A leading online insurance intermediary is being sued by the Goods and Services Tax (GST) authorities for allegedly creating fictitious invoices for marketing and sales services totalling about Rs. 100 crore.
The Directorate General of GST Intelligence (DGGI) issued a criminal notice to the intermediary with offices in Bengaluru. The company’s senior management has since been questioned as a result. The intermediary has been requested to submit documentation of the allegedly rendered service in support of which invoices were made. According to a source in the DGGI, the owners might get harsh penalties for the lack of proof.
Issuing an invoice without supply is punishable by fine and imprisonment for up to five years under Section 122 of the Central GST Act if the amount involved is Rs 5 crore or more. Bail cannot be granted for the crime. The action is intended to broaden the DGGI’s probe into insurance firms that are suspected of paying fees of up to 70% to intermediaries like these and even offline agents.
The Insurance Regulatory and Development Authority of India (IRDAI) has set the limit at 15%. According to individuals explaining the modus operandi, insurance firms established a deal with intermediaries to transfer ineligible input tax credits (ITC) under the pretence of marketing services and generating fictitious invoices. They said that these intermediaries produce two invoices, one within the allowed limit and the other for marketing or sales-related expenses. These businesses have allegedly been taking invalid ITC using this technique, according to DGGI sources.
According to insiders, the activity is carefully planned and carried out with the cooperation of insurance firms. The department is reviewing invoices submitted by both offline brokerages and online insurance markets. If they are unable to explain the service they provided in accordance with the provision, additional procedures may be initiated soon, according to a source with knowledge of the situation.
According to the information obtained, the DGGI also brought the issue up with the IRDAI due to the excess commission element. In its investigation last year, the DGGI found that 15 life and non-life insurance companies, among others, had evaded taxes by Rs 824 crore.
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Many major insurance companies are being investigated. In order to broaden the investigation, The Directorate General of GST Intelligence discovered Rs 824 crore in tax fraud by insurance companies in 2022. Without the underlying supply of services, these businesses generated bogus bills. The Directorate said that Irdai regulations regarding GST were broken. A digital insurance intermediary is accused of creating 100 crore rupees worth of false invoices.
Source: Business-standard
