Rama Krishna Sangem
IT major Infosys got a big relief on on August 1, Thursday. Karnataka state authorities withdrew the pre-show cause notice issued just a day earlier to information technology bellwether Infosys. Besides the Rs 32,403-crore demand made by the investigation department of goods and services tax (GST) on Wednesday, there was another notice from the Karnataka state authorities.
In a disclosure to stock exchanges late on Thursday, Infosys said the Karnataka authorities had communicated to the company that they were withdrawing the pre-show-cause notice. The state authorities have also directed the IT firm to submit further response on the matter to the central authority — Directorate General of GST Intelligence (DGGI).
However, in another significant turn of things, sources have indicated the tax authorities at the Centre may review the GST notice.
This comes amid industry apprehensions that other IT firms may also face similar GST demands. Fearing a flurry of tax notices, industry association Nasscom, in a statement on Thursday, urged the authorities to look into investor concern over avoidable litigation and uncertainties in doing business.
Case by case approach
“Each matter will be examined on a case-by-case basis, depending on its merit,” an official privy to the matter told a media house on Thursday.
The GST authorities will see if it could be viewed under the June 26 circular, providing clarity on the valuation of the “supply of import of services” by a related person. The circular says for importing services, the deemed open market value of transactions will be nil if full input tax credit is available. However, whether Infosys is eligible under this needs to be examined, the person said.
Secondly, such cases need to be examined to check whether the issue is a result of widespread industry-wide trading practices. Accordingly, it could be treated under the newly introduced Section 11A (of the Central GST Act), which allows the tax authorities to waive dues arising from prevalent industry practices, the official said.
The tax demand on Infosys is a pre-GST notice, served keeping in mind that any assessment for FY17 would be time-barred on August 5. Many other big IT firms are keenly watching the Infosys GST case as it might come to them sooner or later.
