₹824cr GST fraud by 16 insurance companies detected
The GST authority has caught an alleged misappropriation of input tax credit worth ₹824 crore by 16 insurance companies who used their intermediaries to issue fake invoices, a statement issued by the Union finance ministry said on Friday.
The Goods and Services Tax (GST) authority has caught an alleged misappropriation of input tax credit (ITC) worth ₹824 crore by 16 insurance companies who used their intermediaries to issue fake invoices, a statement issued by the Union finance ministry said on Friday. The statement did not disclose the names of the firms.
“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 sixteen insurance companies so far,” the ministry said quoting the Directorate General of GST Intelligence (DGGI), Mumbai zonal unit. The investigation was initiated by the DGGI, Mumbai. The statement did not disclose the names of the firms.
During investigations, the ministry statement said, it came to notice that these insurance companies have availed ITC based on invoices issued by several intermediaries for providing services such as advertising, marketing, and brand activation. But no such services were provided, it added.
“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,” the statement said, adding that further investigation is in progress.
Explaining the modus operandi, the ministry 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 liked 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 the 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.”