GST Authorities probe insurance Companies for Commission payouts.

GST Authorities probe insurance Companies for Commission payouts.

The Directorate General of GST Intelligence (DGGI) has been investigating Insurance companies for allegedly paying huge commission basis fake invoices and by floating shell companies and accounting for the payments under other heads to reduce tax outgo.

Recently, the Mumbai unit of the DGGI conducted inspections on some companies and also summoned their executives to further probe into the matter.

GST department has also informed Insurance Regulation Development Authority (IRDA) about the malpractice being adopted by the insurance companies for paying huge Commissions. It is revealed that a commission as high as 70% has been paid by some of the companies while the general rate is 15%.

It is reckoned that GST is the only law that has provisions against the issue of fake invoices.

However, Insurance industry executives maintain that GST authorities have wrongly interpreted marketing and sales-related expenses as commissions on services and were seeking to levy GST tax. The insurance industry has also approached the finance ministry seeking a resolution to the issue as they maintain that the GST department has wrongly interpreted the legal provisions in this regard.

The department is probing transactions of these firms running into more than Rs 5,000 crore and involving GST of over Rs 500 crore.

Tax authorities have slapped huge claims on insurance companies because they interpret marketing and sales-related expenses as services and seek tax on these payments.

Companies are wary of warnings of strict action including arrest and have sought a fair hearing in these cases.

Executives from life insurance companies have also approached the Insurance Regulatory and Development Authority.