According to a top government official, the income tax department has initiated an investigation into the claim that insurance businesses fraudulently claimed GST input tax credits. According to a senior government official, the department is attempting to prove that if these expenses are not legitimate, they must have avoided the income tax assessment.
According to the official, over 22 businesses have complained to the government about fake input tax credits, including the Life Insurance Corporation (LIC), HDFC Life Insurance, ICICI Prudential, Max Life Insurance, and Bajaj Allianz. The officer listed above also stated that we must examine the documents and begin the adjudication and recovery process.
Experts say that life insurance firms’ income tax estimations show differences from those of non-life companies, thus it’s not explicit whether tax evasion penalties can be applied. According to tax experts, litigation is the only alternative accessible to insurance companies to get through this issue.
The entire situation is based on facts. The quantity and reliability of the evidence will determine how the case turns out. But it appears that a protracted legal process is unavoidable.
Regarding GST, it is still arguable whether there has been any tax avoidance because applicable taxes may have been paid on purchases and supplies. According to Abhishek A.
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Rastogi, founder of Rastogi Chambers, who is defending some of the taxpayers on this matter, the related questions are whether there is a lack of service and, in the case of service, whether valuation can be the subject of an investigation.
Rastogi continued by saying that the issue will arise regarding the disallowance of spending on the income tax side. Notices will be issued if the revenue agency can demonstrate that the purchases were either fake or just on paper.
In order to prevent income tax authorities from starting procedures under Section 148A of the Income Tax Act, taxpayers will have the necessary rights to demonstrate the legitimacy of the transactions.
Government sources claim that insurance companies overstepped the permissible limitations set forth in the rules and regulations of the Insurance Regulatory and Development Authority of India (IRDAI) by paying a sum to intermediaries, who then paid it to commission agents. Together, these insurance businesses owe thousands of crores in taxes, in addition to the penalties that the tax code describes.
