The government is not considering any relaxation in the tax demand issued to Infosys last month, citing a government source news agency Reuters reported on Tuesday. The demand, aligned with Goods and Services Tax (GST) regulations, was met with a request from Infosys for 10 days to respond after consultations with tax officials, the source told Reuters.
The source, who wished to remain anonymous due to the lack of authorisation to speak to the media, confirmed that Infosys shares, which had risen by 1.6 per cent amid a broader market rebound, briefly pared gains to 0.3 per cent following the news. They later stabilised to a 1.2 per cent increase.
The government issued a tax demand of over Rs 32,000 crore ($4 billion) to Infosys, pertaining to services received from its overseas branches between July 2017 and the 2021-22 fiscal year. This figure represents 85 per cent of the company’s revenue for the quarter ended June 30.
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In a notification to stock exchanges on August 3, Infosys announced that the demand for Rs 38,980 crore for the financial year 2017-18 had been resolved. The company reiterated its compliance with all central and state regulations and stated that it had paid all its dues.
Neither finance ministry nor Infosys responded immediately to emailed requests by Reuters for comments.
Former Infosys board member and Chief Financial Officer Mohandas Pai has vehemently criticised the Rs 32,000 crore Goods and Services Tax (GST) demand issued to the software company, calling it the epitome of ‘tax terrorism.’
Pai noted that Indian software service companies have been exporting for over 30 years, contributing to approximately 95 per cent of export revenues. He noted that exports are exempt from GST value-added tax (VAT). “This so-called notice, if true, is a classic case of tax terrorism. It is outrageous,” Pai said.
Meanwhile, Karnataka authorities have revoked the ‘pre-show cause’ notice issued to Infosys and instructed the company to provide a fresh response to the Directorate General of GST Intelligence (DGGI) regarding the Rs 32,400 crore GST demand issue. The DGGI, the main intelligence and investigative agency for GST, Central Excise Duty, and Service Tax, is tasked with ensuring better compliance with indirect tax laws.
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