Infosys Faces Over Rs 3 Crore Tax Penalty Amid Alleged Discrepancies

This development comes after a broader investigation by the Directorate General of Goods and Services Tax Intelligence into allegations of Integrated Goods and Services Tax evasion by Infosys

Infosys has said that it has received a penalty notice of over Rs 3 crores from the Deputy Commissioner of Commercial Taxes in Bengaluru. The penalty pertains to alleged discrepancies in tax payments and the excessive use of Input Tax Credit for the financial year 2019-20.

In a statement released on Saturday, Infosys stated that this penalty will not materially impact its financials, operations, or other activities. The company assured stakeholders that the penalty does not significantly affect its overall performance or operations. Additionally, Infosys indicated that this information will be available on its official website.

This development comes after a broader investigation by the Directorate General of Goods and Services Tax Intelligence into allegations of Integrated Goods and Services Tax evasion by Infosys.

In July 2024, the Directorate General of Goods and Services Tax Intelligence (DGGI) initially flagged Infosys for alleged evasion of Integrated Goods and Services Tax (IGST) amounting to Rs. 32,403 crore, related to services received from its overseas branches. However, after ongoing discussions, the Karnataka GST department withdrew the pre-show cause notice while the DGGI's investigation continued.

Recently, Infosys confirmed that the DGGI had communicated the closure of the pre-show cause notice proceedings for the financial year 2017-2018, which involved a GST amount of Rs. 3,898 crore.

The DGGI's investigation had originally focused on allegations that Infosys included expenses from its overseas branches in its export invoices from India. This could potentially impact the calculation of eligible refunds and raise concerns about the company's liability to pay IGST under the reverse charge mechanism.

The situation drew support from the National Association of Software and Service Companies (Nasscom), which stressed the importance of consistent enforcement of government circulars that clarify the tax treatment of transactions between overseas branches and their Indian headquarters. Nasscom underscored that proper adherence to these guidelines is crucial to prevent companies like Infosys from being unfairly penalised.