Karnataka authorities withdraw GST notice sent to Infosys, direct the company to …

In a dramatic turn of events, Infosys has been temporarily relieved of the staggering Rs 32,403 crore GST demand. The Karnataka state tax authorities, who had issued the notice, have withdrawn it and directed the IT giant to respond to the central GST intelligence agency instead.
In a late evening filing on stock exchanges, Infosys informed: “The company has received a communication from Karnataka State authorities, withdrawing the pre-show cause notice and has directed the company to submit further response to DGGI central authority on this matter.” Directorate General of GST Intelligence (DGGI) is the apex intelligence and investigative agency for matters relating to violation of the Goods & Services Tax, Central Excise Duty and Service Tax.

What Infosys said on Rs 32,000 GST demand

The controversy erupted started on July 31 when the tax authorities accused Infosys of evading GST on services received from its overseas branches between 2017 and 2022. The company strongly denied the allegations, citing a recent government circular that exempts such services from GST. Infosys had strongly argued that GST payments are eligible for credit or refund against export of IT services.

NASSCOM comes out strongly in support of Infosys

The massive demand had sent shockwaves through the IT industry, with Nasscom raising concerns about the impact on business sentiment. The industry body emphasized the need for clarity in tax regulations to avoid such disputes. NASSCOM raised the issue with the Union finance ministry.
The apex IT body Nasscom said that the latest tax demand reflects a lack of understanding of the industry’s operating model and sheds light on sector-wide issues wherein multiple companies are facing avoidable litigation and uncertainty.
Nasscom added that government circulars issued based on recommendations of the GST Council must be honoured in enforcement mechanisms so that notices do not create uncertainty and negatively impact perceptions on India’s ease of doing business.