Infosys Faces Ongoing Tax Scrutiny: DGGI to Examine Year-by-Year Liabilities Starting with FY19

Infosys is in the midst of a prolonged tax dispute with Indian authorities as the Directorate General of GST Intelligence (DGGI) closely examines the company’s alleged tax liabilities from FY18 to FY22. After issuing a notice claiming ₹32,400 crore in alleged tax dues for this period, the DGGI is now focusing on determining the tax liability for each year individually.

Currently, the DGGI’s main focus is on FY19. Infosys is in the process of submitting its responses, and while the DGGI has until July 2025 to finalize its decision on FY19, a conclusion is expected sooner.

The case centers on whether reimbursements from Infosys’ Indian head office to its overseas branches should be treated as payments for services, making them subject to Integrated GST. Infosys has cited a June 26 circular from the Central Board of Indirect Taxes and Customs (CBIC), which states that services provided by overseas branches to Indian entities are not liable for GST.

Infosys has informed stock exchanges that it responded to a ‘pre-show cause notice’ from the DGGI regarding the period up to March 2022. The company also mentioned that the proceedings for FY18 were closed, as the deadline for action passed on August 5.

So far, Infosys has not been required to pay any taxes related to this case, but it is uncertain if further proceedings for FY18 will occur. The pre-show cause notice for FY18 mentioned a GST liability of ₹3,898 crore.

Legal experts highlight the importance of determining where the services were provided, as services provided outside of India would not be taxable within the country. The GST Council, set to meet in early September, is expected to clarify the taxability of payments made by companies to their overseas branches, which may impact the resolution of Infosys’ tax issues.