Government may withdraw $4 billion GST demand from Infosys
The Indian government is considering withdrawing its $4 billion back tax demand from IT behemoth Infosys, according to two government insiders (via Reuters). The decision comes after weeks of intense lobbying by Infosys and widespread criticism from the software services sector. Last month, authorities demanded that Infosys pay this additional sum, arguing that its foreign offices should be liable for Goods and Services Tax (GST) retroactively from 2017.
Tax notice contradicts India's broader tax principle
The tax notice issued to Infosys was in line with existing regulations, but the Finance Ministry now believes it contradicts India's broader tax principle of not taxing services exports. The potential withdrawal of the tax notice could also impact other companies. Tax notices amounting to over $1 billion, issued to 10 foreign airlines operating in India, may become void due to a similar issue. The GST Council is expected to make a formal decision on September 9.
Industry reactions to the tax notice
The tax notice has been met with strong criticism from industry figures. Former Infosys board member and CFO Mohandas Pai labeled it as "outrageous" and "a case of tax terrorism at its worst." Sunil Kumar Dhareshwar, Infosys's Executive VP for Finance, met with senior bureaucrats last week to argue against the tax demand. NASSCOM has also called for government intervention to prevent such notices from creating uncertainty and negatively impacting perceptions about India's ease of doing business environment.
