Introduction
DGGI dropping Infosys case has sparked wide debate in the export and tech sectors. This development may signal a more balanced GST refund scrutiny process for India’s software exporters—especially those operating under LUTs or claiming zero-rated benefits.
What Was the Infosys Case About?
- The Directorate General of GST Intelligence (DGGI) had initiated a tax demand against Infosys, alleging misuse of export benefits under zero-rated supplies.
- The issue revolved around non-payment of GST on exports and irregular input tax credit (ITC) refund claims.
- The case has now been quietly dropped, as reported by sources familiar with the development.
Why Is This Significant for Software Exporters?
- Zero-rated supply refunds: Under Section 16 of the IGST Act, exports (including services like software) are treated as zero-rated.
- Exporters can either export under LUT (without paying tax) and claim ITC refund, or pay IGST and claim refund of that.
- The Infosys case had raised concerns among software firms about retrospective scrutiny and recovery demands.
Key Legal Provisions Involved
| Legal Provision | Relevance to Case |
|---|---|
| Section 16 of IGST Act | Zero-rated supply benefit for software exports |
| Rule 89 of CGST Rules | Refund process and documentation |
| Section 54 of CGST Act | Time limits and conditions for claiming refund |
| Circular No. 125/44/2019 | Refund SOP for exporters |
What Does DGGI’s Withdrawal Signal?
- Possible policy realignment towards reducing litigation in export refunds
- Increased focus on ease of doing business for Indian IT companies
- A probable shift from blanket suspicion to risk-based audits
Expert View: Don’t Let Your Guard Down Yet
“This may be a welcome relief, but exporters should not become complacent. Refund claims must still be backed by solid documentation. Errors in invoices, LUT validity lapses, or mismatched GSTR-2A can still lead to trouble,” warns CA Rahul Menon, an indirect tax consultant.
How Exporters Can Stay Safe
- Maintain invoice-level matching with GSTR-1 and GSTR-3B
- Reconcile ITC with GSTR-2A monthly
- Ensure LUT is renewed on time
- Keep proof of service exports like agreements, SoWs, SWIFT receipts
What Should You Do If You’ve Received a Notice?
- Don’t panic. Scrutiny doesn’t mean automatic fraud assumption.
- Respond within deadlines under Section 73/74.
- If you’ve received a GST DRC-01A, explore settlement or filing DRC-03.
- Consult a qualified tax professional before replying.
FAQ Section
Q1: Will this affect past refund claims?
Not directly. Each case is assessed individually, but precedent may help defend against aggressive demands.
Q2: Can exporters expect fewer refund rejections now?
Possibly. But accuracy and documentation remain critical.
Q3: Is Infosys off the hook permanently?
As of now, yes in this specific case. But any future lapses can trigger new action.
Summary
DGGI dropping Infosys case hints at reduced scrutiny on software export refunds. Exporters must still maintain strong documentation to avoid future GST notices and litigation.
Final Words
Exporters of services must use this window to clean up compliance gaps and ensure their refund claims withstand future scrutiny.