Infosys says Karnataka authorities have withdrawn ₹32,403 crore GST tax notice

Infosys informed that Karnataka State Authorities have withdrawn the ‘pre-show cause’ notice and directed.

The IT firm to submit a further response to the DGGI (Directorate General of GST Intelligence) central authority on the matter. This comes after India’s second-largest IT services company said Karnataka GST authorities slapped a ₹32,403 crore notice.

The IT firm said in an exchange filing that it “has also received a pre-show cause notice from Director General of GST Intelligence on the same matter and the Company is in the process of responding to the same. Additionally, as per a recent Circular…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.”

The company contented that GST payments are eligible for credit or refund against the export of IT services saying that it “has paid all its GST dues and is fully in compliance with the central and state regulations on this matter.”

As per reports, the notice sent to Infosys by GST authorities said, “In lieu of receipt of supplies from overseas branch offices, the Company has paid consideration to the branch offices in the form of overseas branch expense. Hence, M/s Infosys Ltd, Bengaluru is liable to pay IGST under reverse charge mechanism on supplies received from branches located outside India to the tune of ₹32,403.46 crores for the period 2017-18 (July 2017 onwards) to 2021-22.”

Apex IT body Nasscom defended Infosys saying tax demand reflects a lack of understanding of the industry’s operating model. It said, “Recent media reports of a GST demand of over ₹320 billion ( ₹32,403 crore) reflects 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.”