The Central Board of Indirect Taxes and Customs (CBIC) is considering amending its June 26, 2024, circular to quash Goods and Services Tax (GST) liabilities for Infosys and similar companies facing tax demands on fund transfers to their overseas branches. According to an official source, this modification could pave the way for Infosys to be relieved of tax notices exceeding Rs 30,000 crore, issued for transactions made between 2017-18 and 2021-22 under the reverse charge mechanism (RCM).
At present with reference to the June circular, the group companies gets freedom to treat the transaction value for the imported services as ‘nil’ subject to full ITC. However, this relief does not extend to services relating to ‘exempt’ supplies. Other ITCs are restricted with potential tax claims for consideration or open market value.
As per the new provisions, the entities will be allowed a full ITC credit on the transactions even if the inputs are used for making zero-rated or exempt supplies or services. This would of course have the result of wiping out the taxes associated with such transactions altogether. Infosys has submitted documents relating to transactions for 2017-18 which led to withdrawal of a Rs 3,989-crore notice. The firm is now working on the submissions for the subsequent years (2018-19 to 2021-22) online and the last date for submission is November 30, 2024.
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