• Notification Date: 28-02-2023
• Notification No: N/A

DGGI issues Summons against 16 Insurance Companies for Alleged Fraudulent GST ITC Claims

The Directorate General of GST Intelligence (DGGI) has launched an investigation into over 16 insurance companies for fraudulent Input Tax Credit (ITC) claims. The department has issued GST summons to several companies in the past two weeks, seeking more information. The authorities are expanding their investigation into the fake invoicing case, which covers more than 120 intermediaries and aggregators in the insurance sector across India. They have requested signed agreements with insurance companies, cumulative input tax credits from FY 2018-19, and documentation showing the rendering of services. 

According to reports, the authorities issued GST summons after initiating prosecution against a leading insurance intermediary for issuing fake GST invoices worth around Rs.100 crore. Intermediaries collaborated with insurance companies to generate fake invoices for marketing and sales promotion. Some intermediaries provided incomplete information while failing to demonstrate the services rendered against such invoices raised in many cases. Recently, prosecution proceedings were initiated against a listed e-intermediary, and the concerned company requested additional time to provide details. 
Government officials reported that last week, officers questioned some of these companies’ Chief Financial Officers (CFO). They were asked to produce documents for tax filing, specifically the revenue these intermediaries obtained from top insurers in India. Once the intermediaries and aggregators have provided all the data, authorities are expected to question insurance companies directly. 

The GST authorities have identified irregularities in commission payments to brokers and intermediaries across the sector. The GST law punishes individuals involved in fake invoicing with five-year imprisonment. The DGGI’s investigation revealed that the insurance firms allegedly gave as much as 70% commission to insurance intermediaries and offline agents, despite the Insurance Regulatory and Development Authority of India (IRDAI) setting the limit at 15-20%. In 2022, the DGGI discovered GST evasion of Rs.824 crore committed by 15 life insurance and non-life insurance companies. 

The investigation is set afoot, and more details are expected to emerge in the coming weeks. The DGGI’s efforts to root out fraudulent activities in the insurance sector demonstrate the Indian government’s commitment to tackling corruption and ensuring transparency in business transactions. 

In another significant move by the Directorate General of GST Intelligence, an alleged 20 Crore GST ITC Scam by Issue of good-less invoices was uncovered and one of the accused was arrested for passing on fraudulent Input Tax Credit (ITC) worth more than ₹20 crore by issuing goods-less invoices more than ₹135 crore (inclusive of GST).