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In a significant development for one of India’s largest IT firms, Infosys has confirmed that the Directorate General of GST Intelligence (DGGI) has formally closed a Goods and Services Tax (GST) demand case involving ₹32,403 crore (approx. USD 3.9 billion). This ends a long-standing inquiry on reverse-charge obligations for cross-border service transactions between 2017 and 2022.
The Core of the Dispute
The case centered on GST liabilities under the reverse charge mechanism (RCM), a compliance framework where the tax liability shifts from the service provider to the recipient, particularly about services availed by Infosys from its overseas branches. The DGGI had issued pre-show cause notices questioning the company’s treatment of these inter-branch transactions.
Infosys’ Response and Compliance
Infosys stated that it had responded to the notices and maintained that it fully complied with Indian GST regulations. The company also emphasized that the transactions in question were internal cost allocations between legal entities of the same corporation, not third-party services.
In a disclosure to the stock exchanges, Infosys confirmed that the authorities had reviewed their submissions and decided not to pursue the demand further.
Why This Matters
The closure of this case has broader implications for Indian multinationals:
- Clarification on cross-border inter-branch services under GST
- Precedent-setting for other firms facing similar scrutiny
- Investor sentiment boost for Infosys amid global compliance concerns
For the Indian tax ecosystem, it highlights both the complexity of reverse-charge tax obligations and the evolving understanding of how they apply to global service firms with integrated operating models.
Industry Reactions
Tax experts note that this case may spur further guidance from the Central Board of Indirect Taxes and Customs (CBIC) on how reverse charge applies to cross-border intra-company service flows, which has been a grey area under Indian GST since its implementation.
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