GST Evasion of Rs. 2,250 crore: DGGI sends Show Cause Notices to HDFC Bank, Go Digit and Policybazaar

The Directorate General of GST Intelligence (DGGI) has expanded its investigation into insurance businesses for claiming incorrect input tax credits. According to persons acquainted with the situation, it has slapped show cause notices on a number of insurance intermediaries, including HDFC Bank, Go Digit Insurance, and Policybazaar.

The notices, issued by the DGGI offices in Mumbai, Ghaziabad, and Bengaluru, said that these organisations created bogus bills for numerous insurance companies without providing any service, which is a criminal offence punishable by prosecution under the GST law.

In the previous 15 days, officials have issued summons and notices to these intermediaries. At least 120 insurance brokers and aggregators from throughout the country are being investigated.

“Based on fake invoices provided by these insurance intermediaries, our investigation revealed that the insurance companies received input tax credit (ITC) without the underlying supply of goods and services. We have issued notices,” an official stated.

Email and text inquiries addressed to HDFC, Policybazaar, and Go Digit received no response as of press time.

In order to claim input tax credit under Rule 16 of the CGST Act, 2017, a buyer must have an invoice on which GST has been paid, as well as have received the goods or services.

Officials believe that these firms conspired to pass on ineligible Input Tax Credit under the pretext of marketing services, and that false bills were produced in a systematic manner.

According to the official, companies will face a 100% penalty. The inquiry was launched in 2022, and so far, officials have discovered evasion to the tune of Rs 2,250 crore, focusing on invoices raised between 2018 and March 2022.

Separately, tax authorities said they sent notifications and summonses to insurance companies and recovered revenue in some cases. According to the official, these corporations have so far contributed Rs 700 crore as a pre-deposit. According to officials, the DGGI summons has already been issued to 12 insurance companies.

According to an official, three investigations were nearing completion, and the report will be completed soon.

A separate investigation is being conducted by the income tax department. The IT department is said to be scrutinising insurance companies’ tax returns in order to investigate incorrect claim expenses related to commission payments to these middlemen.