DGGI sends show cause notices to many insurance companies over tax evasion concerns

The Directorate General of GST Intelligence (DGGI) has sent show-cause notices to some insurance companies, such as HDFC Bank, Go Digit Insurance, and Policybazaar, for issuing fake invoices to claim input tax credit without providing any service. The show-cause notices claimed that these companies issued fake invoices for many insurance companies without providing any service.

DGGI officials have sent out summons and notices to these intermediaries in the last 15 days. At least 120 insurance intermediaries and aggregators from across the country are under scrutiny.

The DGGI started its investigation in 2022 and authorities have reportedly found evasion to the tune of Rs 2,250 crore and are centered on invoices raised from 2018 to March 2022.

As per an official, “Our investigation has revealed that the insurance companies availed input tax credit without the underlying supply of goods and services, based on fake invoices provided by these insurance intermediaries. We have sent notices”.

As per the GST law, under Rule 16 of the CGST Act, 2017, a buyer must have an invoice on which GST has been paid, and such a buyer must have received the goods or services, for availing input tax credit.

Officials said that these entities had formed an arrangement to pass on ineligible Input Tax Credit in the guise of marketing services and fraudulent invoices were produced.

Earlier, DGGI sent notices to about 10-12 mutual fund houses seeking details of their past transactions. In February, DGGI said these mutual funds have booked certain expenditures, against which they have wrongfully claimed input tax credit (ITC) to lower their GST liability. DGGI alleged that this pertains to mutual funds claims in 2017-18, where it has found discrepancies in accounting by Asset Management Companies for expenses, capped at 2.25 per cent of assets under management (AUM).