Reliance General Insurance, a subsidiary of Reliance Capital, has been served with multiple show-cause notices by the Directorate General of GST Intelligence (DGGI), totalling ₹922.58 crore.
These notices include four separate claims requiring GST payments of ₹478.84 crores, ₹359.70 crores, ₹78.66 crores, and ₹5.38 crore respectively. The liabilities are concerning revenue generated from services such as re-insurance and co-insurance.
Sources indicate that Reliance General Insurance will need to account for these amounts as “Contingent Liabilities” in its financial results for the quarter ending on September 30.
It is worth noting that Reliance Capital, the parent company, is currently undergoing corporate insolvency proceedings. Reliance General Insurance is a significant subsidiary that contributes a substantial portion to the parent company’s overall valuation.
GST Multiple Indian Demand Foreign Reinsurers
One of the show-cause notices, amounting to ₹479 crore, questions the applicability of GST on re-insurance commission services provided to various Indian and foreign reinsurers. The GST authority argues that this is included in revenue and should come under the company’s taxable income.
Another notice, totalling ₹360 crores, focuses on the applicability of GST on co-insurance premiums received as a follower in co-insurance transactions.
Reliance General Insurance has argued that the lead insurer has already paid GST on the entire premium. Therefore, there should be no tax applicable on the realization of Follower Premium.
However, the DGGI maintains that a registered entity cannot collect and disburse tax on behalf of another entity, irrespective of any co-insurance arrangement.
The third notice, amounting to ₹79 crore, relates to the availing of Input Tax Credit without underlying services concerning marketing expenses. The fourth notice, totalling ₹5 crore, is due to non-payment of GST under the reverse charge basis for importing re-insurance services from foreign reinsurers, specifically related to an exempted crop insurance scheme.
Reliance General Insurance has deposited ₹10.13 crore as an input tax credit in disagreement with the claims made by the authorities.
