DGGI issues GST Notices of Rs 922 Crore to Reliance General Insurance, Report says [Read Order]

The Directorate General of GST Intelligence (DGGI) has issued three show-cause letters totaling Rs 922.58 crore to Reliance General Insurance Company (RGIC), a Reliance Capital subsidiary run by Anil Ambani on October 8, 2023. According to sources quoted by PTI, DGGI issued these letters in response to the money made from services like reinsurance and co-insurance. Sources with knowledge of the situation claim that the company received four separate notifications for varied sums totaling Rs 478.84 crore, Rs 359.70 crore, Rs 78.66 crore, and Rs 5.38 crore, reported BT. These notifications deal with the application of the Goods and Services Tax (GST) to several RGIC operational areas. The first notice, which totaled Rs 478.74 crore and was received on September 28, concerned the application of GST to reinsurance commission booked on reinsurance services given to both Indian and foreign reinsurance companies. According to DGGI, the re-insurance commission is considered revenue on the company's books, necessitating the payment of GST. In the second notice, which was worth Rs 359.70 crore, it was questioned if GST applied to the co-insurance premiums that the company had been given as a follower in co-insurance transactions. The lead insurer, according to RGIC, has previously paid all of the GST owed on the premium, negating the need for any further GST payments. Regardless of co-insurance agreements, the GST administration maintained that there is no provision in the GST Act that allows one registered entity to collect and dispense taxes on behalf of another. The company's use of input tax credits (ITC) for marketing expenses between July 1, 2017, and March 31, 2022 without equivalent underlying services was the subject of the third notice, which involved Rs 78.66 crore. In response, the corporation made a protest deposit of Rs. 10.13 crore towards the ITC. The fourth show-cause notice, for a total of Rs 5.38 crore, was in relation to the import of reinsurance services from foreign insurers for exempted crop insurance schemes from July 2017 to January 2018, which involved the non-payment of GST under the reverse charge mechanism, reveals sources. It's worth noting that these show-cause notices pose a significant financial challenge to Reliance General Insurance Company. Furthermore, RGIC accounts for a substantial portion, approximately 70 percent, of Reliance Capital's total value, making it a pivotal entity in the ongoing debt resolution process of Reliance Capital. As such, these developments have far-reaching implications for both the insurance subsidiary and its parent company. Recently, the Bajaj Allianz has received a GST demand notice of Rs. 1010 crores. The company received a show cause notice pertaining to its failure to remit Goods and Services Tax (GST) for two specific issues spanning from July 2017 to March 2022. The contentious matter at hand revolves around GST payments associated with these two types of premiums. It’s worth noting that this issue has been a source of disagreement between various companies and the government. Aside from Bajaj Allianz, several other insurance firms have also found themselves in a similar situation, receiving comparable notices from the Directorate of GST Intelligence. This suggests that the government’s scrutiny on GST compliance regarding these specific premiums extends beyond just one company and is part of a broader enforcement effort within the insurance industry. Read More: Bajaj Allianz Receives ₹1,010 Crore GST Demand Notice Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

DGGI issues GST Notices of Rs 922 Crore to Reliance General Insurance, Report says [Read Order]

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