16 insurance firms caught evading GST worth ₹824 crore: Govt
The insurance companies availed input tax credit on the basis of invoices issued by intermediaries for providing services such as advertising, marketing, and brand activation. But no such services were provided, the finance ministry said
NEW DELHI: The Goods and Services Tax (GST) authority has detected alleged misappropriation of input tax credit (ITC) worth ₹824 crore by 16 insurance companies who used their intermediaries to issue fake invoices, according to a statement issued by the Union finance ministry on Friday.
“Investigations have revealed that input tax credit of ₹824 crore has been availed, out of which an amount of ₹217 crore has been paid voluntarily by these 16 insurance companies so far,” it said quoting the Directorate General of GST Intelligence (DGGI), Mumbai zonal unit. The investigation was initiated by DGGI, Mumbai. The statement did not disclose the names of the firms.
During the course of investigations, it came to notice that these insurance companies have availed ITC on the basis of invoices issued by several intermediaries for providing services such as advertising, marketing, and brand activation. But, no such services had actually been provided, it said.
“Thus, in the absence of any underlying supply, the input tax credit availed by the said insurance companies, is not permissible under the GST law,” it said.
Explaining the modus operandi, it said: “Several non-banking financial companies (NBFCs) engaged in micro-financing businesses are acting as corporate agents of the insurance companies and are cross-selling their single premium credit [linked] insurance policies in the course of their lending business. As per IRDA regulations, only a nominal commission is permitted to corporate agents. In order to circumvent these regulations, the insurance companies have resorted to obtaining invoices from intermediaries, in order to transfer commission (over and above the permissible limit) to NBFCs for supply of services of advertising, web marketing etc., whereas there has been no underlying supply of services. In turn, these intermediaries have received invoices from NBFCs for such supplies.”