“The alleged demand and the impugned Show Cause Cum Demand Notice pertains to non-payment of GST on the Co-insurance premium accepted as follower in case of coinsurance transactions and non-payment of GST on re-insurance commission accepted on the reinsurance premium ceded to various Indian and foreign reinsurance companies during the period July 2017 to March 2022,’’ said ICICI Lombard General Insurance in a regulatory filing
Mumbai/New Delhi:
Indian general insurers, led by state owned New India Assurance, have received show causes and demand notices to the tune of Rs 18,000 crore from the Goods and Services Tax(GST) authorities for allegedly not paying the relevant taxes for five years from July 2017 till March 2022.
ICICI Lombard General Insurance, the second largest general insurer, has been served with new show causes and demand notices on Wednesday for allegedly not paying Rs 1,728.9 crore worth of tax for five years from July 2017 till March 2022 by the GST authorities.
“The Directorate General of GST Intelligence, Pune Zonal Unit has served the new show cause cum demand notice to us and the company will be filing appropriate response to the said show cause cum demand notice within the prescribed timelines,” said the insurer on Thursday in a regulatory filing.
“The alleged demand and the impugned Show Cause Cum Demand Notice pertains to non-payment of GST on the Co-insurance premium accepted as follower in case of coinsurance transactions and non-payment of GST on re-insurance commission accepted on the reinsurance premium ceded to various Indian and foreign reinsurance companies during the period July 2017 to March 2022,’’ said the insurer,’’ said ICICI Lombard General Insurance.
Sources pointed out all general insurers have received such notices from GST authorities.
Kolkata based National Insurance Company(NIC) has received demand notice for Rs 1800 crore on the similar grounds.
The show cause and demand notice has been served on general insurers after the GST authorities have allegedly found lapses on the part of these companies for not paying GST dues on coinsurance deals and reinsurance commissions to the respective states where these insurers are located.
However, on coinsurance the general insurers have disputed the GST authorities stand saying the accrued taxes already been paid by the lead insurers in whichever states they are located and they don’t have to pay it again locally.
“No tax evasion has happened by the insurers. All the taxes have been paid in the ways which have been the normal practice for decades. But suddenly the GST authorities in some states are now interpreting the matter differently. The issues now will be referred to the courts,” said industry sources.
On applicability of GST on reinsurance commission, the general insurers have said historically, they have not paid any taxes on such deals.
Reinsurers pay commission to the general insurers when the latter place deals with the former, to compensate the costs of sourcing business by the general insurers.
A top team of senior officials, representing the industry, including Rakesh Joshi, member, (Finance and Investment),IRDAI, Mamta Suri, executive director, IRDAI, Neerja Kapur, CMD, NIA, Bhargava Dasgupta, MD & CEO, ICICI Lombard General Insurance and a tax expert from the auditing firm E&Y, had met Sanjay Malhotra, Revenue Secretary, Ministry of Finance, recently to discuss these contentious issues but so far no relief at sight for the insurers.
The industry is now waiting for any clarity on the issues from the government before moving to the court where each concerned general insurer has to pay 10 per cent of the amount as deposit for which it has received the notice at the beginning of the adjudication process.
Earlier, in another GST lapse case, ICICI Lombard General Insurance had received a show cause notice from directorate general of GST Intelligence, alleging a tax demand of around Rs 273,44 crore under the Central Goods and Services Tax Act, 2017 along with interest and penalty. The matter largely relates to an industry wide issue on applicability of GST on salvage adjusted and ineligible Input Tax Credit, on motor claims settled, the company had said in a regulatory filing. After ICICI Lombard General many other insurers had received such notices over the alleged lapses.