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regular-article-logo Thursday, 29 February 2024

Insurers battle GST demands over unpaid tax, showcause notices worth Rs 7,000 crore served

Listed insurance companies such as New India Assurance, ICICI Lombard General Insurance, ICICI Prudential Life Insurance, HDFC Life Insurance, Star Health and Allied Insurance and others have disclosed such notices to the stock exchanges

A Staff Reporter Calcutta Published 05.12.23, 11:30 AM
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The taxman and the insurance companies are heading for a showdown over GST dues. Analysts anticipate litigations over a host of issues relating to the allegations of unpaid tax.

Showcause notices of over Rs 7,000 crore have already been issued to insurance companies by the Directorate General of GST Intelligence and more companies are under the radar.

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Government-owned insurance companies have also received notices.

Listed insurance companies such as New India Assurance, ICICI Lombard General Insurance, ICICI Prudential Life Insurance, HDFC Life Insurance, Star Health and Allied Insurance and others have disclosed such notices to the stock exchanges.

According to industry observers, insurance companies operate with identical models and have adopted similar tax positions. Due to this, if the tax authorities do not agree with any position adopted by a company, they typically investigate all other companies in the sector.

“Recently some of the issues where the insurance companies received demand notices are input tax credit claims on marketing expenses paid to agents, GST on reinsurance commission as well as on the share of insurance premium of follower insurer in case of co-insurance arrangements, GST on salvage values etc,” said Sandeep Pareek, partner, indirect tax, BDO India.

“Considering the typical nature of operations, it is highly possible that in case of disagreements in one company, it would lead to a significant number of notices to all other insurance companies. In such disagreements, at the initial stage it would be important for the industry bodies (General Insurance Council/Life Insurance Council etc.) to engage with tax authorities,” said Pareek.

“There has been a flurry of notices and rigorous investigations against general insurance companies.

“These proceedings will invariably result into litigation and large-ticket ones given the size and scale of operations of these companies,” said Ranjeet Mahtani, partner, Dhruva Advisors.

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