GST officials have sent a notice of Rs 32,403 crore to Infosys, the country’s and world’s leading IT company, for the services taken by the company from its foreign branches for five years from 2017. Infosys described this notice as a ‘pre-show cause’ notice in a filing given to the stock exchange. The company said that it believes that GST is not applicable on these expenses. According to the news of Bhasha, the Bengaluru-headquartered IT firm said that Karnataka State GST officials have issued a pre-show cause notice for payment of GST of Rs 32,403 crore for the period July 2017 to March 2022 for the expenses incurred by the foreign branch offices of Infosys Limited. The company has responded to the pre-show cause notice.
The company is in the process of responding to this
According to the news, the filing said that the company has received a pre-show cause notice from the Director General of GST Intelligence on the same matter and the company is in the process of responding to it. The company believes that according to the rules, GST is not applicable on such expenses. Infosys said that according to a recent circular issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by foreign branches to the Indian entity are not subject to GST. Infosys argued that GST payments are eligible for credit or refund against export of IT services.
Infosys gave this argument
The company argued that Infosys has paid all its GST dues and is fully compliant with the central and state rules in this matter. According to the report, the document sent by GST officials to Infosys states- In lieu of obtaining supplies from foreign branch offices, the company has paid consideration to the branch offices in the form of foreign branch expenses. Therefore, M/s Infosys Limited, Bengaluru is liable to pay IGST amounting to Rs 32,403.46 crore under the reverse charge mechanism on supplies received from branches located outside India for the period 2017-18 (from July 2017) to 2021-22.
GST notice is more than Infosys’ one year profit
The Directorate General of GST Intelligence in Bengaluru believes that Infosys did not pay Integrated-GST (IGST) on import of services as a recipient of services. It alleges that Infosys set up branch offices outside India and included the expenditure incurred on these as part of its export invoices. The demand of Rs 32,403 crore is more than Infosys’ one-year profit. Infosys’ net profit in the June quarter rose 7.1 per cent year-on-year to Rs 6,368 crore and revenue from operations stood at Rs 39,315 crore, up 3.6 per cent from a year earlier. The GST demand is also of interest, as Infosys manages the Goods and Services Tax Network (GSTN) portal.
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