The tax department may issue notices to other infotech players as well, news agency Reuters reported citing a government source, amid scrutiny of alleged service tax evasion by their overseas offices, a day after Infosys faced the tax demand.
"This is an industry-wide issue," a senior tax official familiar with the developments told Reuters, implying notices may be sent to other IT companies too.
India's second-largest IT company Infosys was slapped with a tax demand for alleged evasion of over Rs 32,000 crore from the Directorate General of GST Intelligence (DGGI), as per a document seen by Moneycontrol. The document said Infosys was including expenses incurred towards overseas branches as part of their export invoice and computing the eligible refund based on that.
Experts too said more tax notices may be in the offing for the alleged tax evasion on services by the overseas offices of some of the major IT companies.
"Issuing such a substantial show-cause notice is likely to set a precedent, leading to similar notices being issued to other multinational companies, particularly in the IT sector," Rajat Mohan, director at accounting firm MOORE Singhi told Reuters.
Infosys clarified that it has paid all dues and GST is not applicable on expenses claimed by DGGI. "Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter," the company said in a statement.
Former Infosys board member and Chief Financial Officer Mohandas Pai called the Rs 32,000 crore GST demand as 'tax terrorism' at its worst. "This is a business model issue, not a tax evasion issue," he added.
Shares of Infosys have been subdued in trade on August 1, weighed down by the tax demand.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
