Shares of Infosys tumbled over 1% in early trade on Thursday, in an otherwise positive broader market, after the country’s second largest software exporter received tax notice for payment of Goods and Services Tax (GST) of ₹32,403 crore. In the overnight trade on the New York Stock Exchange (NYSE), the American Depository Receipts (ADRs) of Infosys slipped 2.12% to $22.13 apiece.
Reacting to the news, Infosys shares fell as much as 1.2% to ₹1,845.40 in the opening trade today, after ending 0.48% lower at ₹1,868.05 in the previous session. The market capitalisation of the country’s second most valued IT stock, after TCS, dropped to ₹7.71 lakh crore.
Earlier this week, Infosys shares touched its 52-week high of ₹1,903 on July 29, 2024, surging 41% against its 52-week low of ₹1,348.10 touched on August 3, 2023. The counter has outperformed BSE benchmark Sensex and BSE IT index in terms of returns in the last one year. The IT heavyweight has risen 37.2% in the past 12 months compared to 23% rally in Sensex and 37% rise in the BSE IT index. The stock has surged 20.5% in calendar year 2024, compared to a 13.45% rise in Sensex and 15.8% in the BSE IT index.
In a late evening filing on July 31, Salil Parekh-led Infosys informed exchanges that it received a pre-show cause notice from the tax authorities for payments of a large sum of ₹32,403 crore under the GST laws. The payment pertains to a period of 5 years starting from July 2017 to March 2022 towards the expenses incurred by overseas branch offices of Infosys. The company has received one such notice from the Karnataka State GST authorities, to which it has already responded.
The Bengaluru-headquartered company refuted the claim and said that it has “paid all its GST dues and is fully in compliance with the central and state regulations on this matter”.
“The company believes that as per regulations, GST is not applicable on these expenses. Additionally, as per a recent Circular (circular number 210/4/2024 dated June 26, 2024) issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by the overseas branches to Indian entity are not subject to GST,” it clarified in the regulatory filing.
“It is also important to note that the GST payments are eligible for credit or refund against export of IT services,” the IT major says.
Last month, Infosys released its June quarter earnings, reporting 7.1% year-on-year rise in its net profit and 3.6% growth in revenue annually. Operating margin was recorded at 21.1% for the quarter, a growth of 0.3% YoY and 1% QoQ. For FY25, Infosys has given a revenue growth guidance of 3%-4% in constant currency, with an operating margin of 20%-22%.
During the quarter under review, Infosys signed the highest number of large deal wins at 34, having a total contract value of $4.1 billion. We won 34 large deals with a total contract value of $4.1 billion, with 57.6% of the deals being net new," says Infosys CEO Salil Parekh at an earnings conference last evening.
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