India’s second-largest IT company, Infosys, is in the spotlight for a significant tax issue. The Directorate General of GST Intelligence (DGGI) has issued a demand alleging that Infosys evaded taxes amounting to over ₹32,000 crore. This claim has been reported by Moneycontrol.
The core of the issue revolves around Infosys’s handling of taxes related to its overseas branch offices. According to the DGGI document, Infosys allegedly failed to pay Integrated Goods and Services Tax (IGST) under the Reverse Charge Mechanism (RCM) for services received from its branches located outside India. The RCM requires the recipient of services, rather than the supplier, to pay the tax.
The document states that Infosys should have paid IGST on the amount of ₹32,403.46 crore for the period from July 2017 to March 2022. This is because the company paid expenses to its overseas branches and included these expenses in their export invoices, potentially leading to tax evasion.
Infosys responded to the allegations by stating that it has paid all its GST dues and is fully compliant with both central and state regulations. The company claims that the GST is not applicable to the expenses in question as per their understanding.
The financial impact of this alleged tax evasion is substantial. The penalty demanded by the DGGI amounts to nearly a year’s worth of Infosys’s profits and about half of its revenue for a single quarter. For the quarter ending June 30, Infosys reported a net profit of ₹6,368 crore, marking a 7.1% increase from the previous year. Their revenue from operations for the same period rose by 3.6% to ₹39,315 crore.
Interestingly, Infosys also manages the Goods and Services Tax Network (GSTN), the platform designed to assist taxpayers in India with GST compliance, including filing returns and making payments. This added layer of involvement in GST compliance makes the current situation even more notable.
The DGGI’s allegations and the substantial amount of the tax demand underscore the seriousness of the issue. As the investigation continues, Infosys’s handling of this situation will be closely watched by industry experts and regulatory bodies alike.
