Tech Giant to Respond to Central Tax Authorities on Service Tax Notice
In a major development in the ongoing Goods and Service tax controversy, software major Infosys has confirmed that the state tax authority of Karnataka has withdrawn the pre-show cause notice issued to the company. However, Infosys will still need to present its case to the central investigating wing of the GST department.
In a regulatory filing on Thursday, Infosys stated that it had received communication from Karnataka state tax officers retracting the preliminary tax document. The company will now focus on responding to the Directorate General of GST Intelligence (DGGI), which is the federal authority dealing with GST, central excise and service tax matters.
It is pertinent to note that both the state and central tax departments had sent notices to Infosys regarding the same issue relating to services availed by the firm from its overseas branches over a five year period starting 2017. The notices pertained to an enormous GST amount of over 32 thousand crores.
While Infosys has termed the DGGI notice as a “pre-show cause” notice and believes the tax is not applicable on the concerned expenses considering they relate to software exports, the tax department had cited the reverse charge mechanism under which the recipient is liable to pay taxes instead of the service provider.
Industry observers will be keenly watching future developments in this high-profile tax dispute involving one of the largest technology firms in the country. The outcome could have repercussions on tax liabilities of other multinational companies with similar global business structures.
