Indian IT outsourcing company Infosys ordered to pay $4 billion in taxes

2024-07-31 18:01:13

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Indian authorities have demanded $3.9 billion in taxes from leading IT outsourcer Infosys, making it one of the latest Indian corporate giants to run afoul of the government’s tax department.

India’s IT sector is showing signs of recovery after a global slowdown in tech spending, and Infosys has confirmed a tax bill of Rs 32,400 crore.

India’s second-largest IT outsourcer on Wednesday said agencies in its home state of Karnataka and the state’s Directorate General of Goods and Services Tax Intelligence have sent it notices to pay GST due between July 2017 and March 2022.

Infosys, based in Bengaluru, the capital of Karnataka state, India’s Silicon Valley, said the tax demand was related to “expenses incurred by overseas branches”.

“The company believes that these charges are not subject to GST as per regulations,” the company said.

Infosys is one of many large Indian and overseas companies that are frequently accused of back taxes by officials in the world’s fastest-growing major economy. Surprise levies and other concerns about tax enforcement have sometimes overshadowed growing international enthusiasm for India as an investment destination.

Foreign and local companies are often locked in lengthy legal battles over India’s opaque and cumbersome tax rules. Vodafone and Cairn Energy have been battling the Indian government for years over high-profile, multi-billion-dollar retroactive tax disputes, ultimately winning.

Last year, Indian authorities slapped notices on the country’s fantasy sports and gaming companies, demanding hundreds of millions of dollars in back taxes.

Infosys cited a recent notification from Indian agencies saying that “services provided by overseas branches to Indian entities are not subject to GST”. The company added that it was “fully compliant” with the regulations and “in fact, its IT service exports are eligible for credit or tax drawback”.

News of the tax demand comes after Infosys and other industry bellwethers including Tata Consultancy Services reported strong quarterly earnings in early July. Those results boosted optimism that sluggish global tech spending is recovering as demand from financial industry clients, a staple of these companies’ business, is recovering.

Tech services are one of India’s global success stories and a key source of white-collar employment in the world’s most populous country as it strives to create jobs for its growing young workforce.

The industry, which is mainly based in Bengaluru, was also spooked by a move this month by the government of Karnataka state, controlled by India’s main opposition Indian National Congress party, to force companies to give up to 70% of jobs to locals.

The state’s chief minister suspended the new rules after a fierce backlash from businesses and industry lobbies in the tech hub, which is also home to major operations of big foreign companies such as Walmart and Goldman Sachs as well as thousands of startups.

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