Introduction: A Significant Development for Infosys
In a major relief for Infosys, the Directorate General of GST Intelligence (DGGI) has officially closed the pre-show cause notice proceedings against the company for the financial years 2018-19 to 2021-22. This closure pertains to a staggering ₹32,403 crore GST demand, marking the end of a prolonged tax dispute that had raised concerns within the corporate sector.
Background: The GST Dispute Unfolds
The controversy began when Infosys received a pre-show cause notice from the Karnataka State Goods and Services Tax (GST) authorities, alleging non-payment of Integrated Goods and Services Tax (IGST) under the reverse charge mechanism (RCM) for services availed from its overseas branches between July 2017 and March 2022. The initial notice raised a demand of ₹32,403 crore, a sum that far exceeded Infosys’s annual profits, causing significant apprehension among stakeholders.
Infosys’s Response: Asserting Compliance
Infosys promptly responded to the notice, asserting that it had duly complied with all applicable GST regulations. The company contended that the GST was not applicable to the expenses in question, referencing a recent circular issued by the Central Board of Indirect Taxes and Customs (CBIC) clarifying that services provided by overseas branches to Indian entities are not subject to GST if the domestic entity is eligible for full input tax credit.
Karnataka’s Withdrawal: A Partial Relief
In a subsequent development, Karnataka State authorities withdrew their pre-show cause notice, directing Infosys to submit further responses to the DGGI. This move was seen as a partial relief, as it shifted the focus of the investigation to the central GST authorities.
DGGI’s Closure: The Final Resolution
On June 6, 2025, Infosys received communication from the DGGI confirming the closure of the pre-show cause notice proceedings for the financial years 2018-19 to 2021-22. This decision effectively ended the tax dispute, providing significant relief to the company and restoring investor confidence.
Industry Reactions: Concerns Over Tax Interpretation
The case has sparked discussions within the industry regarding the interpretation of tax laws. Industry body NASSCOM highlighted that the GST demand reflected a lack of understanding of the IT industry’s operating model, emphasizing that similar notices could lead to avoidable litigation and uncertainty for other companies in the sector.
Conclusion: A Positive Outcome for Infosys
The closure of the ₹32,403 crore GST notice proceedings marks a significant victory for Infosys, allowing the company to focus on its core operations without the overhang of a major tax dispute. This development underscores the importance of clear and consistent tax regulations to foster a conducive business environment.
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