No relief for Infosys: Indian Government refuses to budge on ₹32,000-crore tax demand, after Canada slaps fine

The Indian government is standing firm on its substantial tax demand to Infosys, the country's second-largest IT services firm, according to a government source who spoke on condition of anonymity. The tax authorities are not considering any relaxation in the demand, which was issued last month in accordance with goods and services tax (GST) rules.

Infosys has reportedly sought a ten-day extension to submit its response after meeting with tax officials. The company is facing a tax demand of over ₹ 32,000 crore ($4 billion) related to services received from its overseas branches between July 2017 and the 2021-22 fiscal year. This amount is equivalent to approximately 85% of the company's revenue for the quarter ended June 30.

In a notification to stock exchanges on August 3, Infosys stated that the demand for the 2017-18 financial year, amounting to 38.98 billion rupees, has been closed. The company has previously maintained that it has paid all its dues and is in compliance with central and state regulations.

Additionally, in May, 2024, the Canadian government has fined global IT services provider Infosys CAD 1,34,822.38 ( ₹82 lakh) for underpayment of the employee health tax for the fiscal year ending December 31, 2020.

Infosys disclosed in a regulatory filing that it received the order from Canada's Finance Ministry on May 9. “Penalty imposed on alleged underpayment of Employee Health Tax for the year ended December 31, 2020,” as per the filing.

D.D. Sharma, vice-president at Anand Rathi Securities, commented on the earlier stock movement: “Infosys results just met market expectations and since its guidance was already built in, the stock is seeing profit booking. It had also run-up quite a lot in the past sessions,” as quoted by Reuters.

The broader IT sector has also been affected, with other major players like Tata Consultancy Services and Satyam Computer Services experiencing significant drops in their stock prices, as per Reuters.