According to official sources aware of the ongoing investigation, a central agency tasked with preventing the loss of Goods and Services Tax (GST) revenue has finished its investigation into at least 6 of the 30 insurance companies it is looking into over allegations of improper commission payments to their agents and is in the process of sending them show-cause notices (SCNs).
ICICI Prudential life insurance is one of the companies that have received these notices for the alleged GST liability of Rs 492 cr.
The Directorate General of GST Intelligence (DGGI) had been permitted under Section 74 of the CGST Act for issuing the notice on the finish of the probe for the matter in which the ITC would have been claimed in an improper way. Such insurance companies are been investigated by multiple wings of the Directorate General of GST Intelligence (DGGI), including teams in Mumbai and Meerut for the alleged malpractices and suspected evasion of GST in excess of Rs 5500 cr.
In a notice to stock exchanges, for July 2017 to July 2022 period, ICICI Prudential cited that it has obtained show-cause-cum-demand notice of Rs 492 crore from DGGI.
The business declared that it will respond to the notice and fight the situation as soon as the proper processes are taken. The insurer claimed that it has deposited Rs 190 crore without taking any responsibility in this matter.
From the GST authority, a show-cause-cum-demand notice has been received by HDFC Life Insurance Co in the previous week for the liability of Rs 942.18 crore for the period July 2017 to March 31, 2022. “After HDFC Life, ICICI Pru has the biggest liability, and it is being examined for claiming Input tax credit without actual supply of services,” an official privy stated to the development. “The role of PolicyBazaar was also investigated in the ICICI Pru case.”
Requests for comment from the PolicyBazaar spokesman went unanswered. In the meantime, HDFC Life informed stock markets that the ITC case is an issue affecting the entire sector and that it will take “appropriate steps” as soon as possible. The company has deposited Rs 250 crore with DGGI even though it would contest the matter.
Process of Appeals: The officials mentioned that “The notice could be challenged before the adjudicating authority (AA). Once the AA passes the order, and if it is not in the favour of the firm, it could appeal before the tribunal or the high court.” In the probe of HDFC life, it revealed that no service was engaged for at least 50 vendors.
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“The investigation has found that the overriding commission paid by the firm to its agents was paid through vendors (under probe) as marketing, advertising and manpower supply costs that were never undertaken,” an official quoted above. “These were just accommodative entries, and the agents were the ultimate beneficiaries. Transactions in excess of Rs 5,000 crore were probed by the department in the instant (HDFC Life) case and a GST violation of Rs 942 crore was found.”
Apart from DGGI, The income-tax department is also doing a search operation within such insurance companies for suspected tax avoidance.
They are being investigated by the DGGI for allegedly false ITC claims. In the meantime, the IT department is looking into them for possible tax avoidance because they allegedly broke the rules on commission payments set forth by the Insurance Regulatory and Development Authority of India (IRDAI).
