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Taxmen train guns on life insurers
Alleged discrepancy in service tax payment and misreporting of information by ICICI Prudential, Metlife India. Mahua Venkatesh reports.
Life insurance majors-ICICI Prudential and Metlife India have come under the scanner of the Directorate General of Central Excise Intelligence for alleged discrepancy in payment of service tax and misreporting of information.
Preliminary investigations suggest that misreporting by the two companies likely resulted in a loss of Rs. 50 crore in service tax to the exchequer.
"However, further investigations are currently on and the sum could be even more than Rs. 100 crore," a senior finance ministry official told HT on the condition of anonymity.
Life insurance companies are required to pay commission to channel partners including corporate agents and insurance brokers for businesses provided by them. The commission paid is taxable and is paid by insurance companies by way of Reverse Charge Mechanism.
According to investigations by the Directorate General of Central Excise Intelligence, the two companies have shown only a part of the total commission paid by them to channel partners in their books of accounts while the rest has been shown as expenses under different heads in order to avoid tax payment.
The scrutiny of books was "part of a routine process," said Rajesh Relan, managing director and country manager, Metlife India. "Metlife India has always fulfilled its service tax obligations in accordance with the law and has shared all information with the authority."
HT was unable to contact ICICI Prudential.
A life insurance industry expert said that most companies have opposed the implementation of service tax on commission, citing losses to their profit margins.
