DGGI closing pre-show cause GST notice proceedings of Rs 3,898 Cr for 2017-18: Infosys

Infosys on Saturday said it had got a communication from the Directorate General of GST Intelligence (DGGI), closing the pre-show cause notice proceedings for 2017-2018 that amounted to Rs 3,898 crore.

Earlier this week, the second largest IT services company of India received a Rs 32,403-crore GST notice from authorities.

In a BSE filing on Saturday evening, Infosys said it had received and responded to a pre-show cause notice issued by DGGI for the period July 2017 to March 2022.

“The company has now received a communication from DGGI closing the pre-show cause notice proceedings for the financial year 2017-2018. The GST amount as per the pre-show cause notice for this period was Rs 3,898 crore,” Infosys said.

DGGI is the apex intelligence and investigative agency for matters relating to violation of the Goods and Services Tax, Central Excise Duty and Service Tax, and has been entrusted with the task of improving compliance with Indirect Tax laws.

Infosys made headlines on Wednesday after GST authorities — Karnataka State GST authorities and DGGI — slapped a Rs 32,403-crore notice on it for services availed by the company from its overseas branches for five years starting 2017.

The company had described the notices as “pre-show cause” and categorically maintained that GST is not applicable to the expenses mentioned.

A day later, Infosys said that Karnataka state authorities had withdrawn the pre-show cause notice to the company and directed it to submit a further response to DGGI central authority on the issue.

The Bengaluru-headquartered IT firm had been served a pre-show cause notice for payment of GST of Rs 32,403 crore for the period July 2017 to March 2022 towards expenses incurred by overseas branch offices of Infosys Limited, and the company had previously said it has responded to the pre-show cause notice.

The company believes that as per regulations, GST is not applicable to such expenses.

“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 had said.

The company had strongly argued that GST payments are eligible for credit or refund against export of IT services.

“Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter,” the company had previously contended.

As per reports, the document sent to Infosys by 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,” it added.