Infosys likely to escape $4bn GST demand after lobbying, industry backlash: Report

India is likely to retract its $4 billion back tax demand on Infosys. The controversial tax notice, issued last month, called for Infosys to pay goods and services tax (GST) on its overseas offices dating back to 2017, sparking an industry-wide outcry.

Behind the potential tax demand U-turn is weeks of intense lobbying by the Bengaluru-headquarterd IT giant and mounting criticism from the software services industry, Reuters cited two government sources with direct knowledge of the situation as saying.

Although a formal decision is still pending, the move to retract the notice would mark a significant win for Infosys, which has been actively lobbying top government officials to seek relief from the tax demand. Sunil Kumar Dhareshwar, Infosys’ executive vice president for finance, recently met with senior bureaucrats to argue that the tax notice was unwarranted.

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The backlash from the tech sector, which argued that the tax demand was unjustified and harmful to India’s business environment, played a significant role in prompting the government to reconsider its position.

The National Association of Software and Service Companies (NASSCOM), an influential industry lobby group, also intervened, urging the government to ensure that such tax notices do not create uncertainty or damage India’s reputation for ease of doing business. NASSCOM emphasized that the demand reflected a fundamental misunderstanding of the software industry’s operating model.

Reuters cited a source within the finance ministry as indicating that while the tax investigation unit followed existing regulations, the broader principle of not taxing services exports has led the ministry to believe the notice was misplaced.

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The GST Council, composed of state finance ministers and chaired by the federal finance minister, is expected to formally address the issue on September 9. The resolution could also affect similar tax notices worth over $1 billion that were sent to ten foreign airlines operating in India, including Etihad and British Airways.