The Goods and Services Tax (GST) has revolutionized indirect taxation systems in many countries. The Forward Charge Mechanism (FCM) and Reverse Charge Mechanism (RCM) are the two key mechanisms behind its functioning that aim to simplify and streamline taxation. While FCM is the standard approach for most transactions, RCM is applied in specific circumstances to ensure compliance and tax collection from certain categories of suppliers. Understanding these mechanisms is crucial for businesses to efficiently fulfill their GST obligations.
The Directorate General of GST Intelligence (DGGI) has sent a pre-showcause notice to Infosys for failing to pay Integrated Goods and Services Tax (IGST) on services obtained from overseas branches. As per the notice, the IT company has unpaid taxes amounting to ₹32,403 Crore for the period of July 2017 to July 2021–2022. Infosys has not yet responded to the notice but is expected to have enough time to explain and contest it. The tax authorities state that the company failed to pay IGST under the reverse charge mechanism, which requires the recipient of services to pay the tax.