Mint Quick Edit | Infosys GST bill defies logic

Taxation should never be like reading tea leaves. But the storm in a teacup over a goods and services tax (GST) demand of about ₹32,400 crore made of Infosys (now being relooked) suggests a system full of riddles. As reported, services were availed by Infosys from its overseas branches. 

By one interpretation of India’s GST rules, this would have required “reverse charge” tax payments on these imports by the company. Hence the tax bill. However, the services Infosys bought went into its software exports, which are tax-free and thus eligible for input tax credits. 

Also read: Infosys says DGGI withdraws tax demand of ₹3,898 crore for FY18

So, if the company could anyway claim the tax back, why should it apply in the first place? A reverse charge mechanism does exist under GST. But its applicability in this case is unclear. On its part, Infosys has denied any evasion, arguing that GST simply isn’t applicable on stuff bought from its own foreign units. 

The case is being examined by the Directorate General of GST Intelligence. Should some quirk or technicality mean it still owes money, then it’s the rules that would need sorting out. Such tax riddles create uncertainty for businesses. It would be best if tax authorities clarify what exactly the law says.