Infosys’ $4 Billion GST Notice Sparks Speculation, Other IT Firms May Also Get Under Scanner: Report

Infosys announced on Wednesday that it had received "pre-show cause" notices from the tax authorities but maintained that it had already settled the relevant taxes

Indian authorities might soon start issuing notices to other major IT services firms as part of an investigation into alleged tax evasion linked to operations conducted by their international offices, according to a Reuters report citing government sources on Thursday. This update comes just a day after Infosys was hit with a record $4 billion tax demand notice from Karnataka State GST authorities.

The government has made its highest-ever tax demand on India's second-largest tech services company, Infosys. The authorities have accused Infosys of evading taxes and are seeking Rs 32,000 crore (approximately $3.8 billion), which represents nearly the entire revenue for the company's quarter ending on June 30.

Infosys announced on Wednesday that it had received "pre-show cause" notices from the tax authorities but maintained that it had already settled the relevant taxes. In its statement, the company affirmed that it had fulfilled its tax obligations and complies with central and state regulations.

“Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter. The company has responded to the pre-show cause notice. Subsequent to the publication of the news articles, the company has also received a pre-show cause notice from the Director General of GST Intelligence on the same matter, and the company is in the process of responding to the same,” the IT giant said in the statement.

“Additionally, as per a recent circular (circular number 210/4/2024 dated June 26, 2024) issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by the overseas branches to the Indian entity are not subject to GST,” it added.

However, tax authorities are extending their investigations beyond Infosys. "This is an industry-wide issue," a senior tax official told Reuters. The official also indicated that similar notices are expected to be issued to other IT companies.