IT Department finds alleged Tax Evasion worth Rs.15,000 crore by Insurance Companies

The Income Tax Department has finished its investigation into insurance companies and discovered tax fraud of more than Rs 15,000 crore. The investigation was being carried out to look into suspected malpractices done by insurance companies regarding commission payments.

According to a report, the investigation is now complete, and the tax imposed would be roughly Rs 4,500 crore. The government reviewed around 25 insurers and 250 companies as part of the investigation.

As per report’s anonymous source, “the findings, which detail the alleged evasion, the modus operandi, and the amounts involved, have been shared with assessing officers of the concerned firms and mid-level entities.”

Following an examination of the investigation’s outcomes, the assessment officers would ‘increase the tax demand, inclusive of interest and penalty,’ according to the report.

The Directorate General of GST Intelligence (DGGI) also investigated the insurers. The tax department investigated alleged tax evasion in violation of the Insurance Regulatory and Development Authority of India (IRDAI), while the DGGI investigated insurers for allegedly fraudulent input tax credit claims.

“The GST authorities were expected to complete their investigation into bogus input tax credit claims shortly and to issue show-cause notices to private insurance companies.” as per the report cited in april this year.

After the GST authorities complained to the regulator in 2022 about the suspected use of shell firms to pay agents with commissions much in excess of the cap, insurance companies came under scrutiny for the commissions paid to the agents by the insurers.

The insurance industry has contended that the GST authorities misread the circumstances. They contend that the authorities have incorrectly classified marketing and sales-related costs as commissions on services.

According to a July investigation, roughly 15 insurance firms, including HDFC Life Insurance, Aditya Birla Sun Life Insurance, and others, were discovered to be evaded GST worth Rs 2,350 crore.