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Infosys, one of India’s leading IT firms, has been served a notice by the Directorate General of GST Intelligence for an alleged tax evasion amounting to over ₹32,000 crore. The notice pertains to a significant discrepancy regarding the payment of Integrated Goods and Services Tax (IGST) under the Reverse Charge Mechanism (RCM) for the period between July 2017 and March 2022.
According to the notice, Infosys has been accused of failing to pay the appropriate IGST on supplies received from its overseas branch offices. The tax authorities have calculated the alleged liability to be ₹32,403.46 crore. The issue centres around the company’s practice of treating payments to its overseas branches as branch expenses, rather than accounting for them as taxable supplies.
Under the GST framework, the Reverse Charge Mechanism requires the recipient of goods or services to pay the tax instead of the supplier. The Directorate General of GST Intelligence’s document outlines that Infosys included these expenses in their export invoices and, based on these values, claimed refunds. The authorities argue that this method was incorrect and that the company should have paid IGST on the supplies received from its foreign branches.
The notice alleges that Infosys’s accounting practices led to significant underreporting of tax liabilities, prompting the tax authorities to demand a substantial payment. Infosys has yet to respond publicly to the notice. This development comes at a time when the company is already navigating various regulatory and compliance challenges.