Infosys Hit with Over Rs. 3 Crore Tax Penalty

Infosys Ltd. has disclosed that it has received a penalty notice from the Deputy Commissioner of Commercial Taxes in Bengaluru. The penalty amounts to over Rs.3 crores and is related to alleged discrepancies in tax payments and the excessive availing of Input Tax Credit for the financial year 2019-20.

This penalty will have no material impact on its financials, operations, or other activities, Infosys said in an exchange notice on Saturday. The company reassured its stakeholders by stating that there is no significant effect on its overall performance and operations due to this penalty. The filing also mentioned that the company would host this information on its official website.

This recent development follows a broader investigation by the Directorate General of Goods and Services Tax Intelligence into Infosys's alleged evasion of Integrated Goods and Services Tax .

The DGGI had initially flagged Infosys for alleged IGST evasion amounting to Rs.32,403 crore in July 2024, related to services received from its overseas branches. However, after ongoing discussions, Karnataka's GST department withdrew the pre-show cause notice for the company while the DGGI's investigation continued.

Recently, Infosys confirmed that it had received communication from the DGGI, closing the pre-show cause notice proceedings for the financial year 2017-2018, which involved a GST amount of Rs.3,898 crore.

The DGGI's investigation had originally scrutinized Infosys for allegedly including expenses from its overseas branches in its export invoices from India, thereby affecting the computation of eligible refunds. This raised concerns regarding the company's liability to pay IGST under the reverse charge mechanism.

The issue prompted support from the National Association of Software and Service Companies (Nasscom), which emphasized the need for consistent enforcement of government circulars that clarify the tax treatment of transactions between overseas branches and the Indian headquarters. Nasscom highlighted that proper implementation of these guidelines would ensure that companies like Infosys are not unfairly penalized.