Infosys, India’s second-largest software exporter, is at the center of a major tax dispute following a notice for alleged GST evasion amounting to Rs 32,400 crore ($4 billion) over five years. This sum is equivalent to the company’s annual operating profit.
Infosys has asserted that it has complied with all legal tax obligations and is not liable for the alleged amount. Despite this, the company’s shares have declined by 2.5% in response to the news. The Bengaluru-based firm released a statement on Thursday evening indicating that the initial pre-show-cause notice from the state authority had been withdrawn and that it had been directed to respond to the GST intelligence directorate in New Delhi. By Saturday, Infosys confirmed that the notice for the financial year ending March 2018, which represented 12% of the total demand, was now “closed.”
The tax authorities’ claim is based on the assertion that Infosys should have paid GST on services imported from its overseas branches, which are involved in soliciting business and coordinating outsourcing projects with the main office in India. The company is accused of not paying GST on these services, which allegedly complicates the tax structure.
This controversy is particularly notable given Infosys’s role in developing the software for India’s GST system—a project valued at $200 million, intended to streamline tax collection. The GST, which was introduced as a significant fiscal reform, has faced criticism for its complexity, with multiple tax rates and separate taxes for petroleum and alcohol. Infosys has been criticized for technical issues with the GST and income tax portals, adding to the current scrutiny.
Political implications of the tax dispute are significant. The ruling party has recently lost its parliamentary majority, and demands similar to Infosys’s tax notice could potentially affect other IT service firms, raising concerns among industry leaders. The issue highlights ongoing debates about the GST’s effectiveness and its impact on India’s business environment.
The broader context of this dispute reflects a challenging period for both Infosys and the Indian tax system, raising questions about the future of the GST code and its implications for businesses operating in India.
I’m a finance writer with three years of experience in investment analysis. At Investorwelcome , I translate complex financial concepts into clear, actionable insights to help investors navigate the market with confidence. Combining my solid academic background with practical industry knowledge, I’m dedicated to providing readers with accurate and timely information. My goal is to empower both new and seasoned investors by simplifying intricate data and offering strategic advice. When I’m not writing, I stay engaged with market trends and investment innovations to ensure my content remains relevant and valuable.
