The second-largest domestic IT company, Infosys Ltd, is facing scrutiny today due to a pre-show cause notice that it received from the Karnataka State GST authorities over the GST payment of Rs 32,403 crore for the period of July 2017 to March 2022, which pertains to costs spent by Infosys' foreign branch offices.

Infosys stated in stock market filings that it had addressed the pre-show cause notice. "Subsequent to the publication of the news articles, the company has also received a pre-show cause notice from Director General of GST Intelligence on the same matter and the company is in the process of responding to the same," stated Infosys.

According to Infosys, it doesn't think GST applies to costs paid by foreign branch offices. Furthermore, the Salil Parekh-led company stated that services rendered to Indian entities by their foreign subsidiaries are exempt from GST, in accordance with a recent circular released by the Central Board of Indirect Taxes and Customs based on the recommendations of the GST Council.

Infosys stated that it has paid all of its GST obligations and complies completely with all applicable federal, state, and local rules, and that the GST payments are eligible for credit or refund against the export of IT services.

The Q1 earnings from the IT company were stronger than anticipated. Following its quarterly results, analysts predicted that the IT major's value differential with Tata Consultancy Services Ltd (TCS) will continue to close due to the company's robust performance, upbeat comments, and revised forecast. They recommended 'Buy' for the company, pointing to its robust comeback and appealing dividend yield of more than 3%.