Tech giant Infosys has secured temporary relief from a ₹32,400-crore goods and services tax (GST) demand after the Karnataka state authorities withdrew a preliminary notice seeking the hefty amount from the software services giant.

However, the IT company must now face scrutiny from the central directorate general of GST intelligence (DGGI), it said in a stock exchange filing.

The development comes a day after the Bengaluru-based firm disclosed that it had received the preliminary GST notice from Karnataka authorities for services availed by it from its overseas branches between 2017 and 2022. Infosys has maintained that GST is not applicable to these expenses.

“Additionally, as per a recent Circular...issued by the Central Board of Indirect Taxes and Customs on the recommendations of the GST Council, services provided by the overseas branches to Indian entity are not subject to GST,” Infosys said.

The IT major has also received a similar notice from the DGGI, India’s apex tax investigation agency, and is currently responding to it.

As per reports, the document sent to Infosys by GST authorities said “in lieu of receipt of supplies from overseas branch offices, the company has paid consideration to the branch offices in the form of overseas branch expense. Hence, M/s Infosys Ltd, Bengaluru is liable to pay IGST under reverse charge mechanism on supplies received from branches located outside India to the tune of ₹32,403.46 crore for the period 2017-18 (July 2017 onwards) to 2021-22.”

The initial demand exceeded Infosys’ annual profit, sparking concerns among industry observers about the potential impact on investor sentiment and the broader technology sector.