IT giant Infosys Ltd. has announced that the Directorate General of Goods and Services Tax Intelligence (DGTS) has closed the pre-emptive demand process for the financial year 2018. The GST amount for the period stood at Rs 3,898 crore.
On July 31, Infosys came under the radar of the DGGI for alleged Integrated Goods and Services Tax fraud of Rs 32,403 crore after an investigation by the officers of the DGGI, Bangalore Zonal Unit. Following this, the Karnataka GST department withdrew the preliminary notice issued to the company, while the DGGI investigation continued.
The company said in an exchange filing: « The company has received and responded to a preliminary demand notice issued by DGGI for the period July 2017 to March 2022. The company has now received a communication from DGGI closing the preliminary demand notice process for the financial year 2017-18. The GST amount as per the preliminary demand notice for this period was Rs 3,898 crore. »
The tax department said Infosys is liable to pay IGST under the reverse billing mechanism for services it receives from its branches outside India. As per the IGST Act, 2017, branches abroad are considered separate establishments and the services provided by them are considered imports as per the IGST Act.
The DGGI notice had also noted that Infosys included the expenses incurred on overseas branches as part of its export invoice from India and based on the said export values, it calculated the eligible reimbursement.
Following the development, the National Association of Software and IT Services Companies (NASSCOM) backed Infosys by pointing out that there is already a government circular which states that the market value of transactions is nil for import of services, provided input tax credit is available. The body also said that there is a need for the law enforcement authorities to implement the government circular properly.
