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Infosys is hit with a ₹32,403 crore GST demand for services from overseas branches over five years. The company disputes the claim, referencing compliance and recent regulations exempting such services from GST.
India's second-largest IT services company, Infosys’ share price will be closely watched as the company has been issued a significant goods and services tax (GST) demand of ₹32,403 crore.
This GST demand is not the first such incident involving Infosys. In April, the Odisha GST Authority fined the company ₹1.46 lakh for availing ineligible input tax credit.
The tax notice specifies that Infosys paid consideration to its overseas branches in the form of expenses. As a result, Infosys is deemed liable for Integrated Goods and Services Tax (IGST) under the Reverse Charge Mechanism (RCM) on these transactions.
The total demand, covering the period from July 2017 to the fiscal year 2021-22, amounts to ₹32,403.46 crore. The RCM system requires the recipient, rather than the supplier, to pay the tax on goods or services received.
In an official exchange filing, Infosys stated that it has settled all its GST dues and remains fully compliant with both central and state regulations. The company maintains that GST does not apply to the expenses cited by the Directorate General of GST Intelligence (DGGI).
Infosys referred to a recent circular (number 210/4/2024 dated June 26, 2024) issued by the Central Board of Indirect Taxes and Customs, which specifies that services provided by overseas branches to the Indian entity are exempt from GST.
Additionally, Infosys highlighted that GST payments are eligible for credit or refund against the export of IT services.
The notice reportedly outlined that Infosys included expenses from its overseas branches in their export invoices from India, which were used to calculate eligible refunds. However, intelligence from Bengaluru's DGGI officers indicated that Infosys had not paid IGST under RCM for services imported from its overseas branches.
On Wednesday, Infosys share price closed at ₹1,869, reflecting a minor decline of 0.43%. Over the past year, Infosys shares have yielded a return of 36.90%, with a gain of 20.48% so far in the calendar year 2024.
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