Infosys shares were down almost 1 per cent in morning trade after reports that the Directorate General of GST Intelligence was investigating the company for the alleged evasion of over Rs 32,000 crore.
Earlier yesterday, it was reported that the Directorate General of GST Intelligence has said that Infosys is “liable to pay IGST under reverse charge mechanism on supplies received from branches located outside India to the tune of Rs 32,403.46 crores for the period 2017-18 (July 2017 onwards) to 2021-22.”
Infosys, on its part, said in a stock exchange filing that GST is not applicable on expenses claimed by DGGI, adding that the company has paid all dues and is fully in compliance with the central and state regulations on this matter.
Further, Infosys is also learnt to have clarified that the notice is a pre-show cause notice, and there no demand yet. The company will have to respond to the GST authorities explaining why the demand is not tenable, CNBC TV18 reported citing sources.
The huge tax hits Infosys just as the company, and India’s other major IT firms, are showing signs of recovery following a slowdown in discretionary tech spending in key overseas markets.
For context, the sum demanded amounts to more than a full year’s net profit of the company and about a quarter’s worth of revenue. For the Q1 FY25, Infosys reported its net profit rose 7.1 percent on-year to Rs 6,368 crore, with revenue rising 3.6 percent to Rs 39,315 crore. More encouragingly, the company raised its revenue growth guidance for the financial year 2024-25 to 3-4 percent, beating Street expectations.
Former Infosys board member and Chief Financial Officer Mohandas Pai has slammed the Rs 32,000 crore Goods and Services Act (GST) demand sent to the software firm, dubbing it ‘tax terrorism’ at its worst.
“Finance ministry should immediately intervene. Such tax terrorism impacts investment into India in a big way,” Pai, who is also the Chairman of Aarin Capital, told Moneycontrol in a telephonic conversation.
He further said that Indian software service companies have been exporting for more than 30 years, and generate about 95 percent of export revenues. Adding that exports are exempt under GST value added tax (VAT). “This so called notice, if true, is a classic case of tax terrorism. It is outrageous.”
He alleged that some people in the GST department have let their imagination “run riot” and are bent on harassing exporters, by interpreting the law in any manner they wish.
“This is no way for the GST department to harass taxpayers. This is not the ease of business promised to business by Prime Minister Modi,” Pai said.
He elaborated that it is very clear that some officials are out to disrupt business by making such outrageous demands without “proper application of mind.”
Pai called upon technology industry body Nasscom to immediately intervene on behalf of the industry, and stop further deterioration of business in India.
“Every large MNC (multinational company) operating, every large GCC (Global Capability Centre), and Indian IT service giants would get very upset at the way they are being treated. Such tax terrorism impacts investment into India in a big way,” Paid said.
Infosys share price has gained more than 20 per cent since January this year, outperforming benchmark NSE Nifty 50 index, which has risen about 15 per cent.
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