IT services giant Infosys is facing a demand for almost $4 billion in tax demand from Indian state of Karnataka, relating to expenses incurred by its overseas branches.

On Wednesday, the Bengalaru-based business filed [PDF] a notice with the Bombay Stock Exchange disclosing the matter.

India media report that the matter concerns a client based outside India, which Infosys served with workers both within its home nation and elsewhere. Expenses incurred by Infosys's offshore entities were included in invoices sent from India, so local authorities feel that Indian sales taxes are therefore due.

Infosys argues those expenses should not attract Indian sales tax and has cited a government circular to back its position.

The filing argues it is "fully in compliance with the central and state regulations on this matter."

The circular in question is not a new policy, but rather reads as a "clarification" on the valuation of imported services.

India's Goods and Services Tax (GST) was implemented in 2017. This case represents one of the largest related cases since its debut, according to local media.

If found in the wrong, Infosys is reportedly in line for a fine worth around one year's profit and a quarter worth of revenue.

Commentators on social media have pointed out the irony that the same outfit that manages India's income tax portal is under investigation for tax evasion.

That tax portal was not Infosys's finest hour. Launched in 2021 and intended to streamline tax filing and compliance processes, it quickly faced criticism for frequent glitches, user interface problems, and slow processing times.

The portal’s debut was so badly botched that India's government reverted to manual tax filings within a week. ®

https://www.theregister.com//2024/08/01/infosys_india_tax_dispute/