Infosys $4 Billion Dollars Tax Request Likely to Be Withdrawn After Backlash: Report

GST Council likely to take formal decision on September 9 (Representative)

New Delhi:

India is likely to withdraw its demand for $4 billion in back taxes from Infosys after weeks of lobbying by the IT giant and a wave of criticism from the software services industry, two government sources with direct knowledge of the plan said.

Authorities last month ordered Infosys to pay an additional amount, saying its overseas units should have paid goods and services tax (GST) dating back to 2017.

The Indian tax investigation unit followed the applicable rules and sent a notice to Infosys, but the federal finance ministry now believes that the notice is against India’s broader tax policy of non-taxation of exports of services, one of the sources said.

The sources declined to be identified because a formal decision has not yet been made. India’s finance ministry and Infosys did not respond to Reuters requests for comment.

Tax notices worth over $1 billion issued to 10 foreign airlines operating in India, including Etihad and British Airways, are likely to become redundant as the problem is similar, the source said.

The GST Council, comprising state finance ministers headed by the federal finance minister, is likely to take a formal decision on September 9, the second source said.

Former Infosys board member and CFO Mohandas Pai called the tax notice “scandalous” and “a case of tax terrorism at its worst”.

Last week, Infosys Vice President of Finance Sunil Kumar Dhareshwar met top officials to seek help, arguing that the tax demand was unjustified, according to a third government source.

The National Association of Software and Service Companies, an industry lobbying group, has appealed for government intervention to ensure that “the notifications do not create uncertainty and negatively impact the perception of the ease of doing business in India.”

It also said such tax demands reflected a “lack of understanding of the industry’s operating model.”

Earlier this month, the Indian government directed tax officials to seek guidance from the administration before initiating cases regarding common industry practices to maintain “ease of doing business” and avoid litigation.

Other recent key decisions that Prime Minister Narendra Modi’s government has backtracked on amid criticism include a new property tax, which has since been relaxed, and a move to recruit private experts for senior government jobs because the job advertisements did not include an affirmative action category for lower castes.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)