News

Published: August 2, 2024
Updated: August 2, 2024

Infosys Tax Evasion Case: Karnataka GST Authority Withdraws Pre-Show-Cause Notice

Regulatory Update

Infosys, one of India's leading IT companies, has announced that the Karnataka GST authority has withdrawn its pre-show-cause notice related to alleged tax evasion. This decision comes with a directive for Infosys to submit further responses to the Directorate General of GST Intelligence (DGGI).

Official Statement

In a regulatory filing on August 1, 2024, Infosys confirmed the withdrawal of the pre-show-cause notice. The company stated, "The Karnataka state authorities have withdrawn the pre-show cause notice and directed the company to submit further responses to the DGGI central authority on this matter."

Background of the Investigation

The DGGI has flagged Infosys for alleged indirect tax evasion amounting to ₹32,403 crore. The investigation centers on services provided by Infosys’ overseas branches and their inclusion in export invoices from India. The alleged evasion pertains to integrated goods and services tax (IGST) over a five-year period until FY22.

Legal Framework

Under the IGST Act, Infosys' overseas branches and the parent company are considered 'distinct persons.' The DGGI is investigating Infosys for non-payment of IGST on the import of services provided by these branches.

Infosys' Position

Infosys maintains that GST is not applicable on the expenses incurred by its overseas branches. The company refers to a recent circular issued by the Central Board of Indirect Taxes and Customs (Circular No. 210/4/2024 dated June 26, 2024), which states that services provided by overseas branches to an Indian entity are not subject to GST. Infosys emphasizes that it has paid all its GST dues and is in full compliance with both central and state regulations.

Infosys is required to continue engaging with the DGGI to address the concerns raised. The company's position on the non-applicability of GST to the services in question, backed by recent regulatory clarifications, is central to its defense. Further responses and interactions with the tax authorities will determine the resolution of this high-stakes investigation.