Former Infosys board member and Chief Financial Officer Mohandas Pai has strongly criticised the Rs 32,000 crore Goods and Services Tax (GST) demand issued to the software company, describing it as the epitome of 'tax terrorism.'
Pai said that Indian software service companies have been exporting for over 30 years and account for approximately 95 per cent of export revenues. He highlighted that exports are exempt from GST value-added tax (VAT). "This so-called notice, if true, is a classic case of tax terrorism. It is outrageous," Pai, who also serves as Chairman of Aarin Capital, told Moneycontrol.
"Finance ministry should immediately intervene. Such tax terrorism impacts investment into India in a big way," he added.
The pre-show cause notice issued by Karnataka State GST authorities demanding the payment of Rs 32,403 crore in GST has caused a major shock, given Infosys’ reputation as one of India's most well-governed companies.
The claim is from the Directorate General of GST Intelligence (DGGI), alleging that Infosys evaded over Rs 32,000 crore in integrated goods and services tax (IGST).
Infosys said in a regulatory filing on Wednesday that it has paid all dues, and the demand notice pertains to expenses incurred by its overseas branch offices from July 2017 to March 2022. “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,” the company statement added.
However, the DGGI has stated that since the company establishes overseas branches to serve clients in accordance with its agreements, both the branches and the company are considered 'distinct persons' under the IGST Act, according to an ET Prime report.