The Goods and Services Tax wing of the Central Board of Indirect Taxes and Customs (CBIC) has carried out tax searches and inspections against several insurance companies. The list of companies the tax sleuths have visited includes several of the major life and non-life insurers.
A government source said the tax searches were about cases where the insurance companies had taken input tax credit in excess of what they are entitled to. This is not the first time that the CBIC has launched a coordinated action against several companies in the sector.
Some years ago, the indirect tax department had investigated the non-life companies for alleged tax evasion in the motor insurance business. The combined dues had then amounted to over Rs 1,500 crore.
This time the quantum of the overdrawal of input tax credit is still being added up, but it is expected to be over Rs 3,000 crore for the entire industry. The combined demand by the department from the insurance arms of one of the financial sector entities is itself close to Rs 600 crore, it is understood.
Business Standard reached out via email and phone calls to several companies to elicit their reaction to the searches. None of them were willing to comment on the government action, which has been on since early this week.
A top source in the Insurance Regulatory and Development Authority of India confirmed the extent of action by the CBIC.
However, the source said the regulator had not been informed officially by the finance ministry. Some of the companies are in favour of collective action by roping in the General Insurance Council and the Life Insurance Council to offer a collective response to the GST wing of CBIC.
Interestingly, while some of the companies or their promoter companies are listed in the stock exchanges, none has so far apprised the shareholders of the action by the CBIC.
Over the past couple of years, the government has been taking a series of steps to ensure there are no leakages in the GST revenues. Both the direct and indirect tax departments have been pooling their information to ensure the tax dues are realised.
In August 2022, the gross GST revenue collected reached Rs 1.43 trillion, which is 28 per cent more year-on-year. For the past six months in a row, the monthly GST revenues have crossed the Rs 1.4 trillion mark.