GST Council May Ease Tax Burden of Infosys, Foreign Airlines

The Goods and Services (GST) council is likely to provide tax relaxation to Infosys in the upcoming meeting scheduled for September 9, as per a CNBC report. The move reportedly comes amidst the growing concerns regarding the regulations in place, which are affecting the ease of doing business, especially in the service sector. 

The concern came to the forefront after the Directorate General of Goods and Services Tax Intelligence (DGGI) issued notice to several foreign airlines, shipping lines, and IT giant Infosys. Additionally, DGGI sent a tax demand of Rs 32,000 crore to the tech giant.  

Apart from tax relief to Infosys, the council chaired by Union finance minister Nirmala Sitharaman in its upcoming 54th meet might relax regulations related to taxes. The decision will likely benefit players, including foreign airlines and shipping lines, as per a source cited in the report. The department of revenue is also considering changes to reduce compliance burdens for affected businesses.  

Moreover, the DGGI would be able to send tax notices only after getting approval from the Central Board of Indirect Taxes and Customs (CBIC). Currently, DGGI has sole authority to investigate tax evasion cases and issue notices regarding the same. 

What is the contention between tax authorities and Infosys?  

The GST tax evasion accusation against Infosys was initiated by the Government of Karnataka. The state government issued a tax demand notice to the tech giant worth Rs 32,000 crore.  

The Rs 32,000 crore tax demand was for the services received by the company from its overseas branches for five years, 2017–2022.  

However, the matter was later transferred to the central tax authority, DGGI. Earlier, in August, the company said in a filing on BSE, “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 crores.”  

The move by the tax authorities met with strong criticism from the tech industry. NASSCOM, a non-profit industry association, said that the GST notice shows lack of understanding of the IT industry by the enforcement authorities.