The goods and services tax department has widened the probe against insurance companies for alleged wrongful availment of input tax credit. The Director General of GST Intelligence is likely to serve show cause notices to 10 more insures soon, taking the number of firms under the drive to 30.
“Investigations into 20 insurers are complete and another 10 cases are under probe as of now. Depending on the findings, show cause notices will be sent to the latter too,” said a person familiar with the development. The latest set of notices will be slapped on some of the prominent general insurance companies, the source added.
The DGGI had launched a probe into insurance companies in 2022 after it found that some of these firms had wrongfully availed input tax credit on the basis of invoices issued by several intermediaries for providing services of advertising, marketing, brand activation even when no such services had actually been provided. In the absence of any underlying supply, the ITC was not permissible under the GST law.
This was done to circumvent IRDAI regulations that mandated only nominal commissions to corporate agents. The insurers obtained invoices from these intermediaries for supply of services of advertising, web marketing to transfer higher than permitted commission to NBFCs working as corporate agents.
The probe had till now unearthed such practices at private sector insurers till now.
While this has turned into an industry wide investigation, many insurers are understood to have also asked the GST department to refer the matter to the insurance regulator IRDAI. Officials however, are however of the view that since this is a taxation related issue, it has to remain within the domain of the Central Board of Indirect Taxes and Customs.
This is turning into an industry wide issue and both the GST as well as income tax department has launched investigations into these practices,” noted the source, adding that it is expected that the new norms on commission by IRDAI will help curb this.
The new IRDAI rules, effective April 1, there is an overall cap on expenses of management of insurance companies.
Source: The Financial Express
https://www.financialexpress.com/economy/gst-probe-into-insurers-widens-10-more-firms-to-get-notices-soon/3090237/
