Leading insurance companies under GST scanner for alleged fake invoicing

Leading insurance companies have come under the scanner of the investigations wing of the Goods and Service Tax (GST) administration for allegedly issuing fake invoices of commissions to agents.

The Directorate General of GST Intelligence (DGGI) has started investigating cases against these companies at their Mumbai offices, sources said.

Notices have also been issued to vendors of these companies, they added.

The case relates to the issue of invoices to agents by insurers for their commissions and payment of GST to the government by these companies under the Reverse Charge Mechanism (RCM). Generally the seller of the service pays GST to the government, but in case of some services where it is difficult to identify service providers, the tax is paid by the buyer of service under the RCM mechanism.

This is then claimed by insurance companies as input tax credit, sources said.

However, those opposing these notices said that the process is revenue neutral to the government.

"While the moot point remains whether the services have been received by insurance companies, the related aspect is that these are revenue neutral transactions and hence any coercive measures cannot be taken without adjudication of the issue," said Abhishek Rastogi, founder of Rastogi Chambers.

He said in some cases, it appears that summons have been issued to top management and this approach is against the broad circular which prevents field officers from doing so at the very inception.

Earlier in August, the Central Board of Indirect Taxes and Customs (CBIC) had issued instructions, prescribing procedures and dos and don’ts for issuing summons. It had said chairmen, managing directors, chief executive officers, chief financial officers should not be issued summons to call documents, or evidence in the first instance.