Indian Government Unyielding on $4 Billion Tax Demand Against Infosys; Company Seeks Extension

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The Indian government has firmly stated that it will not be considering any concessions or relaxations regarding the substantial tax demand issued to Infosys (INFY.NS) last month. According to a government source who spoke on the condition of anonymity, the demand is strictly in line with the Goods and Services Tax (GST) regulations.

Infosys, India’s second-largest IT services firm, has requested an extension of ten days to formulate and submit its response to the tax authorities. This request follows a recent meeting between the company’s representatives and tax officials.

The government source, who was not authorized to speak publicly, emphasized that the administration is steadfast in its position and will not entertain adjustments to the tax demand.

Prior to this announcement, Infosys shares had experienced a rise of 1.6% due to a broader market recovery. However, upon hearing the news, the company’s stock saw a slight reduction in gains, adjusting to a 0.3% increase before settling at a 1.2% rise.

The tax demand issued to Infosys amounts to over 320 billion rupees, or approximately $4 billion. This demand pertains to services provided by Infosys’s international branches from July 2017 to the fiscal year 2021-22. Notably, this sum represents a significant 85% of the company’s revenue for the quarter ending June 30.

In a notification sent to stock exchanges on August 3, Infosys clarified that the tax demand for the financial year 2017-18, amounting to 38.98 billion rupees, has been resolved. The company has previously asserted that it has settled all its tax liabilities and remains compliant with both central and state regulations.

As of now, neither the Indian finance ministry nor Infosys has responded to requests for further comments or clarifications regarding this issue. The situation continues to evolve as Infosys navigates this substantial tax challenge.