Banks, Insurers Face GST Notices in matter of bogus commission payments:

Banks, Insurers Face GST Notices in matter of bogus commission payments The GST authorities are preparing to send show-cause notices to 29 insurance companies, a major private bank, around five non-banking financial companies (NBFCs), and over 100 merchants. These entities were involved in paying for bogus services in order for insurers to pay a bank commission that exceeded the legal limit. Another 28 private insurers are being investigated by the GST authorities for obtaining illegal input tax credit (ITC) for excess commission payments to finance businesses for bogus services by delivering manpower or paying in kind. In contrast to the allowable 15% commission, insurers have paid up to 70% of the first-year premium under various headings. The insurance company paid for the distributor's labor, but he claimed ITC. During the investigation, the insurance companies voluntarily paid Rs 800 crore of the fraudulently claimed ITC, but the GST authorities are continuing to investigate because the amount involved is estimated to be in the thousands of crores. The income tax agency is also looking into these corporations in a tax evasion case worth over Rs 13,000 crore. According to a GST official, whether granting consumer, vehicle, or home loans and pushing insurance policies, lenders might exercise influence over borrowers. As a result, insurers compete by paying bigger commissions to financial businesses to sell their products. The insurer's strategy for paying larger commissions was to hire personnel from staffing MNCs, but these hired people would work for banks and NBFCs. "During the investigation, it was discovered that none of the employees assigned to banks/NBFCs were assigned any insurance company work." "Insurance companies received ITC for workforce deployed and working for other companies," said a GST official. "These outsourced employees were paid by insurance companies, but they were working for banks or NBFCs," he continued. Staffing MNC officials stated that their contracts were with insurance firms and that it was not their concern where the insurance companies placed the people.