Fresh GST summons issued to over 16 insurance intermediaries across India

The Directorate General of GST Intelligence (DGGI) has initiated a probe against over 16 insurance companies alleging fraudulent Input Tax Credit (ITC) claims. 

The department has issued GST summons to many companies in the last two weeks, asking for more details. The GST authorities have extended their investigation into the fake invoicing case covering over 120 intermediaries, and aggregators in the insurance sector spread across India. They have requested signed agreements with insurance companies, cumulative input tax credits from FY 2018-19, and documents evidencing the rendering of services.

As per media reports, they issued GST summons weeks later when the authorities initiated prosecution against a leading insurance intermediary for issuing fake GST invoices worth around Rs.100 crore. Intermediaries teamed up with insurance companies to generate fake invoices for marketing and sales promotion. 

Some intermediaries gave information partly while failing to demonstrate the services rendered against such invoices raised in many cases. Prosecution proceedings were launched recently against a listed e-intermediary, and the concerned company sought further time to provide details.

A government official reported to the media that the officers questioned some of these companies’ Chief Financial Officers (CFO) last week. They were asked to produce some documents for tax filing, specifically the revenue these intermediaries obtained from top insurers in India.

Once the intermediaries and aggregators have handed over all the data, authorities are expected to question insurance companies directly. The GST authorities reckon sector-wide irregularities in the payment of commissions to brokerages and intermediaries.

The GST law punishes people involved in fake invoicing with five-year imprisonment. The DGGI’s investigation found that the insurance firms allegedly gave as much as 70% in commission to insurance intermediaries and offline agents. It is prevalent despite the Insurance Regulatory and Development Authority of India (IRDAI) setting the limit at 15-20%. In 2022, the DGGI identified GST evasion of Rs.824 crore committed by 15 life insurance and non-life insurance companies.