0.62%, on the BSE.