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Indian IT giant Infosys is facing a significant tax dispute with Indian authorities. The Goods and Services Tax (GST) department has issued a notice demanding Rs 32,403 crore from Infosys for services received from its overseas branches between 2017 and 2022. This substantial demand, exceeding the company's annual profit, has sent shockwaves through the industry.
The crux of the dispute lies in the interpretation of GST regulations regarding services received from overseas entities. The GST authorities contend that Infosys' overseas branch expenses should be subject to GST under the reverse charge mechanism. They argue that since Infosys received services from its overseas branches, it is liable to pay the tax. Infosys, however, vehemently disagrees with this assessment. In its official statement to the Bombay Stock Exchange, Infosys clarifies its position, stating that it believes GST is not applicable on these expenses.
The company cites a recent circular issued by the Central Board of Indirect Taxes and Customs (CBIC) that exempts services provided by overseas branches to Indian entities from GST. This circular, issued in June 2024, reinforces Infosys' stance that the tax demand is unwarranted. Furthermore, Infosys highlights that all its GST dues have been paid, demonstrating its commitment to compliance with Indian tax regulations.
This high-profile case underscores the complexities of international tax law, particularly within the context of rapidly evolving digital business models. The outcome of this dispute could have far-reaching consequences for other multinational companies operating in India, setting a precedent for how GST is applied to cross-border transactions. It remains to be seen how the dispute will be resolved, with both parties likely to engage in legal proceedings to defend their respective positions. The case will undoubtedly be closely watched by the business community, as it could significantly impact the tax landscape for multinational corporations operating in India.
Source: Infosys terms Rs 32,000 GST refund notice 'pre-show cause': Read company's letter to BSE