Infosys GST Evasion Row: Tax Authority Closes Notice For July 2017 To March 2018 Period

IT major Infosys Ltd. said that the Directorate General of Goods and Services Tax Intelligence is closing the pre-show cause notice proceedings for FY18. The GST amount for this period was Rs 3,898 crore. 

Infosys came under the radar of DGGI for alleged evasion of Integrated Goods and Services Tax, amounting to Rs 32,403 crore, on July 31, after an investigation done by the officers of DGGI, Bangalore Zonal Unit. Following which, Karnataka's GST department had withdrawn the pre-show cause notice issued to the company, while the DGGI investigation continued. 

Now, the company in an exchange filing has said, “The Company had received and responded to a pre-show cause notice issued by DGGI for the period July 2017 to March 2022. The company has now received a communication from DGGI closing the pre-show cause notice proceedings for the financial year 2017-2018. The GST amount as per the pre-show cause notice for this period was Rs 3,898 crore.”

The tax authority had said that Infosys is liable to pay IGST under the reverse charge mechanism for the services it receives from its branches located outside India. According to the IGST Act 2017, the overseas branches are seen as distinct establishments, and services provided by them are considered as imports under the IGST Act. 

The DGGI notice had also noted that Infosys was including the expenses incurred towards overseas branches as part of their export invoice from India and based on the said export values, it was computing the eligible refund. 

After the development, IT industry body National Association of Software and Service Companies, or Nasscom, had backed Infosys underscoring that there already is a government circular, which clarifies that market value of transactions are nil for import of services, provided full input tax credit is available. The body also said there is a need for proper implementation of the government Circular by the enforcement authorities.