Infosys Infosys shares drop 1% after IT major slapped with Rs 32,403 crore GST notice for overseas expenses
Bengaluru/IBNS: Shares of Indian multinational information technology company Infosys dropped 1 percent to the day's low of Rs 1,845.40 on BSE on Thursday (Aug 1) after the IT major was slapped with a RS 32,403 crore Goods and Services Tax (GST) notice by the Directorate General of GST Intelligence over overseas expenses, reports said.
However, the Bengaluru-headquartered IT firm has provided clarification on the matter via a filing to the exchanges, calling the GTS notice a 'pre-show cause' notice and saying it believes the GST is not applicable on these expenses.
Infosys said Karnataka State GST authorities have issued a pre-show cause notice to the company 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.
The IT major added that it has responded to the pre-show cause notice.
"...the Company has also received a pre-show cause notice from Director General of GST Intelligence on the same matter and the Company is in the process of responding to the same," the filing by Infosys read.
"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 in its filing.
Arguing that GST payments are eligible for credit or refund against export of IT services, the firm said, "Infosys has paid all its GST dues and is fully in compliance with the Central and State regulations on this matter."
The document sent to Infosys by the Karnataka GST authorities says: "In lieu of receipt of supplies from overseas branch offices, the Company has paid consideration to the branch offices in the form of overseas branch expense."
"Hence, M/s Infosys Ltd, Bengaluru 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," the GST notice read.
The Directorate General of GST Intelligence in Bengaluru believes that the IT major did not pay the Integrated-GST (IGST) on the import of services as a recipient of services, and it also alleges that Infosys set up branch offices outside India and included the expenses it incurred towards these as part of its export invoice, according to reports.
However, the GST authority's demand of Rs 32,403 crore is more than a year's profit for Infosys as the company's June quarter net profit rose 7.1 percent year-on-year to Rs 6,368 crore, and revenue from operations stood at Rs 39,315 crore, a rise of 3.6 percent from a year ago.
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