Aviva India paid to Fake Vendors worth Rs.218 Crore to dodge Paying Indian Taxes

India’s Income Tax Department accused British insurer Aviva of breaking local regulations by creating a plan including counterfeit invoices and unauthorized cash transactions to bypass commission restrictions for sales agents, according to a news agency report.

The aforementioned discovery was made by the Directorate General of GST Intelligence (DGGI), which is responsible for checking violations of Goods and Services Taxes and indirect taxes, according to reports. According to the notice, Aviva improperly claimed tax credits on $26 million in fraudulent invoices, resulting in $5.2 million in tax evasion.

Aviva India spent nearly $26 million between 2017 and 2023 on firms purporting to provide marketing and training services, according to the tax notification issued on August 3. However, the DGGI’s investigations reveal that, despite professing to supply services, these vendors did not perform any work. Instead, they served as middlemen, directing payments to Aviva’s agents.

The DGGI notice to Aviva India on August 3 revealed that the insurer’s operations in India disbursed almost $26 million between 2017 and 2023 to firms purporting to provide marketing and training services.

“Aviva and its officials were involved in a deep-rooted conspiracy and used the method of fake invoices (without receipt of services) to pass on certain money to … insurance distributors of Aviva,” the investigation’s notice stated.

As per reports on the notice, which is not public, for the first time. These “show cause” notices often require companies to explain why they should not face penalties for their alleged actions.

This case is part of a larger investigation against over a dozen Indian insurers who reportedly evaded $610 million in unpaid taxes, interest, and penalties. Aviva has yet to release a statement in this regard.

The tax notice delivered to Aviva suggested that the company might face penalties totalling around $11 million. This amount is roughly equivalent to Aviva’s profits from life insurance sales in India for 2023.