GST Demand Notice of Rs.32,000 Crore to Infosys for alleged Tax Evasion

The Directorate General of GST Intelligence (DGGI) has issued a demand to India’s second-largest IT giant Infosys for alleged tax fraud of more than Rs.32,000 crore, according to sources.

“In lieu of receiving supplies from foreign branch offices, the Company has compensated the branch offices in the form of overseas branch expenses. Hence, M/s Infosys Ltd, Bengaluru is obliged to pay IGST under the reverse charge mechanism on supplies received from branches located outside India to the tune of Rs.32,403.46 crores for the year 2017-18 (July 2017 onwards) to 2021-22,” the document said.

The Reverse Charge Mechanism (RCM) in Goods and Services Tax (GST) is a mechanism in which the recipient of goods or services is required to pay the tax rather than the supplier.

According to the document, Infosys included expenses for overseas branches in their export invoice from India and calculated the applicable return based on the export values.

“The receipt of export proceeds and export invoice related to the project was being raised by the Company,” according to the document.

In an exchange filing, Infosys stated that it has paid all dues and that GST is not applicable to DGGI-claimed expenses. “Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter,” the business stated in the filing.

The document also reveals intelligence gathered and created by Bengaluru’s DGGI officials indicating that the company got services from abroad branches but did not pay Integrated Goods and Services Tax (IGST) under RCM on the import of services.

The supposed penalty against the Bengaluru-based company is roughly a year’s earnings and a quarter’s revenue. For the quarter that ended June 30, Infosys’ net profit increased 7.1% year on year to Rs.6,368 crore, while consolidated revenue from operations increased 3.6% to Rs.39,315 crore.