Infosys breathed a sigh of relief as Karnataka state authorities decided to withdraw the 'pre-show cause' notice. The IT giant now has to present its case to the Directorate General of GST Intelligence (DGGI). This comes just a later after the company was hit with a whopping Rs 32,403 crore GST demand.
Earlier this week, the GST authorities flagged services availed by Infosys' from its overseas branches over the past five years, dating back to 2017. The company has already asserted that the GST isn't applicable on the mentioned expenses and labeled the notice as a 'pre-show cause' notice.
At 9:40 am, the shares of the IT company were trading at Rs 1,834 price level, down by nearly 1 per cent on the National Stock Exchange.
Advertisement
In a late evening filing on Thursday, Infosys informed: "The company has received a communication from Karnataka State authorities, withdrawing the pre-show cause notice and has directed the company to submit further response to DGGI central authority on this matter."
The Bengaluru-headquartered firm on Wednesday disclosed that Karnataka State GST authorities had issued a pre-show cause notice for payment of GST of Rs 32,403 crore for the period July 2017 to March 2022 towards the expenses incurred by overseas branch offices of Infosys Limited, and added that the company has responded to the notice.
"...the Company has also received a pre-show cause notice from Director General of GST Intelligence on the same matter and the Company is in the process of responding to the same," Infosys had said in the statutory filing on Wednesday.
Advertisement
The company believes that as per regulations, GST is not applicable on such 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 entity are not subject to GST," Infosys had said.
Infosys had strongly argued that GST payments are eligible for credit or refund against export of IT services.
"Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter," the company had contended.
On Thursday, apex IT body Nasscom said the latest tax demand reflects a lack of understanding of the industry's operating model and sheds light on sector-wide issues wherein multiple companies are facing avoidable litigation and uncertainty.
In a detailed statement issued a day after Infosys' BSE filing on GST 'pre-show cause' notice, Nasscom asserted that government circulars issued based on recommendations of the GST Council must be honoured in enforcement mechanisms so that notices do not create uncertainty and negatively impact perceptions on India's ease of doing business.
(With inputs from PTI)
