Nasscom Backs Infosys Amid Tax Evasion Allegations
Government circular states that import of services have a nil transaction value, says Nasscom on Infosys tax issue.
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The IT industry body, the National Association of Software and Service Companies, or Nasscom, has said that a recently issued government circular has clarified that imports of services have a nil transaction value. There is a need for proper implementation of the government circular by the enforcement authorities, it said.
This comes after IT major Infosys Ltd. received a pre-show cause notice for payment of a Goods and Services Tax of Rs 32,403 crore for the period from July 2017 to March 2022, towards expenses incurred by overseas branch offices.
“Circular No. 210/4/2024, dated June 26, 2024, states that for the import of services, the deemed open market value of such transactions will be nil if a full input tax credit is available,” Nasscom said.
The GST demand order received by Infosys reflects a lack of understanding of the industry's operating model, it said. This is an industry-wide issue, and multiple companies are facing avoidable litigation, uncertainty, and concerns from investors and customers, according to it.
"The issue at hand involves the applicability of GST through the reverse charge mechanism. The GST enforcement authorities have been issuing notices for remittance by the Indian head office to its foreign branches for cases where there is no service between the head office and the foreign branch for this RCM, ignoring that this is not a case of ‘import of service’ by the head office from the branch," it said.
It said that it is not a new problem and courts have been ruling in favour of the industry in these cases. In lieu of this, Nasscom had requested the Ministry of Finance issue a circular to clarify the position so that the industry could avoid this litigation risk. In response to this, the government issued the above-mentioned circular.
“These demands should be addressed by the above-mentioned circular, independent of the basic tax position of there being no supply in the first place. We will continue to pursue with the government the need for proper implementation of the government circular by the enforcement authorities,” Nasscom said in a statement.
