India is likely to retract its demand that Infosys pay $4 billion in back taxes after weeks of lobbying by the IT giant and an onslaught of criticism from the software services industry, said two government sources with direct knowledge of the plan.
Authorities last month ordered Infosys to pay the additional amount, arguing that its overseas offices should pay goods and services tax (GST) dating back to 2017.
The country’s tax investigation unit followed prevailing regulations in sending out the notice to Infosys but the federal finance ministry now believes the notice is against India’s broader tax principle of not taxing services exports, one of the sources said.
The sources declined to be identified as a formal decision has yet to be made. India’s finance ministry and Infosys did not reply to Reuters requests for comment.
Tax notices worth more than $1 billion combined to 10 foreign airlines operating in India, including Etihad and British Airways, will also likely be made redundant as the issue is similar, said the source.
The GST Council, comprised of state finance ministers and chaired by the federal finance minister, will probably make a formal decision on Sept. 9, said a second source.
Former Infosys board member and chief financial officer Mohandas Pai has called the tax notice “outrageous” and “a case of tax terrorism at its worst.”
Last week, Infosys’ executive vice president for finance, Sunil Kumar Dhareshwar, met top bureaucrats to seek relief, arguing the tax demand was not warranted, according to a third government source.
Earlier this month, the Indian government ordered tax officials to seek directions from the administration before pursuing cases over widely prevalent industry practices so that “ease of doing business” can be maintained and litigation avoided.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Aug 23 2024 | 2:00 PM IST
Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.