The Income Tax department has uncovered evasion of more than Rs 15,000 crore as it completed the investigation into alleged malpractices in the payment of commissions by insurance companies.
The insurers were also investigated by the Directorate General of GST Intelligence (DGGI). The investigation by the tax department looked into alleged tax evasion in violation of the Insurance Regulatory and Development Authority of India (IRDAI), while the DGGI looked into the insurers for allegedly fake input tax credit claims (ITC).
The commission paid by insurers to agents came under scanner after the GST authorities had informed the regulator in 2022 about these alleged shell companies being floated to route the commissions to agents which is above the cap set by it. In the beginning of April, this year the GST started their probe into availment of ineligible input tax credit and started to send more show-cause notices to private insurance companies.
The probe has now been concluded by the GST Department and the tax to be levied regarding the same will be around Rs 4,500 crore. More than 25 insurers and 250 businesses were investigated by the department in the probe.
The insurance industry executives claimed that these expenses are marketing and sales-related and have been wrongly interpreted as commission on services by GST authorities.
Sources stated that the findings, which detail the alleged evasion, the modus operandi and the amounts involved, have been shared with assessing officers of the concerned firms and the mid-level entities. The Assessing Officers, after studying the findings, will raise the tax demand, inclusive of interest and penalty
About 15 insurance companies including the likes of HDFC Life Insurance, Aditya Birla Sun Life Insurance, and more were found to be evading GST worth Rs 2,350 crore.
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