Infosys under GST investigation for alleged ₹32,000 crore tax evasion

Infosys, India's second-largest IT services company, is currently under investigation by Karnataka's Goods and Services Tax (GST) authorities for allegedly evading more than ₹32,000 crore in Integrated Goods and Services Tax (IGST). The Directorate General of GST Intelligence (DGGI) has raised concerns about services the company availed from its overseas branches over a five-year period, from July 2017 to March 2022.

According to the DGGI, Infosys established branch offices abroad to service clients under specific agreements. These branches and the main company are treated as "distinct persons" under the IGST Act, which implies that Infosys should have paid IGST on the services it received from these overseas branches under the reverse charge mechanism.

The Karnataka GST authorities issued a pre-show cause notice to Infosys demanding payment of ₹32,403 crore for expenses incurred by its overseas branches during this period. The company responded, stating that GST should not apply to these expenses according to current regulations. Infosys also highlighted a recent circular (Circular No. 210/4/2024, dated June 26, 2024) from the Central Board of Indirect Taxes and Customs, which suggests that services provided by overseas branches to Indian entities are exempt from GST.

Infosys reassured that it has paid all its GST dues and is fully compliant with both central and state regulations. The company emphasized that GST payments are eligible for credit or refund against the export of IT services.

This development follows a strong first quarter for Infosys in FY25, where it reported a 7.1% year-on-year increase in consolidated profit after tax, reaching ₹6,368 crore. Despite this, the company's stock closed 0.48% lower on the BSE at ₹1,868.05 per share.