The insurance businesses have been receiving Input Tax Credits (ITC) on fictitious invoices for the last six years. They allegedly availed the ITC wrongfully. The concerned 12 insurers have received letters from the Goods and Services Tax (GST) officials, who took heed of the situation.
It was claimed that insurance companies had received ITCs based on the invoices from the services which were not actually performed. This kind of Input Tax Credit claim was strictly prohibited by the Goods and Services Tax Act.
An enterprise can claim ITC under the provisions of GST for taxes paid on purchases made for its business operations. However, to be eligible for this ITC, the purchases must be real, and the provider must have paid the appropriate taxes to the government.
According to the officials, the insurance companies were already paying corporate agents commissions that were higher than those allowed by the Insurance Regulatory and Development Authority (IRDA).
Recently, it was reported that the Central board of Indirect Taxes (CBIC) has registered 106 cases against the insurance companies for evading taxes worth 7582 crores in the past 5 years.
Moreover, the GST officials issued similar notice to the 29 insurance companies for availing ITC for excess commission.
Further, although the GST authorities are still investigating into the situation because it is anticipated that there may be many thousands of crores at stake. The insurance companies voluntarily repaid Rs 800 crore of the ITC that had been wrongly claimed during the investigation.
Over 16 insurance businesses are the subject of an investigation by the Directorate General of GST Intelligence (DGGI) for suspected fraudulent Input Tax Credit (ITC) applications.
Further, according to sources, the authorities issued GST summonses after starting legal action against a prominent insurance intermediary for creating fictitious GST invoices worth approximately Rs. 100 crore. Insurance companies and intermediaries worked together to create fictitious invoices for marketing and sales promotion.
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