IT major Infosys' shares opened lower today amid reports of the firm being investigated by tax authorities. The company replied to the reports in a press release on Wednesday.

What Happened: Infosys is under investigation by the goods and services tax (GST) authorities for allegedly evading taxes. The Karnataka State GST authorities have issued a pre-show cause notice demanding the payment of ₹32,403 crore in GST from July 2017 to March 2022, the company said in the release. The payment is related to expenses incurred by the company’s overseas offices.

The blue-chip company has also received a pre-show cause notice from the director general of GST Intelligence in the same matter. While it has replied to the former notice, the company is in the process of drafting a response to the latter, it said in the release. 

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Infosys' Response: Infosys has contested the charges. The company believes that according to regulations, GST should not apply to these expenses. Services provided by an overseas branch to an Indian entity are not subject to GST, the company said, citing a recent circular by the  Central Board of Indirect Taxes and Customs. 

The circular cited by the firm states that "in case of import of services by a registered person in India from a related person located outside India, the tax is required to be paid by the registered person in India under reverse charge mechanism."

"Infosys has paid all its GST dues and is fully in compliance with the central and state regulations on this matter," the company added in the release.

Mohandas Pai, a former CFO of the company, also took to micro-blogging platform X to express his frustration. Pai referred to the notice as "a case of Tax Terrorism at its worst".

Price Action: Infosys was down 0.51% at ₹1,858.75 on Thursday morning. 

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