Insurance Companies: Transactions by insurers worth Rs 12,000 under taxpayer’s lens

Insurance Companies: Transactions by insurers worth Rs 12,000 under taxpayer's lens

Greater than ₹12,000 transactions are underneath the scanner of the earnings tax division, which is investigating a number of fee brokers of insurance coverage firms for alleged tax evasion, savvy folks informed ET.

They stated these transactions have been made by shell firms, whose insurance coverage firms allegedly paid commissions to intermediaries a lot increased than the restrict set by the insurance coverage regulator.

In November final 12 months, the ministry carried out searches at properties linked to the brokers after items and companies tax (GST) officers reported to the insurance coverage regulator of alleged misconduct in distributing commissions to greater than a dozen insurance coverage firms’ brokers.

The GST Basic Directorate of Intelligence (DGGI) is investigating these firms for allegedly paying excessive commissions to brokers which are alleged shell firms and accounting for these funds underneath different headings to scale back tax expense.

These firms, which embrace each life and non-life insurers, are underneath scrutiny by tax authorities for allegedly displaying fraudulent spending to pay overcommissions to entrance organizations, a senior authorities official informed ET.

“In different phrases, whereas practically 15 p.c of it was paid via authorized channels, the surplus was directed to firms and proven as advertising or promoting bills. These firms issued faux invoices and the one legislation that counts faux invoices as paperwork is GST.” official claimed.

“Findings relate to searches made on fee brokers (by the IT division). The investigation concluded, “These entrance organizations have been investigated and admitted that in some instances they didn’t present any promoting or promotional companies. An investigation of those expenditures revealed that these have been bogus expenditures and have been nothing greater than supporting information for ongoing investigations.”

Within the GST lawsuit, insurance coverage trade executives alleged that authorities had incorrectly interpreted advertising and sales-related expenditures as service commissions and charged taxes.

In line with trade sources, a few of these insurance coverage firms have approached the finance ministry to discover a answer to what they see as authorized variations within the interpretation of the GST statute.

As ET reported on November 12, 2022, citing educated individuals, DGGI’s Mumbai unit had carried out inspections of a number of firms and had known as their managers.

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