The Directorate General of GST Intelligence (DGGI) has issued a show cause notice to Infosys Ltd over alleged ineligible refund claims amounting to Rs 414.88 crore under the GST framework. The notice pertains to ITC refunds claimed by the company on service exports between 2018-19 and 2023-24.
According to a report, the investigation was triggered by information suggesting that Infosys had included services rendered by its overseas offices and external contractors within its zero-rated export turnover from India, thereby inflating refund claims under Section 54 of the Central GST Act, 2017.
DGGI Questions ITC Refund Claims on Export Services
Infosys, India's second-largest IT exporter, derives nearly 97% of its revenue from exports. During the review period, the company reportedly filed multiple refund applications across different GST registrations, categorising these as zero-rated outward supplies - transactions that attract a 0% GST rate but allow ITC refunds on input costs.
Under Rule 89 of the CGST Rules, 2017, read with Section 20 of the IGST Act, 2017, exporters are eligible for ITC refunds on goods or services used in exports, provided they are genuine zero-rated supplies. However, the DGGI has alleged that Infosys included services not actually exported from India, but delivered by its foreign branches and subcontractors, leading to excessive refund claims.
Disputed Services and Refund Overstatement
The investigation highlights a distinction within Infosys' operational model-tasks executed at Indian development centres are categorised as Offshore, while those performed at client sites abroad are classified as Onsite. According to officials, Infosys allegedly merged services performed by foreign branches and subcontracted entities into its export turnover, despite those activities occurring outside India's taxable jurisdiction.
Such classification, the DGGI contends, resulted in the company overstating its zero-rated turnover and claiming ITC refunds on input costs that were not attributable to Indian exports.
Wider Implications for the IT Sector
This case underscores the growing scrutiny of ITC refund practices in India's technology sector, especially concerning cross-border service structures involving offshore and onsite components. The outcome could influence how major exporters account for services delivered through foreign branches or affiliates under GST.
Infosys has not yet issued an official statement regarding the notice. The DGGI's proceedings are currently in progress and further action will depend on the company's response and subsequent findings.
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