Infosys case signals new approach to granting tax benefits for IT firms

The move by the Directorate General of GST Intelligence (DGGI) to close ₹32,403-crore of pre-tax proceedings against Infosys Ltd signals the government's acceptance of the fact that business processes of software companies need not necessarily be organized in a way that is convenient for the tax administration, two people familiar with the development said.

- Gireesh Chandra Prasad

The closure of the case, based on a clarification issued by the Central Board of Indirect Taxes and Customs (CBIC) last June and verification of Infosys' transactions for the past five years, is significant as it changes the way GST authorities will examine the transactions of software companies.

It allows officials to view Indian tech businesses making use of offshore branches for exporting services from India at the broadest level, and conclude that the offshore branches' services to the parent are not taxable because the parent can claim credit for any tax paid on it or claim a refund for it, explained one of the persons quoted above.