Infosys GST Case: ₹32,403 Crore Dispute Partially Closed as Karnataka, DGGI Drop FY18 Demand
Karnataka withdraws notice; DGGI drops FY18 demand in Infosys' ₹32,403 crore GST case, but ₹28,505 crore still under review.

Bengaluru, June 6: In a major development for India’s tech sector, Infosys Ltd. confirmed that a significant portion of the ₹32,403 crore Goods and Services Tax (GST) case against the company has been closed. The development comes after the Karnataka GST authorities withdrew their pre-show cause notice, and the Directorate General of GST Intelligence (DGGI) concluded proceedings related to the financial year 2017-18. This partial closure, however, does not yet signal a complete resolution, as GST demands for the subsequent four financial years continue to be under scrutiny.
Karnataka Withdraws Notice, FY18 Demand Shelved
According to official disclosures by Infosys, the company had received a pre-show cause notice alleging non-payment of Integrated GST (IGST) under the reverse charge mechanism. The claim revolved around services procured by Infosys from its own overseas branches between July 2017 and March 2022, which the authorities alleged were taxable under GST laws.
The Karnataka state authorities have now withdrawn this notice, acknowledging Infosys’ stance that no GST is applicable on such intra-entity cross-border services. The DGGI, which had been examining the same matter, has also dropped proceedings related to FY18, which involved a GST demand of ₹3,898 crore.
Infosys welcomed the development but maintained that its interpretation of the law remains consistent with the clarification issued by the Central Board of Indirect Taxes and Customs (CBIC) in June 2024. That circular had clearly stated that services rendered by overseas branches of an Indian company to the parent unit in India do not attract GST, provided full input tax credit is available.
Remaining GST Demand Of ₹28,505 Crore Still Under Review
Despite the closure of the FY18 case, a substantial demand amounting to ₹28,505 crore remains unresolved. This pertains to the fiscal years 2018-19 to 2021-22, during which similar transactions were carried out by Infosys involving its overseas offices.
The company has clarified that it continues to engage with the DGGI and other relevant authorities to address the outstanding issues. While no new demand notices have been issued yet, the matter is under review and could evolve based on further interpretation or investigation.
Infosys, in its statement to the stock exchanges, reiterated that it believes the GST demand is not tenable, citing the established position supported by CBIC’s clarification.
Industry Bodies Raise Alarm Over Sector-Wide Implications
The case has drawn significant attention from industry groups. Nasscom, the premier trade body representing India’s technology industry, voiced concerns that such tax interpretations could potentially harm the sector’s global competitiveness. According to Nasscom, the move reflects “a lack of understanding” of how IT companies with global operations function. They warned that taxing internal cross-border services under GST could lead to double taxation and discourage overseas expansion.
Industry watchers also noted that the magnitude of the demand—₹32,403 crore—is more than the annual profit of Infosys, underscoring how serious and unusual this tax demand was in scale. While the FY18 closure provides some relief, the ongoing proceedings for later years continue to pose financial uncertainty.
Regulatory Clarity Vital For Stability In Cross-Border Services
The issue has reignited a long-standing debate around the treatment of internal branch services under Indian tax laws. According to tax experts, the key question revolves around whether a company’s overseas branch can be considered a separate entity for taxation purposes. The CBIC’s June 2024 circular, which Infosys has heavily relied on, stated that these services are not liable to GST under the reverse charge mechanism.
Legal professionals familiar with indirect taxation believe that unless there is willful evasion or misreporting, such internal transactions should not attract tax, especially when there is no revenue leakage and full credit is available on the Indian side. The Infosys case could therefore serve as a litmus test for similar disputes in the IT and consulting sectors.
Financial Market Response Muted But Watchful
Market response to the announcement has been relatively muted, with Infosys’ stock trading flat post the disclosure. However, analysts note that a full closure of the case would have been viewed more positively by investors. The uncertainty surrounding the ₹28,505 crore balance continues to weigh on sentiment.
Brokerages tracking Infosys are expected to revise their risk models depending on how the remaining demands are handled. For now, the company’s balance sheet remains strong enough to absorb the potential liabilities, but stakeholders will be closely monitoring any further notices or tax proceedings.
Relief, But Not Closure Yet
For Infosys, the closure of the ₹3,898 crore demand for FY18 is a crucial win in what could have been a long and financially draining legal battle. It also reinforces the importance of regulatory clarity in high-stakes tax matters. However, with over ₹28,000 crore still in question, the matter is far from over.
As India’s digital economy expands and companies continue to scale globally, the need for consistent, sector-sensitive tax interpretation becomes even more critical. The Infosys GST episode has already triggered that conversation—and its final outcome may well define how India regulates service exports for years to come.
Source: Infosys, DGGI, CBIC, Nasscom
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Arpit Thakur is a Reporting Fellow at Hindustan Herald, dedicated to covering the dynamic world of business and finance. A student at Amity University, Noida, Arpit leverages his academic insights to provide daily, well-researched analyses of market trends, corporate developments, and economic policies. He is committed to delivering clear and impactful financial news to our readers.