Infosys issued over Rs 3 crore tax penalty notice

The Deputy Commissioner of Commercial Taxes in Bengaluru has issued Infosys Ltd. a penalty notice. The penalty to Infosys amounts to over Rs 3 crore. This penalty is related to alleged discrepancies in tax payments and the excessive availing of Input Tax Credit for the financial year 2019-20. Infosys highlighted that this penalty will have no material impact on its financials, operations, or other activities.

The IT company has informed all its stakeholders that the penalty imposed by the Deputy Commissioner of Commercial Taxes would have no significant impact on its overall performance and operations. The regulatory filing has also stated that the company would publish this information on its official website.  

This current action comes after the Directorate General of Goods and Services Tax Intelligence conducted a deeper investigation into Infosys' alleged Integrated Goods and Services Tax evasion.

Prior to this, Infosys was flagged for alleged IGST evasion amounting to Rs.32,403 crore in July 2024 by the DGGI. The evasion was related to services received from its overseas branches. After the current discussions, Karnataka's GST department dropped the company's pre-show cause notice as the DGGI investigation remain continued.      

Infosys has recently confirmed that the company had received communication from the DGGI, closing the pre-show cause notice proceedings for the financial year 2017-2018. This pre-show cause notice proceedings involved a GST amount of Rs 3,898 crore.

The DGGI's initial inquiry focused on Infosys for allegedly adding expenses from its overseas offices to its export bills from India. This has impacted the computation of eligible reimbursements. This has resulted in raised concerns regarding Infosys’ liability to pay IGST under the reverse charge mechanism.

The National Association of Software and Service Companies (Nasscom) has expressed support for the issue, underscoring the importance of regular implementation of government circulars on clarifying the tax classification of transactions that are done between foreign branches and Indian headquarters. Nasscom has also stressed that proper implementation of these guidelines by the body would ensure that organisations like Infosys are not unfairly penalised.