Infosys: GST Intelligence alleges Rs 32,000 Crore tax evasion – What’s at Stake?

IT services company Infosys has received a pre-show cause notice for alleged evasion of goods and services tax (GST) amounting to ₹32,403 crore.
In a recent BSE filing, Bengaluru-based Infosys revealed that Karnataka GST authorities have issued a pre-show cause notice demanding ₹32,403 crore in GST for the period from July 2017 to March 2022. This notice relates to expenses claimed by Infosys’s overseas branches. The company has confirmed that it has responded to the notice.

GST on Overseas Branch Expenses

Infosys clarified that GST is not applicable to the expenses incurred by their overseas branches, as per regulations. 

“The Company believes that as per regulations, GST is not applicable on these expenses. Additionally, as per a
recent Circular (circular number 210/4/2024 dated June 26, 2024) issued by the Central Board of Indirect Taxes and
Customs on the recommendations of the GST Council, services provided by the overseas branches to Indian entity
are not subject to GST.”

Infosys has paid all its GST dues and remains fully compliant with both central and state regulations on this matter.

Allegations and Clarifications

The Directorate General of GST Intelligence claims that Infosys is liable to pay IGST under the reverse charge mechanism for supplies received from branches located outside India, amounting to Rs. 32,403.46 crores for the period from July 2017 to 2021-22. According to the allegations, Infosys paid consideration to its overseas branch offices in the form of overseas branch expenses, which necessitates the IGST payment under the reverse charge mechanism.

Infosys included the expenses incurred towards overseas branches as part of their export invoice from India. Based on these export values, the company computed the eligible refund. The receipt of export proceeds and the export invoice related to the project were being raised by the company.

Infosys maintains that GST payments are eligible for credit or refund against the export of IT services. The company believes it has adhered to all GST regulations and remains confident in its compliance with the law.