It what could be another big blow for Indian companies, taxmen have decided to extend their scrutiny on all life insurance companies to examine discrepancy in financial reporting, if any.
Preliminary investigations by the Directorate General of Central Excise Intelligence have revealed that several life insurance majors have provided incorrect audit information, thereby avoiding part payment of service tax. Tax authorities have asked insurers to provide details of their income and expenditure to assess the extent of loss.Tax authorities have already initiated investigations into the books of ICICI Prudential and Metlife India to examine discrepancies in their financial reports. HDFC Life and Reliance Life could be the next in line.
Assessment of the books of Metlife India and ICICI Prudential has indicated a likely service tax loss of R50 crore, a senior finance minister official said. “However, if more companies are found to be avoiding payment of service tax, the loss could be significantly higher,” the official told HT.
Life insurance companies pay commission to channel partners including corporate agents and insurance brokers for business provided by them. The service tax on the commission is paid by insurance companies.
Official sources told HT that a few companies have shown a fraction of the total commission paid by them to channel partners in their books of accounts to avoid payment of full service tax. The rest has been shown as expenses under different heads in order to avoid payment of service tax.
MetLife India Insurance said that the company has provided all necessary details. “This is part of a routine exercise being carried out by the central excise department,” said Rajesh Relan, MD & country manager, MetLife India Insurance.
Experts said that the issue needs to be looked into.
“To blame the auditors for any discrepancy in the records of companies is not fair as there are other officials involved in the exercise,” said Amarjit Chopra, former president, Institute of Chartered Accountants of India. “It needs to be seen whether or not all provided to them were correct.”