Infosys gets major relief as DGGI closes Rs. 32,403 Cr GST case

In a major regulatory relief, Infosys Ltd announced on Friday that the Directorate General of GST Intelligence (DGGI) has officially closed the Rs. 32,403 crore Goods and Services Tax (GST) reverse charge case against the company for the financial years 2018-19 to 2021-22.

The Bengaluru-based IT giant informed stock exchanges that it had received formal communication from the DGGI marking the closure of pre-show cause notice proceedings. This effectively ends a prolonged tax dispute that had hovered over India’s second-largest IT services firm for nearly a year.

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Shares of Infosys are expected to react positively to the development given the sheer scale of the potential liability now resolved. The original GST demand was more than Rs. 32,000 crore, a figure that exceeded Infosys’s full-year FY25 net profit of Rs. 26,713 crore.

Background: A High-Stakes GST Dispute

The tax case stemmed from services availed by Infosys from its overseas branch offices between July 2017 and March 2022. Authorities had argued that the company was liable to pay Integrated GST (IGST) under the Reverse Charge Mechanism (RCM), as it had effectively “imported” services from its own foreign branches.

In July 2024, Karnataka State GST authorities and later the DGGI had issued a pre-show cause notice, demanding GST payment of Rs. 32,403 crore. Infosys responded to the notice, maintaining that the services provided by overseas branches to the Indian entity were not taxable under GST, citing a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) which clarified this position based on GST Council recommendations.

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Infosys also argued that such payments were eligible for input tax credit or refunds as part of its export of IT services, and asserted that it had fully complied with central and state GST laws.

Matter Now Fully Closed

Infosys had earlier received closure from DGGI for FY2017–18 in August 2024. With Friday’s communication, the closure now covers the remaining disputed period — FY2018–19 to FY2021–22 — bringing the entire matter to a close.

“With the receipt of today’s communication from DGGI, this matter stands closed,” Infosys said in its filing.

The company has also posted this update on its official website.

Business Outlook Steady Despite Uncertainty

Despite this relief, Infosys continues to navigate a challenging macroeconomic environment. For the quarter ended March 2025, the company reported an 11.7 per cent decline in net profit to Rs. 7,033 crore, largely due to compensation costs and acquisition-related expenses.

For the full FY25, Infosys posted a modest 1.8 per cent rise in net profit to Rs. 26,713 crore, with revenues growing 6.06 per cent to reach Rs. 1,62,990 crore — slightly ahead of its own guidance. However, for the current fiscal (FY26), Infosys has projected flat to 3 per cent growth in constant currency terms, citing ongoing global uncertainty.

Investor Sentiment Likely to Improve

While revenue growth may remain muted in the short term, the closure of a Rs. 32,403 crore tax risk eliminates a significant legal and financial overhang. The market is likely to view the development as a vote of confidence in Infosys’s tax compliance stance and operational integrity.

With this overhang removed, analysts suggest that Infosys can now focus more aggressively on pursuing new global IT contracts and expanding in high-growth areas like AI, cloud, and digital transformation  sectors where it faces stiff competition from peers like TCS, Wipro, and HCLTech.