Infibeam Avenues Hit with ₹32 Crore GST Penalty Notice

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Infibeam Avenues Limited, a prominent Indian fintech company, has been issued a tax and penalty order totaling ₹32.01 crore Goods and Service Tax (GST). The order, dated January 27, 2025, from the Ahmedabad South office, disallows certain GST exemptions claimed by the company on debit and credit card transactions up to ₹2,000 between July 2017 and March 2024. The demand comprises ₹16 crore in tax and an equal amount as a penalty. Infibeam contends that the order overlooks a key clarification from the GST Council, asserting that RBI-regulated payment aggregators qualify as “acquiring banks” and are thus eligible for the exemption. The company is evaluating all options, including filing for rectification under Section 161 of the CGST Act, and maintains that the demand will not impact its financials or operations.

Company Overview

Founded in 2007 by Vishal Mehta, Infibeam Avenues Limited is a leading digital payments and e-commerce technology solutions provider in India. Headquartered in GIFT City, Gandhinagar, the company offers a comprehensive suite of web services, including digital payment solutions, data center infrastructure, and software platforms to merchants, enterprises, corporations, and governments in both domestic and international markets. Its flagship brand, CCAvenue, operates as a PCI DSS 3.2.1 compliant payment gateway platform, providing over 240 payment options and enabling real-time connections with more than 55 Indian banks since its establishment in 2001. The company also operates in the Middle East, with offices in the UAE and the Kingdom of Saudi Arabia.

Financial Performance

In the quarter ending December 2024, Infibeam Avenues reported a nearly 50% year-over-year increase in consolidated Profit After Tax (PAT), reaching ₹64.4 crore. Operating revenue rose by 18% year-over-year to ₹1,070.3 crore. The company attributes this growth to a significant increase in transaction volumes and merchant additions across all fintech platforms.

GST Penalty Details

The CGST department’s order challenges the GST exemptions claimed by Infibeam Avenues on small-value transactions (up to ₹2,000) made via debit and credit cards during the specified period. Infibeam argues that the order did not consider the clarification from the 55th GST Council Meeting, which explicitly states that RBI-regulated payment aggregators qualify as “acquiring banks” under Entry No. 34 of Notification No. 12/2017, making them eligible for the exemption. The company is assessing all available options, including filing an application for rectification under Section 161 of the CGST Act, which allows corrections for errors apparent on record. Infibeam asserts that this demand will not significantly impact its financials, operations, or other activities.

Background on GST Exemptions

Under Indian GST law, certain small-value transactions are exempt from tax to promote digital payments and financial inclusion. Specifically, transactions up to ₹2,000 made through debit and credit cards are exempt under Entry No. 34 of Notification No. 12/2017. Infibeam argues that the CGST order overlooks the GST Council’s clarification, which classifies RBI-regulated payment aggregators as “acquiring banks.” This classification enables them to process these transactions without charging GST.

Company’s Response and Future Actions

Infibeam Avenues has stated that it is evaluating all options to address the CGST demand, including filing for rectification of the order. The company maintains that the demand is not maintainable and asserts that it will not affect its financial health or operational activities. Stakeholders are advised to monitor official communications from the company for updates on this matter.

Learning for Startups and Entrepreneurs

This situation underscores the importance of maintaining thorough compliance with tax regulations and staying abreast of official clarifications. Startups and entrepreneurs must actively document their tax positions and align them with the latest guidelines from regulatory authorities. Engaging with tax professionals and legal advisors can help in navigating complex tax landscapes and mitigating potential risks.

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