The Directorate General of GST Intelligence (DGGI) has widened its investigations of insurance companies for alleged GST violations to 10 more insurers, taking the total number of insurers covered by the probe to 30.
“Investigations into 20 insurers have been completed and another 10 cases are under probe as of now. Depending on the findings, show cause notices will be sent to the latter too,” reported Financial Express, quoting a person familiar with the development.
A total tax evasion of INR25bn ($302m) by insurers has been detected by the DGGI to date, of which the insurers concerned have already settled around INR7.5bn on their own.
The DGGI launched a probe into insurance companies in 2022 after it found that some insurers had wrongfully benefitted from input tax credit (ITC) based on invoices issued by several intermediaries for services such as advertising, marketing, and brand activation even when no such services had been provided. In the absence of any underlying supply, the ITC was not permissible under the GST law. This was done to circumvent IRDAI regulations on commissions and to disguise commission payments that exceeded the limit permitted under regulations.
New IRDAI rules, which took effect on 1 April, are expected to halt such violations as they change the cap structure on expenses of insurance companies. However, the new rules do not have a retrospective effect and do not rectify past practices relating to commissions.
