I-T department uncovers evasion of Rs 15,000 crore by insurance companies

The commission paid by insurers to agents came under scanner after the GST authorities had informed the regulator in 2022 about these alleged shell companies being floated to route commissions to agents which is above the cap set by it

The income tax (I-T) department has uncovered evasion of more than Rs 15,000 crore as it completed its investigation into alleged malpractices in the payment of commissions by insurance companies.

The tax on this will be about Rs 4,500 crore, people aware of the matter told The Economic Times.

The probe covered more than 25 insurers and over 250 businesses. “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 the mid-level entities,” a source told the news daily. “The AOs, after studying the findings, will raise the tax demand, inclusive of interest and penalty,” the report added.

Moneycontrol could not independently verify the report.

Apart from the I-T department, insurers were also investigated by the Directorate General of GST Intelligence (DGGI). While the DGGI was probing them for fake input tax credit (ITC) claims, the tax department was investigating alleged tax evasion in violation of Insurance Regulatory and Development Authority of India (IRDAI) norms.

The commission paid by insurers to agents came under scanner after the GST authorities had informed the regulator in 2022 about these alleged shell companies being floated to route commissions to agents which is above the cap set by it.

Sources, in April, told Moneycontrol that the GST authorities are soon going to complete their probe into availment of ineligible input tax credit and will send out more show-cause notices to private insurance companies.

In their defence, the insurance industry executives claimed that these expenses are marketing and sales-related and have been wrongly interpreted as commission on services by GST authorities.

As per a Moneycontrol report, as many as 15 insurance companies, including Bajaj Allianz, Aditya Birla Sun Life Insurance, HDFC Life Insurance along with some public insurers have been found to evade Rs 2,350 crore of Goods and Service Tax (GST).