Infosys has recently been embroiled in a controversy over a Goods and Services Tax (GST) notice alleging tax evasion to the tune of Rs 32,403 crore. The notice, issued by the Karnataka State GST authorities, has been disputed by the company, leading to a slight dip in its share prices. The company's shares, which opened at Rs 1,850, were trading between 0.5-1 per cent lower following the news. Despite this, the company's shares have seen a significant increase of over 20 per cent since the beginning of the year.
The GST notice is based on the claim that Infosys is liable to pay Integrated GST (IGST) under the reverse charge mechanism on supplies received from branches located outside India. The alleged evasion amount pertains to the period from July 2017 to March 2022. However, Infosys has refuted these allegations in a stock exchange filing, stating that as per regulations, GST is not applicable on these expenses. The company further cited a recent circular issued by the Central Board of Indirect Taxes and Customs (CBIC), which states that services provided by overseas branches to Indian entities are not subject to GST. Infosys has maintained that it has paid all its GST dues and is fully compliant with central and state regulations on this matter.
This development has sparked concerns that other major IT companies may also receive similar notices. Tax authorities are reportedly scrutinizing alleged tax evasion on services by overseas offices of these firms. This could potentially lead to a wider investigation into the IT sector's tax practices, particularly those related to overseas operations. The controversy has elicited reactions from various quarters. Mohandas Pai, the company's former CEO, termed the incident as an instance of 'Tax Terrorism'. He expressed outrage over the notice, highlighting the potential implications for the IT sector and the business environment in general.
Infosys has a history of robust financial performance and has consistently reported better-than-expected quarterly results. Analysts have suggested a 'Buy' on the stock, citing strong recovery and an attractive dividend yield of over 3 per cent. The company's resilience in the face of this controversy will be a key factor in maintaining investor confidence.
The current situation brings to mind similar instances in the past where major corporations have faced tax evasion allegations. These cases often involve complex legal and regulatory issues, and can have significant implications for the companies involved. It is crucial for companies to ensure full compliance with tax laws and regulations, and to respond promptly and transparently to any allegations or inquiries.
The GST notice issued to Infosys has stirred up a significant controversy. The company's response and the subsequent market reaction highlight the complexities of tax compliance for multinational corporations. As the situation unfolds, it will be interesting to see how Infosys navigates this challenge, and what implications it may have for the broader IT sector. The company's stance on the issue, backed by its strong financial performance and investor confidence, will likely play a crucial role in shaping the outcome of this controversy.
