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Infosys, a leading IT services company headquartered in Bengaluru, India, has been served with a pre-show cause notice by the Karnataka GST authorities, alleging GST evasion of up to Rs 32,403 crore. This significant sum relates to expenses incurred by Infosys' overseas branch offices during the period from July 2017 to March 2022. The company has responded to the pre-show cause notice and maintains that GST is not applicable on such expenses, citing recent regulations and circulars from the Central Board of Indirect Taxes and Customs (CBIC) and the GST Council.
According to Infosys, services provided by its overseas branches to its Indian entity are not subject to GST, as per the latest guidelines. The company also emphasizes that any GST payments made are eligible for credit or refund against export of IT services. To further bolster its stance, Infosys states that it has fulfilled all its GST dues and adheres fully to central and state regulations regarding this matter. However, sources close to the investigation suggest that the Infosys offices outside India will be considered distinct entities under the Integrated Goods and Services Tax (IGST) Act, which would classify services rendered by branch offices as import of services, making them subject to GST.
This case highlights the complexity of international taxation and the evolving interpretations of GST regulations. The pre-show cause notice serves as a formal notification and an opportunity for Infosys to present its arguments and evidence to the GST authorities. The outcome of this case could have significant implications for other multinational companies operating in India and for the future application of GST regulations on cross-border services. The ongoing dialogue between Infosys and the GST authorities will be closely watched by the industry, as it could set a precedent for how similar cases are handled in the future.
Source: Infosys Gets Pre-Show Cause Notice For Alleged Rs 32,400-Crore GST Evasion