Infosys tax case: India open to resolving over Rs 32,000 crore tax dispute with Infosys

India will find ways to resolve tax disputes with major companies including Infosys Ltd. and foreign airlines, people familiar with the matter said, suggesting New Delhi is open to making accommodations to avoid hurting investor sentiment in the South Asian nation.

Authorities are exploring options to settle with companies including Infosys, which last month got hit by a demand for 324.03 billion rupees ($3.9 billion) in back taxes dating back to 2017, the people said. Authorities at the time cited non-payment of taxes on expenses incurred by overseas offices of the company, which provides IT services to banks and other multinational corporations from the US to Europe.

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The demand coincided with tax notices sent to 10 foreign airlines including British Airways. Analysts have warned that the unusual tax demands — issued with little warning — may hamper India’s attempts to lure investment away from China, while perpetuating perceptions that the country remains a difficult place to do business.

The Goods and Services Tax council, a panel comprising federal and state finance ministers, is slated to meet Sept. 9 to discuss, among other things, the notices.

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The government is working on finding a solution to the issue to ensure the long-term ease of doing business, the people said, asking not to be identified discussing sensitive matters.

CNBC-TV18 earlier reported on the possible relief.

The aim is to amicably resolve the disputes and cut down potential litigation. Finance Minister Nirmala Sitharaman on Wednesday urged tax officials to exercise their powers judiciously, and use enforcement measures as a last resort to encourage voluntary compliance.

A finance ministry spokesperson didn’t respond to an email seeking comment. India has a history of tax disputes with foreign firms such as Vodafone Group Plc. Critics have said those episodes worsen the business environment and may discourage foreign investors, at a time India needs foreign capital and expertise to propel the economy.

Infosys has resisted the tax authorities’ demands. The International Air Transport Association objected to the move and called for an urgent resolution of the matter.