The Directorate General of GST Intelligence has held Bengaluru-based Infosys Limited responsible for GST tax evasion to the tune of a staggering Rs 32,403.46 crore. A report issued on July 30, 2024, by the Directorate General office in Bengaluru said that intelligence gathered by its officers pointed out that the company had received services from its overseas branches and had not paid the Integrated Goods and Service Tax (IGST) under the Revenue Charge Mechanism (RCM) on import of services. The tax has been calculated for the period 2017-18 (July 2017 onwards) to 2021-22. Two notices have been sent to Infosys Limited on the same.

The report said that Infosys opened branches outside India once they were awarded projects to comply with local laws. It said that all the sales and marketing offices were located in the branches and formed an integral part of the branches in addition to the delivery teams. The overseas branches were engaged in the implementation of the projects being executed by Infosys and ensured the efficient running of the company’s businesses, better delivery of the company’s services, better coordination between customers and managing the company employees working on on-site projects, among other things.

According to the report, section 8 of the IGST Act, 2017 designates branch offices as an establishment in such foreign countries. “Hence the company and overseas branches would be treated as distinct persons,” the note said.

“Further, the company was including the expenses incurred towards overseas branches as part of their export invoice from India and computing the eligible refund. The receipt of export proceeds and export invoices related to the project was being raised by the company. In the instant case, all the expenses incurred by the overseas branches are met by the company. Overseas branches have supplied the said services to the company and the same shall be treated as import of services by the company as per section 2(11) of IGST Act, 2017,” the note stated.

“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 32403.46 crore for the period 2017-18 (July 2017 onwards) to 2021-22. Further investigation is under progress,” the note forwarded to the Principal Director General of GST Intelligence said.

In its response, Infosys said they have paid all GST dues and are fully in compliance with the central and state regulations on this matter. "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," the statement read.

In September 2023, Infosys said it had received a demand for collection of GST with interest and penalty totalling Rs 37.75 lakh.

Incidentally, Infosys bagged the order to design the website for GST in 2015 to build and maintain the GST technology network for five years for Rs 1,380 crore. They also built the Income Tax site for e-filing in 2021, in addition to the website for the Ministry for Corporate Affairs to access company records. Numerous complaints have been expressed about the income tax portal, which has been facing repeated glitches.