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Business EconomyPosted at: Aug 1 2024 11:21PM


Karnataka withdraws pre-show cause notice against Infosys

Bengaluru, Aug 1 (UNI) In a significant development, Karnataka state authorities on Thursday withdrew the pre-show cause notice issued to Infosys, one of India's premier IT firms, just a day after its issuance.
The company has been directed to provide further responses to the Directorate General of Goods and Services Tax Intelligence (DGGI) regarding an alleged tax evasion case amounting to over Rs 32,000 crore.
Infosys is currently entangled in a substantial tax controversy with the DGGI, which has accused the company of failing to pay Integrated Goods and Services Tax (IGST) on services received from its international branches.
The DGGI's claim covers the period from July 2017 to the financial year 2021-22 and amounts to a staggering Rs 32,403.46 crore. The primary issue revolves around the Reverse Charge Mechanism (RCM) as stipulated in the IGST Act of 2017.
According to the DGGI, Infosys should have classified the services provided by its overseas branches as imports into India. Under RCM, the recipient of services in India must pay the applicable IGST on such transactions.
The agency contends that Infosys erroneously included these overseas expenditures in its export invoices, thereby claiming tax refunds that they argue are not justified.
Infosys, however, has categorically denied the allegations. The company asserts that it has complied with all GST obligations and adhered to the relevant tax laws. Infosys contends that the tax demand is unwarranted and maintains that the company's procedures for handling services from its international branches were legally sound. This defense underscores a critical aspect of the dispute: the interpretation and application of the IGST Act in the context of multinational corporations with complex global operations.
The situation has attracted significant attention, including strong reactions from prominent business leaders. Mohandas Pai, a well-known figure in the Indian business community, has openly criticized the DGGI's actions. Pai described the Rs 32,000 crore tax demand as “tax terrorism,” suggesting that such excessive demands represent an abuse of tax authority. He cautioned that such actions could damage the business environment by creating a climate of uncertainty and fear among corporations.
As the dispute unfolds, Infosys remains steadfast in its defense of tax compliance, while the DGGI persists in its substantial tax claim. The ongoing developments will be closely monitored by stakeholders across various sectors, given the potential ramifications for India's corporate taxation framework. UNI BDN SSP
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Tags: #Karnataka withdraws pre-show cause notice against Infosys
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