Infosys Shares Tumble on ₹32,000 Crore GST Notice

1 Aug 2024 , 10:00 AM

Infosys shares fell nearly 1% in early trading on August 1, following reports that the IT giant received a Goods and Services Tax (GST) notice alleging tax evasion amounting to ₹32,000 Crore. The stock was trading at ₹1,850 on the National Stock Exchange (NSE) at 9:16 AM, extending a 0.5% decline from the previous day.

The Directorate General of GST Intelligence (DGGI) has reportedly claimed that Infosys is “liable to pay IGST under reverse charge mechanism on supplies received from branches located outside India,” totalling ₹32,403.46 Crore for the period from July 2017 to 2021-22. The notice covers transactions from the company’s overseas branches to its Indian headquarters.

Infosys responded to the allegations in a stock exchange filing, asserting that the GST does not apply to the expenses identified by the DGGI. The company stated that it has fulfilled all tax obligations and is in full compliance with both central and state regulations. Infosys also clarified that the communication from the DGGI is a pre-show cause notice, meaning no formal demand for payment has yet been made. The company will need to respond to GST authorities to contest the claimed demand.

The timing of the tax notice comes as a setback for Infosys and other major Indian IT firms, which are beginning to show signs of recovery after a period of reduced discretionary tech spending in key international markets. The alleged tax liability amounts to more than a full year’s net profit for Infosys and roughly a quarter of its quarterly revenue.

In the first quarter of the fiscal year 2024-25, Infosys reported a 7.1% year-on-year increase in net profit, reaching ₹6,368 Crore, while revenue rose 3.6% to ₹39,315 Crore. Notably, the company has raised its revenue growth guidance for the fiscal year 2024-25 to 3-4%, surpassing market expectations.