The tax officials are investigating a section of automobile dealers who have allegedly issued fake invoices without offering any service which is an unlawful action under goods and services tax (GST law). The authorities are going to ask the car dealers to prove that general insurance companies have received their services. According to a business newspaper, the investigators have somewhat distrusted that auto dealers marketed insurance plans that earned them commissions above what insurance regulations offered.
The dealers have issued fake GST invoices and based on that insurance companies declared input tax credits, without an essential supply of services, said the two officials who are in knowledge of the investigation.
It should be noted that the cap ranges from 15% to 20%, depending on the products recommended by India’s Insurance Regulatory and Development Authority of India (IRDAI). IRDAI separated commission restrictions and put an overall cap on operating costs and commissions as of April 1.
With this, there is a 100% fine and the registration of the duplicate invoice generator could be also disapproved. The unlawful action under the GST law is not bailable. In the GST system, generating an invoice in the absence of supply leads can take the responsibility to a jail term of up to five years, if the money is equal to or more than INR 5 crore. Additionally, a penalty of 100% will also be charged.
Read also: Complete Information Related to Bogus Invoicing Under GST
A top government source told Business Daily that the said amount of tax evasion, in this case, is over INR 12,500 crore, which is significantly more than the initial estimate of INR 1,000 crore. As the investigation goes deeper, we can discover a connection between insurance firms and numerous such intermediaries who are defying the law to evade taxes. The problem will soon be resolved.
The next step is to broaden the investigation the Directorate General of GST Intelligence (DGGI) has started in opposition to 16 insurance commissions as high as 60%-70% to middlemen like these, and then using input tax credit on the bills issued in the name of marketing and sales services.
