Infosys Under GST Intelligence Scanner For Alleged Evasion Of Over Rs 32,000 Crore

IT major Infosys Ltd. is being investigated by the Directorate General of GST Intelligence for alleged evasion of Integrated Goods and Service Tax amounting to Rs 32,403 crore, according to an incident report by DGGI. 

The software exporter has established overseas branches outside India, which is considered a distinct person under the provisions of the IGST Act 2017. Further, the intelligence gathered and developed by the officers of DGGI, Bangalore Zonal Unit, Bengaluru, has indicated that the company has received services from overseas branches and has not paid IGST under the Reverse Charge Mechanism on the import of services. 

“To implement the on-site project-related work, the company has set up branch offices outside India for the purpose of carrying out business. In view of Explanation 1 to Section 8 of IGST Act, 2017, branch offices shall be treated as establishments in such foreign countries. Hence, the company and overseas branches would be treated as distinct persons,” the DGGI explained in the report. 

Infosys was also including the expenses incurred towards overseas branches as part of their export invoice from India and based on the said export values, it was computing the eligible refund. The receipt of export proceeds and export invoices related to the project was being raised by the company.

“Thus, in lieu of receipt of supplies from overseas branch offices, the company has paid consideration to the branch offices in the form of overseas branch expenses. Hence, Infosys is liable to pay IGST under the reverse charge mechanism on supplies received from branches located outside India to the tune of Rs 32,403.46 crore for the period 2017-18 (July 2017 onwards) to 2021-22,” the report read. 

Responding to the allegation, Infosys has issued a statement saying, “The company believes that, as per regulations, GST is not applicable on these expenses. Additionally, as per a recent circular issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by the overseas branches to Indian entities are not subject to GST.” 

Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter, it said. It is also said that the GST payments are eligible for credit or refund against the export of IT services.