GST: 16 Insurance Companies Being Probed For Ineligible Input Tax Credit Claim

The Goods and Services Tax authorities are investigating 16 insurance companies for availing ineligible input tax credit.

The GST authorities initiated investigation after information against ICICI Prudential Insurance Co. surfaced, BQ Prime has learnt. The company voluntarily paid Rs 100 crore during the investigation and is not currently looking to contest the charges.

ICICI Prudential didn't respond to BQ Prime's emailed queries.

The probe revealed that the 16 insurance companies availed ineligible input tax credit worth Rs 824 crore, according to a statement by the Ministry of Finance. Of that, they have voluntarily paid Rs 217 crore so far.

The charges include wrongful claim of input tax credit in the absence of underlying supply.

"It has come to notice that these insurance companies have availed input tax credit on the basis of invoices issued by several intermediaries for providing services of advertising, marketing, brand activation, etc., whereas no such services had actually been provided," the statement said.

Under the GST law, businesses can offset the tax paid on inputs against the levy on final goods and services they provide.

According to the ministry statement, the modus operandi involved non-bank lenders acting as corporate agents of insurance companies and cross-selling single premium credit linked insurance policies in the course of their lending business.

The Insurance Regulatory and Development Authority regulations only allow nominal commission to corporate agents.

In this case, the insurance companies allegedly obtained invoices from intermediaries to transfer commission—over and above the permissible limit—to NBFCs for providing advertising and web marketing services. But intermediaries had not offered such services, the ministry said.

Investigation is on and insurance companies, intermediary marketing and branding companies, NBFCs and banks in multiple cities are under the scanner.