GST body closes part of tax demand against Infosys

The Directorate General of Goods and Services Tax Intelligence (DGGI) has closed a tax demand for ₹3,898 crore (about $465,000) for the financial year 2017-18, Infosys Ltd said last week, in what comes as a partial relief for the IT services firm.

The partial respite comes after after Karnataka GST officials raised a ₹32,403 crore notice for unpaid integrated goods and services tax (IGST) for services availed by the company from its overseas branches for five years between July 2017 and March 2022. Integrated GST is levied on imports and inter-state movement of goods and services.

“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 ₹3,898 crore,” Infosys told the stock exchanges on Saturday.

IT industry lobby Nasscom had come out in support of the IT firm and shared that the incident reflected the GST enforcement mechanism’s lack of understanding of the IT industry’s operating model and had also appealed to the ministry of finance to issue a circular clarifying its stance to avoid litigation risk for IT firms.

The company had refuted the GST claims saying that as per regulations, GST was not applicable and cited a recent circular (no. 210/4/2024 dated 26 June) issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, which said services provided by the overseas branches to Indian entity are not subject to GST.