Tarun Bajaj, revenue secretary, ministry of finance
The government has said investigations by the Directorate General of GST Intelligence, Mumbai Zonal Unit have revealed that input tax credit of Rs 824 crore has been availed by 16 insurers, out of which an amount of Rs. 217 crore has been paid voluntarily by these insurance companies so far
Tarun Bajaj, revenue secretary has assured the insurers that there wouldn’t be any coercive action against them particularly summoning or arrest of CEOs of the companies by the GST enforcing authorities
A representative team of the general insurance industry led by MN Sarma, secretary general, General Insurance Council along with Bhargav Dasgupta, MD & CEO, ICICI Lombard General Insurance, the country’s largest private sector general insurer , Ritesh Kumar, MD &CEO, HDFC Ergo General insurance, Nilesh Garg, MD&CEO, Tata AIG General insurance, Anuj Gulati, MD&CEO, Care Health Insurance, had met Bajaj recently to appraise him of their side of the development
New Delhi;
In a quandary, the insurance industry has rushed to knock at the doors of the government over issue of alleged `GST evasion lapses’ by a few private sector insurers.
While a top representative team consisting of some of the CEOs of leading private sector general insurers have already met the Tarun Bajaj, retiring revenue secretary, ministry of finance(MoF), the representatives of life insurers are planning to meet Bajaj’s successor Sanjay Malhotra shortly after he takes over his new job in December.
Earlier, the government had said Directorate General of GST Intelligence, Mumbai Zonal Unit initiated investigations against sixteen insurance companies on the issue of availment of ineligible input tax credit.
Investigations by the Directorate General of GST Intelligence, Mumbai Zonal Unit have revealed that input tax credit of Rs 824 crore has been availed, out of which an amount of Rs 217 crore has been paid voluntarily by these sixteen insurance companies so far, said a statement from the government.
During the course of investigations, it has come to notice that these insurance companies have availed input tax credit on the basis of invoices issued by several intermediaries for providing services of advertising, marketing, brand activation etc., whereas no such services had actually been provided, said a government statement.
“Thus, in the absence of any underlying supply, the input tax credit availed by the said insurance companies, is not permissible under the GST law,” said the government.
Explaining the modus operandi adopted by the insurers to pay the illegal commission the government further has said, several non-banking financial companies (NBFCs) engaged in micro financing businesses are acting as corporate agents of the insurance companies and are cross selling their single premium credit liked insurance policies in the course of their lending business.
As per IRDA regulations, only nominal commission is permitted to corporate agents.
“In order to circumvent these regulations, the insurance companies have resorted to obtaining invoices from intermediaries, in order to transfer commission (over and above the permissible limit) to NBFCs, for supply of services of advertising, web marketing etc., whereas there has been no underlying supply of services. In turn, these intermediaries have received invoices from NBFCs for such supplies,” said the government.
Further investigation is in progress, said the government.
According to MoF sources, a representative team of the general insurance industry led by MN Sarma, secretary general, General Insurance Council along with Bhargav Dasgupta, MD & CEO, ICICI Lombard General Insurance, the country’s largest private sector general insurer , Ritesh Kumar, MD &CEO, HDFC Ergo General insurance, Nilesh Garg, MD&CEO, Tata AIG General insurance, Anuj Gulati, MD&CEO, Care Health Insurance, had met Bajaj recently to appraise him of their side of the development.
“Yes, it is a fact that some private sector insurers as part of marketing strategies for growing their business, particularly in the own damage(OD)motor portfolio, have paid money to a few individuals illegally on forged invoices and have claimed input credits against those invoices. The GST authorities, after detecting them, have already served notices to these insurers.’’ admitted one of the CEOs of a leading company.
Industry sources said the amount, which has been evaded by the insurers is in the range of Rs 1,000 has now come under the scanner of of the IT authorities also.
Bajaj, after giving a patient hearing to the insurers, had assured that he would ensure a fair investigation against the alleged violation of GST rules by some of the players in the industry.
He also assured that there wouldn’t be any coercive actions against general insurers including arrest or summoning of CEOs of the companies by the GST enforcing authorities.
On hearing the pleadings of the CEOs, Bajaj, who is retiring during month end commented, `Normally, the insurance industry has remained law abiding. All the aspects of allegations will be looked into. If the insurers have made any payment to any institutions, it will be excluded from the purview of the investigation by the GST authorities.’’ .
There were also some speculations that some insurers are ready to settle the GST cases by paying hefty fines.
However, Asia Insurance Post, after checking with some of the CEOs, learnt that the insurers will prefer adjudication to paying fines.
“We will go to the court in case our efforts to settle the dispute with GST authorities fail,” said a CEO of a prominent life insurance company on conditions of anonymity.