Nasscom on Thursday defended Infosys, which is facing a ₹32,000-crore GST notice, saying the move reflected a lack of understanding of the industry’s operating model.
“Recent media reports of a GST demand of over ₹ 320 billion reflected a lack of understanding of the industry’s operating model,” the apex body said, without naming Infosys.
“This is an industry-wide issue, and multiple companies are facing avoidable litigation, uncertainty, concerns from investors and customers,” Nasscom said in a statement.
According to Nassom, the issue at hand involves the applicability of GST through the reverse charge mechanism (RCM). The GST enforcement authorities have been issuing notices for remittance by the Indian head office to its foreign branches for cases where there is no service between the head office and the foreign branch for this RCM, ignoring that this is not a case of ‘import of service’ by the head office from the branch.
Nasscom further said this was not a new problem and courts had been ruling in favour of the industry in such cases. This issue was even addressed during the erstwhile service tax law, where favourable judgments were delivered by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), it added.
“The government circulars issued based on recommendations of the GST Council must be honoured in enforcement mechanisms so that notices do not create uncertainty and negatively impact perceptions on India’s ease of doing business. It is crucial that compliance obligations are not subject to multiple interpretations,” the body said.
Nasscom had requested the Ministry of Finance to issue a circular to clarify its position so that the industry could avoid the litigation risk. The government and the GST Council had been supportive and as a result, less than two months ago, a circular was issued exactly to address this issue, it said.
According to the apex industry body, circular No. 210/4/2024, dated June 26, 2024, states that for the import of services, the deemed open market value of such transactions will be nil if full input tax credit is available. “We will continue to pursue with the government on the need for proper implementation of the government circular by the enforcement authorities,” it stated.
