Infosys Receives Partial Relief from DGGI for Rs 3,898 Cr FY18 GST Tax Case
The Directorate General of Goods and Services Tax Intelligence (DGGI) has provided partial relief to IT services giant Infosys by concluding the tax proceedings for the financial year 2017-18 (FY18), as confirmed by the company in its recent communication to the exchanges. The GST liability for this period amounted to Rs 3,898 crore. This development comes in the wake of the withdrawal of a substantial Rs 32,000 crore GST notice issued to Infosys by the Karnataka state GST authority.
While this marks a significant reprieve for Infosys, the status of notices pertaining to the subsequent financial years (2018-19, 2019-20, 2020-21, 2021-22) remains unclear, raising uncertainties for the IT major.
Of particular note is the impending time-bar on the GST demand raised for FY18, set to take effect on August 5. This matter revolves around alleged non-payment of integrated GST (IGST) on services received from overseas branches under the reverse charge mechanism (RCM). Infosys has been under scrutiny for purportedly failing to remit IGST for services obtained from its foreign affiliate. The company had promptly responded to a pre-show cause notice issued by DGGI covering the period from July 2017 to March 2022, and it has now received communication from DGGI indicating the closure of the pre-show cause notice proceedings for the financial year 2017-2018.
In response, Infosys stated, “The GST amount as per the pre-show cause notice for this period was Rs 3,898 crore.”
According to sources, the Central Board of Indirect Taxes and Customs (CBIC) is currently reviewing the matter in light of the June 26 circular. The circular specifies that for the import of services, the deemed open market value of such transactions will be deemed NIL if full input tax credit is available. However, the eligibility of Infosys for this review is yet to be determined.
The conclusion of tax proceedings for FY18 signifies a pivotal development in the ongoing scrutiny faced by Infosys, although the lingering uncertainty surrounding subsequent financial years persists. As the matter continues to unfold, all eyes are on the review being conducted by the CBIC to shed further light on this intricate issue.
This article is based on the information available as of the time of writing and is subject to updates or developments.
