India May Send Tax Notices To More IT Firms After $4 Billion Demand To Infosys

Tax officials may issue notices soon to more major infotech services firms in a scrutiny of alleged evasion of tax on services by their overseas offices, a government source said, a day after Infosys was slapped with a $4-billion tax demand.

In serving its highest ever tax demand on Infosys, the government accused India's second-largest tech services company of evading taxes on such services, and sought Rs 320 billion, or almost all its revenue for the quarter ended June 30.

"This is an industry-wide issue," a senior tax official with knowledge of the matter, told Reuters, adding that notices were likely to be sent to some other IT companies. The source spoke on condition of anonymity as he was not authorised to speak to the media.

The Finance Ministry did not immediately reply to an email seeking comment. Experts said more tax notices for the same violation were likely to be in the offing.

"Issuing such a substantial show-cause notice is likely to set a precedent, leading to similar notices being issued to other multinational companies, particularly in the IT sector," said Rajat Mohan, director at accounting firm MOORE Singhi.

The overseas offices carry out projects for Indian infotech firms and provide services to international clients, among other functions.

Shares of Infosys were down 0.6 per cent at Rs 1,857.7 after Wednesday's tax notice.