K'taka withdraws Infy notice; Centre may go for review

DGGI to examine if June 26 circular can apply in this case

- SHRIMI CHOUDHARY

In fast-moving developments on Thursday, the Karnataka state authorities withdrew the pre-show cause notice issued just a day earlier to information technology bellwether Infosys. Besides the ₹32,403-crore demand made by the investigation department of goods and services tax (GST) on Wednesday, there was another notice from the Karnataka state authorities.

In a disclosure to stock exchanges late on Thursday, Infosys said the Karnataka authorities had communicated to the company that they were withdrawing the preshow-cause notice. The state authorities have also directed the IT firm to submit further response on the matter to the central authority Directorate General of GST Intelligence (DGGI).

In another significant turn of things, sources have indicated the tax authorities at the Centre may review the GST notice.

This comes amid industry apprehensions that other IT firms may also face similar GST demands. Fearing a flurry of tax notices, industry association Nasscom, in a statement on Thursday, urged the authorities to look into investor concern over avoidable litigation and uncertainties in doing business.

"Each matter will be examined on a case-by-case basis, depending on its merit," an official privy to the matter told Business Standard on Thursday.

The GST authorities will see if it could be viewed under the June 26 circular, providing clarity on the valuation of the "supply of import of services" by a related person.

The circular says for importing services, the deemed open market value of transactions will be nil if full input tax credit is available.

However, whether Infosys is eligible under this needs to be examined, the person said.