DGGI Ends GST Notice Proceedings Against Infosys for Rs 3,898 Cr

Infosys announced on Saturday that it has received a communication from the Directorate General of GST Intelligence (DGGI) closing the pre-show cause notice proceedings for the financial year 2017-2018, which amounted to Rs 3,898 crore. Earlier in the week, Infosys had been issued a Rs 32,403-crore GST notice by authorities.

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In a BSE filing on Saturday evening, Infosys stated it had received and responded to a pre-show cause notice from DGGI for the period July 2017 to March 2022. The company has now been informed by DGGI that the pre-show cause notice proceedings for the financial year 2017-2018 have been closed. The GST amount mentioned in this notice was Rs 3,898 crore.

GST Notice Details

On Wednesday, Infosys made headlines when GST authorities, including Karnataka State GST authorities and DGGI, issued a Rs 32,403-crore notice for services availed by the company from its overseas branches over five years starting in 2017. Infosys described these notices as pre-show cause and asserted that GST is not applicable to the mentioned expenses.

The Bengaluru-based IT giant had previously stated that it had responded to the pre-show cause notice for payment of GST of Rs 32,403 crore for the period July 2017 to March 2022. This amount was related to expenses incurred by Infosys' overseas branch offices. The company believes that according to regulations, GST is not applicable on such expenses.

DGGI's Role and Compliance

DGGI is the top intelligence and investigative agency for violations related to Goods and Services Tax (GST), Central Excise Duty, and Service Tax. It is responsible for enhancing compliance with Indirect Tax laws. Infosys has maintained that it has paid all its GST dues and is fully compliant with central and state regulations on this matter.

According to reports, the document sent by GST authorities to Infosys states: "In lieu of receipt of supplies from overseas branch offices, the Company has paid consideration to the branch offices in the form of overseas branch expense. Hence, M/s Infosys Ltd, Bengaluru is liable to pay IGST under reverse charge mechanism on supplies received from branches located outside India to the tune of Rs 32,403.46 crores for the period July 2017 onwards to March 2022."

Company's Response and Circular

A day after receiving the notice, Infosys said Karnataka state authorities had withdrawn the pre-show cause notice and directed it to submit further responses to DGGI central authority on the issue. Additionally, according to a recent circular issued by the Central Board of Indirect Taxes and Customs based on recommendations from the GST Council, services provided by overseas branches to Indian entities are not subject to GST.

Infosys has argued strongly that GST payments are eligible for credit or refund against export of IT services. The company reiterated its stance that it complies with all relevant regulations and has paid all necessary dues.

The developments highlight ongoing scrutiny and regulatory challenges faced by major corporations in India regarding tax compliance. Infosys' proactive engagement with authorities reflects its commitment to adhering to legal requirements while contesting charges it deems unjustified.