The Goods and Services Tax (GST) authorities issued summons against the insurance intermediaries for generating phoney invoices in a row. In the previous two weeks in an effort to gather further evidence as part of their investigation into the false invoicing case against them.
In accordance with section 70 of the Central Goods and Services Tax (CGST), the tax authorities summoned several insurance intermediaries for fabricating invoices under the guise of marketing and sales in cooperation with insurance businesses.
The summons were issued to collect Information required including their agreement and contract with insurance companies, the total amount of input tax credits granted to them since 2018–19, as well as any supporting documentation demonstrating the provision of services. Further issued in connection with an investigation by the Directorate General of GST Intelligence (DGGI) into allegations of fraudulently claiming input tax credits by at least 16 insurance businesses in 2022.
According to a report, the Tax authorities recently filed charges against a listed intermediary. The situation is still open, though, therefore the involved company asked for some time to provide information.
The I-T team would shortly contact insurance firms after gathering all of the data from the intermediaries, according to sources. The government believes widespread irregularities in the way that brokerages and intermediaries are paid commissions. If the amount involved is ₹5 crore or more, issuing an invoice without a supply is punishable by a prison sentence of up to five years under the GST regime.
In accordance with the DGGI investigation, insurance companies were allegedly paying commissions of up to 70% to middlemen like these and even offline agents. Incidentally, the cap ranges between 15-20% depending on the goods the Insurance Regulation and Development Authority of India has approved (IRDAI). As part of its investigation last year, the DGGI discovered tax evasion by 15 life and non-life insurance companies as well as other parties totaling 824 crore.
The income tax administration has already begun interviewing executives of some of these intermediaries in order to learn more about the money they got from the insurance firms as “commission” and if it was completely stated in their tax filings.
Further, when the tax agency investigates potential tax evasion by creating phoney invoices, the GST team monitors the ineligible input tax credit.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
