'GST Notice Shows Lack of Understanding...', Infosys Gets Industry Support, Nasscom Bats For IT Firm

Apex IT association Nasscom on Thursday came out in support of Infosys — which is facing a Rs 32,403 crore GST notice, saying that the move reflected a lack of understanding of the industry’s operating model.

Flagging the issue of the applicability of GST through the reverse charge mechanism (RCM), Nasscom rued that multiple companies are facing avoidable litigation, uncertainty, and concerns from investors and customers.

GST authorities have slapped a Rs 32,403 crore notice on Infosys for services availed by the company from its overseas branches for five years starting in 2017.

“Recent media reports of a GST demand of over Rs 320 billion (Rs 32,403 crore) reflects a lack of understanding of the industry’s operating model,” Nasscom said in a statement, without naming Infosys.

The leading industry body asserted that it is crucial that compliance obligations are not subject to multiple interpretations.

Accelerating services exports is key to India’s ambition of ‘Viksit Bharat’ and for attracting global tech investment to India, it added.

“This requires a supportive policy environment and ease of doing business. The 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,” it said.

What Infosys Said?

Infosys has called the notice a ’pre-show cause’ notice and said that it believes the GST is not applicable to these expenses.

The Bengaluru-headquartered IT firm on Wednesday said Karnataka State GST authorities have 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 pre-show cause notice.

“…the Company has also received a pre-show cause notice from the Director General of GST Intelligence on the same matter and the Company is in the process of responding to the same,” the filing had said.

The company contended that as per regulations, GST is not applicable to 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 said.

Infosys argued that GST payments are eligible for credit or refund against the 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 said.

The demand – at a staggering Rs 32,403 crore – is more than a year’s profit for Infosys.

For the June quarter, Infosys’ net profit rose 7.1 per cent year-on-year to Rs 6,368 crore, and revenue from operations stood at Rs 39,315 crore, an increase of 3.6 per cent from a year ago.

(With PTI inputs)