IT giant Infosys on Saturday said the Directorate General of Goods and Services Tax Intelligence (DGGI) is concluding the pre-show cause notice proceedings for the financial year 2017-2018, involving Rs 3,898 crore.
This comes after that company, on July 31, received a demand notice for alleged tax evasion amounting to over Rs 32,000 crore from the DGGI.
“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 stated in a regulatory filing. As a result, an amount of Rs 28,000 crore related to FY22 is still under review by the authorities.
On August 1, Infosys revealed that the Karnataka state authorities had rescinded the pre-show cause notice issued a day earlier and directed the company to provide further responses to the DGGI concerning the issue.
Infosys asserts that it has settled all dues and contends that GST is not applicable to the expenses claimed by the DGGI. “Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter,” the company declared in a regulatory filing on July 31.
However, the DGGI claims that Infosys paid consideration to its overseas branch offices in the form of overseas branch expenses. Consequently, Infosys might be required to pay IGST under the Reverse Charge Mechanism (RCM) on these transactions.
Under the RCM in GST, the recipient of goods or services is responsible for paying the tax instead of the supplier. The DGGI argues that Infosys included the expenses incurred towards overseas branches as part of their export invoice from India, and based on these export values, calculated the eligible refund. Thus, this approach resulted in a significant underpayment of IGST by the Bengaluru-based IT firm.