After GST notice for FY18-22 to Infosys, DGGI withdraws demand of Rs 3,898 crore
New Delhi, August 4, 2024
The DGGI had slapped a Rs 32,403 crore notice on Infosys for services availed by the company from its overseas branches over a five-year period starting 2017.
On Thursday, the company informed stock exchanges that Karnataka state GST authority had withdrawn its notice. (File Photo)
In a partial reversal from its earlier position, Goods and Services Tax (GST) authorities have withdrawn notice of Rs 3,898 crore to tech major Infosys out of the total tax demand of Rs 32,403 crore raised last week for the five-year period starting 2017-18. The company informed stock exchanges late Saturday about having received a communication from Directorate General of GST Intelligence (DGGI) about closure of “the pre-show cause notice proceedings for the financial year 2017-2018”.
“The Company had received and responded to a pre-show cause notice issued by DGGI for the period July 2017 to March 2022. The Company has now received a communication from DGGI closing the pre-show cause notice proceedings for the financial year 2017-2018. The GST amount as per the pre-show cause notice for this period was Rs 3,898 crore,” Infosys said in its filing on stock exchanges.
While the filing doesn’t mention about the status of the tax demand notice for rest of the years out of the total five-year period of 2017-18 to 2021-22, officials said the demand notice for the rest of the years is also likely to be withdrawn in the coming days. A decision could also happen at the adjudication stage, an official said.
The DGGI had slapped a Rs 32,403 crore notice on Infosys for services availed by the company from its overseas branches over a five-year period starting 2017.
Bengaluru-based Infosys, in a stock exchange filing Wednesday, had called the missive from the tax department a “pre-show cause” notice and said it believes the GST is not applicable on the expenses in contention.
On Thursday, the company informed stock exchanges that Karnataka state GST authority had withdrawn its notice. The company is now required to respond to only DGGI on the matter.
In its notice, the GST probe wing has invoked reverse charge mechanism, where the recipient of goods/services assumes the responsibility for tax payment, instead of the seller. In its exchange filing, Infosys had said GST payments are eligible for credit or refund against export of IT services.
Infosys had said that as per a recent Circular (circular number 210/4/2024 dated June 26, 2024) issued by the Central Board of Indirect Taxes and Customs (CBIC) on the recommendations of the GST Council, services provided by the overseas branches to the Indian entity are not subject to GST.
The particular circular referred to by the company (No.210/4/2024) issued in June, while flagging the case of import of services by a registered person in India from a related person located outside India, stipulates that “the tax is required to be paid by the registered person in India under reverse charge mechanism”.
While noting that in such cases, the registered person in India is required to issue self-invoice under Section 31(3)(f) of CGST Act and pay tax on reverse charge basis, the circular then goes on to clarify that “…in cases where the foreign affiliate is providing certain services to the related domestic entity, and where full input tax credit is available to the said related domestic entity, the value of such supply of services declared in the invoice by the said related domestic entity may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules.”
In cases where full input tax credit is available to the recipient, if the invoice is not issued by the related domestic entity with respect to any service provided by the foreign affiliate to it, the value of such services may be deemed to be declared as nil, the circular had said.
[The Indian Express]
