Indian authorities are expected to send notices to several major IT services firms as part of an investigation into alleged tax evasion involving their overseas offices, a government source revealed on Thursday. This development follows a $4 billion tax claim against Infosys, India's second-largest tech services provider. The government's unprecedented tax demand accused Infosys of tax evasion and sought ₹320 billion, nearly equivalent to its revenue for the quarter ending June 30. Infosys, which received 'pre-show cause' notices from tax authorities, maintains that it has paid all relevant taxes and complies with central and state regulations.
The tax authorities' scrutiny extends beyond Infosys, indicating an industry-wide issue. A senior tax official informed Reuters that more notices could be issued to other IT companies. The finance ministry has yet to respond to a request for comment. Experts predict that more tax notices for similar alleged violations are imminent. Rajat Mohan, director at MOORE Singhi, suggests that the substantial notice issued to Infosys could establish a precedent for similar actions against other multinational companies, particularly in the IT sector.
Overseas offices of Indian IT firms are involved in various projects and services for international clients. Infosys' shares fell by one percent to ₹1,868.25 on Thursday. Some tax experts believe Infosys may face a prolonged legal battle and recommend seeking a court stay on the proceedings. Abhishek Rastogi, founder of Rastogi Chambers, argues that since the services were provided outside India, Infosys should not be liable for local taxes. In the past year, India's goods and services tax department has issued over 1,000 notices to various companies, including Life Insurance Corporation of India, Dr Reddy’s Laboratories, and Ultratech Cement, as well as online gaming companies, demanding approximately ₹1 trillion in allegedly evaded taxes. These demands have been contested in tribunals and courts.
