Nasscom urges for tax reforms

New Delhi: After Infosys was slapped with a Rs32,403-crore GST notice, apex IT body Nasscom on Thursday said the latest tax demand reflects a lack of understanding of the industry’s operating model and sheds light on sector-wide issues wherein multiple companies are facing avoidable litigation and uncertainty.

In a detailed statement issued just a day after Infosys’ BSE filing on GST ‘pre-show cause’ notice of Rs32,403 crore, Nasscom asserted that government circulars issued based on recommendations of the GST Council must be honoured in enforcement mechanisms so that notices do not create uncertainty and negatively impact perceptions on India’s ease of doing business.

“Recent media reports of a GST demand of over Rs 320 billion (Rs 32,403 crore) reflects a lack of understanding of the industry’s operating model.

This is an industry-wide issue, and multiple companies are facing avoidable litigation, uncertainty, and concerns from investors and customers,” Nasscom said without naming Infosys.

The issue at hand involves the applicability of GST through the reverse charge mechanism (RCM). Nasscom argued that the GST enforcement authorities have been issuing notices for remittance by the Indian head office to its foreign branches for cases where there is no service between the head office and foreign branch for this RCM, ignoring that this is not a case of ‘import of service’ by the head office from the branch.

“This is not a new problem, and courts have been ruling in favour of the industry in these cases. This issue was even addressed during the erstwhile service tax law, where favourable judgments were delivered by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT),” Nasscom said.