The GST notice issued to IT major Infosys Limited alleging the company evaded tax of more than Rs 32,403 crore, sparked a strong protest from Nasscom – the trade association of the IT and BPM industry. In a statement issued on Thursday, August 1, Nasscom said that the notice issued by the GST Intelligence division to Infosys reflected a lack of understanding of the IT industry’s operating model.

“It is crucial that compliance obligations are not subject to multiple interpretations. Recent media reports of a GST demand of over Rs 320 billion reflect a lack of understanding of the industry’s operating model. This is an industry-wide issue, and multiple companies are facing avoidable litigation, uncertainty, and concerns from investors and customers,” Nasscom stated. 

Meanwhile, Infosys said that the notice issued to them had been withdrawn and they had been directed to submit a further response to the Director General of GST Intelligence on this matter. 

The notice issued to Infosys stated that the company owed Rs 32,403.46 crore in tax for receiving services from its overseas branches and import of services under the Reverse Charge Mechanism. The tax had been calculated from July 2017 to March 2022. 

Nasscom stated GST enforcement authorities had chosen to ignore there was no import of service by the head office for the overseas branch and had been issuing notices. 

“This is not a new problem and courts have been ruling in favour of the industry in these cases. This issue was even addressed during the erstwhile service tax law, where favourable judgments were delivered by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The Karnataka High Court has stayed a show cause notice in a similar case for a large IT company,” Nasscom said. 

Further a circular had also been issued by the Ministry of Finance stating that for the import of services, the deemed open market value of such transactions will be nil if full input tax credit is available, the trade body said.

Former CFO of Infosys and Board member, Mohandas Pai in a tweet declared that trust in government was being destroyed by tax authorities. Earlier, he had slammed the notice stating it was a case of tax terrorism at its worst. “If this notice is correct this is outrageous, a case of Tax Terrorism at its worst. Service exports from India are not subject to GST. Can officials interpret anything they want?” he tweeted.