Infosys has firmly refuted allegations of GST payment evasion, asserting that it has met all its GST obligations and remains "fully compliant" with both central and state regulations.


In a regulatory statement to the stock exchanges, Infosys emphasized that GST payments are eligible for credit or refund concerning the export of IT services, not for expenses incurred by the company's overseas branch offices.


The Karnataka State GST authorities have issued a pre-show cause notice demanding payment of Rs. 32,403 crores in GST for the period from July 2017 to March 2022, related to expenses of Infosys Limited’s overseas branches.


Infosys, a publicly traded company, saw its shares dip slightly by 0.56 percent on the Nifty this morning.


Citing a recent government circular, Infosys stated, “The company believes that, according to regulations, GST does not apply to these expenses. Furthermore, as per Circular number 210/4/2024 dated June 26, 2024, issued by the Central Board of Indirect Taxes (CBDT) and Customs on the GST Council’s recommendations, services provided by overseas branches to Indian entities are exempt from GST.”


Infosys has responded to the pre-show cause notice. Following media reports on this matter, the company also received a pre-show cause notice from the Director General of GST Intelligence and is preparing a response, according to its communication to the stock exchanges.


The notice from the Director General of GST Intelligence (DGGI) Bangalore Unit claimed that Infosys was obligated to pay GST under the Reserve Charge Mechanism, which mandates the service recipient to pay the tax.


Most IT firms, including Infosys, have established overseas branches to comply with local legal requirements while undertaking international projects.