Infosys Didn't Pay Rs 32,000 Crore GST; Govt Starts Investigation


Mohul Ghosh

Mohul Ghosh

Aug 01, 2024


Infosys, one of India’s leading IT services companies, is under investigation by the Directorate General of GST Intelligence (DGGI) for an alleged evasion of over Rs 32,000 crores in integrated goods and service tax (IGST). The internal document accessed by ET Prime reveals that this investigation is related to the non-payment of IGST on the import of services as a recipient of those services.

Infosys Didn't Pay Rs 32,000 Crore GST; Govt Starts Investigation

Background of the Investigation

Scope of the Evasion

The period under investigation spans from July 2017 to the fiscal year 2021-2022. The document, dated July 30, 2024, indicates that Infosys is being scrutinized for its transactions involving overseas branches. Under the IGST Act, these branches and the parent company are treated as ‘distinct persons’. This classification implies that services received from these branches are subject to GST under the reverse charge mechanism.

Details of the Allegations

Distinct Persons and Reverse Charge Mechanism

As Infosys creates overseas branches to service its clients, these branches and Infosys itself are considered separate entities under the law. Consequently, any services provided by these branches to the main company are liable for GST. The document states that Infosys paid its overseas branches for their services, categorizing these payments as ‘overseas branch expenses’. As a result, Infosys is required to pay GST on these transactions.

Ongoing Investigations

The DGGI is continuing its investigation, which typically involves a case report followed by either an official visit or a demand for information and a summons. A source close to the matter confirmed that Infosys has been notified about the investigation but maintains that it is fully compliant with both state and central GST laws.

Past Incidents

This is not the first time Infosys has faced scrutiny from the GST authorities. Earlier in April, the Odisha GST Authority imposed a penalty of Rs 1.46 lakh on the company for availing ineligible input tax credit. However, the scale of the current investigation is much larger, potentially setting a significant precedent for other multinational companies operating under similar arrangements.

Conclusion

Infosys is now at the center of a high-stakes investigation that could have major implications for its financial standing and compliance practices. The outcome of this probe will be closely watched by industry stakeholders and could lead to more stringent enforcement of GST regulations for companies with international operations.

As the investigation progresses, it will be crucial for Infosys to navigate the legal complexities and ensure compliance with all applicable tax laws to mitigate potential penalties and maintain its reputation as a leading IT services provider.

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Mohul Ghosh
Mohul Ghosh
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