Under pressure in the ‘GST evasion’ issue, the insurance industry has approached the government to sort out the issue without burning its fingers. While a top representative team consisting of some of the CEOs of leading private sector general insurers have already met Tarun Bajaj, retiring Revenue Secretary, Ministry of Finance (MoF), the representatives of life insurers are planning to meet Bajaj’s successor Sanjay Malhotra shortly after he takes over his new job in December.
While a section of insurance officials claimed it was due to oversight on their part, the evasion issue has thrown light into the murky dealings in the sector. These insurance companies have availed input tax credit on the basis of invoices issued by several intermediaries for providing services like advertising, marketing and brand activation whereas no such services had actually been provided.
Earlier, the government had said Directorate General of GST Intelligence, Mumbai Zonal Unit initiated investigations against 16 insurance companies on the issue of availment of ineligible input tax credit. Investigations by the unit revealed that input tax credit of Rs 824 crore has been availed, out of which an amount of Rs 217 crore has been paid voluntarily by these 16 insurance companies so far, a statement from the government said.
“In the absence of any underlying supply, the input tax credit availed by the said insurance companies, is not permissible under the GST law,” it said.
MoF sources said a representative team of the general insurance industry had met Bajaj recently to appraise him of their side of the development. Bajaj, after giving a patient hearing to the insurers, had reportedly assured that he would ensure a fair investigation against the alleged violation of GST rules by some of the players in the industry.
Sources said he also assured that there wouldn’t be any coercive actions against general insurers including arrest or summoning of CEOs of the companies by the GST enforcing authorities.
On hearing the pleadings of the CEOs, a top government official said, “normally, the insurance industry has remained law abiding. All the aspects of allegations will be looked into. If the insurers have made any payment to any institutions, it will be excluded from the purview of the investigation by the GST authorities.’’
There were also some speculations that some insurers are ready to settle the GST cases by paying hefty fines.
On the modus operandi adopted by the insurers to pay the illegal commission, the government further has said several non-banking financial companies (NBFCs) engaged in micro financing businesses are acting as corporate agents of the insurance companies and engaged cross selling their single premium credit linked insurance policies in the course of their lending business.
According to IRDA regulations, only nominal commission is permitted to corporate agents. “In order to circumvent these regulations, the insurance companies have resorted to obtaining invoices from intermediaries, in order to transfer commission (over and above the permissible limit) to NBFCs, for supply of services of advertising, web marketing etc., whereas there has been no underlying supply of services. In turn, these intermediaries have received invoices from NBFCs for such supplies,” the government said.
The insurance sector is pushing for a reduction in the GST on health policies to bring more people under the insurance umbrella. Overtaking the motor segment, the health sector has already become the fastest growing segment in the insurance sector after the pandemic hit the country in March 2020 and medical costs surged.
Source: The Indian Express
https://indianexpress.com/article/business/violation-of-gst-rules-insurers-ask-govt-to-sort-gst-evasion-lapses-8270463/
