In a regulatory filing on Saturday, Infosys said the Directorate General of Goods and Services Tax Intelligence (DGGI) is concluding the pre-show cause notice proceedings for FY18. The GST amount for the period was ₹3,898 crore.
On July 31, the company received a pre-show cause notice from the Karnataka State GST authorities instructing it to pay Goods and Services Tax (GST) amounting to ₹32,403 crore for the period of July 2017 to March 2022. Following this, Infosys also received a pre-show cause notice from the DGGI. However, the company announced that the Karnataka state authorities had withdrawn the notice a day later and had instructed it to provide additional information to the DGGI regarding the issue.
The tax authority stated the IT firm is liable to pay integrated goods and services tax (IGST) under the reverse charge mechanism (RCM) for the services it receives from its overseas branches. According to the IGST Act 2017, overseas branches are seen as distinct establishments, and the services provided are considered imports.
However, in the regulatory filing dated July 31, Infosys clarified that according to regulations, it does not believe GST can apply to the expenses incurred by its overseas branch offices. The company noted that services provided by these overseas branches to Indian entities are not subject to GST, adding that it had paid all its GST dues.
Since the RCM in GST means the recipient of goods or services is required to pay the tax instead of the supplier, the DGGI argued that Infosys included the expenses incurred towards overseas branches as part of their export invoice from India, and calculated the eligible refund based on these export values.