IT-Dept orders IT companies to pay Rs. 10,000 crore service tax

In a blow to the Information Technology (IT) and IT-enabled services (ITeS) companies, the income tax department asked IT companies including Infosys, TCS and Mindtree  to pay a service tax worth nearly Rs. 10,000 crore, according to media reports. As the reports surfaced on Thursday, the share prices of IT and IT-enabled services companies witnessed a mixed trade on the bourses in Thursday’s trading hours. 

While Nifty IT was up by one per cent in the intraday trade on Thursday, it closed up by 0.99 per cent, with Infosys, KPII and Mahindra Tech driving its growth during the trading hours; on the other hand, Mindtree, Wipro and Oracle Financial Services Software lost up to one per cent during the trade. About five IT companies ended the trade in red with Mindtree closing lower by 1.21 per cent. 

According to reports, the service tax department has sent a notice on the matter to over 200 companies in the sector, demanding them to return the export benefits claimed by the companies during the time period of last five years on software provided to clients outside India. The reports also mentioned that the companies have also been asked to additionally pay a 15 per cent service tax along with the fines. 

The development is expected to severely affect the IT sector which is already facing the brunt of tighter US immigration laws and rising automation in the industry.