BENGALURU: The Directorate General of
GST Intelligence
(
DGGI
) initiated the first move to blow the peace pipe by closing the pre-show cause proceedings against
Infosys
for the 2017-2018 financial year. This sets the stage for putting a lid on the Rs 32,000 crore
tax controversy
surrounding the IT major, which caused an uproar due to the erroneous understanding displayed by GST authorities.
The move follows the swift intervention of the
finance ministry
to quell the outrage among businesses without denting
business sentiment
, as India Inc rallied behind Infosys as a show of strength against the wrongful interpretation of the law.
“The company has now received a communication from DGGI closing the pre-show cause notice proceedings for the financial year 2017-2018. The GST amount as per the pre-show cause notice for this period was Rs 3,898 crore,” the company said in a stock exchange filing on Saturday. Infosys also said it had received and responded to a pre-show cause notice issued by DGGI for the period July 2017 to March 2022.
DGGI’s actions are an “over-interpretation” of the law, according to tax officers and consultants who believe regulations clearly outline the proper handling of transactions between branches and headquarters. They also highlighted that Central Board of Indirect Taxes and Customs had issued a circular on June 26 to clarify any ambiguities. Nasscom, an industry lobby group, referenced this circular on Thursday when defending Infosys.
A tax expert, asserting that DGGI’s position contradicts the law, explained that although Infosys transferred funds to its 256 branches 56 countries, these did not issue invoices requesting payment for services provided.
