Bogus invoices row: GST authorities summon insurance intermediaries

I-T joins probe, quizzes chief financial officers seeking info on 'commissions'

Widening its probe in the bogus invoicing case against insurance intermediaries and aggregators, the Goods and Services Tax (GST) authorities issued summons to several of them in the past two weeks seeking extensive information.

The information sought includes their agreement and contract with insurance companies, total input tax credit passed to them since 2018-19, along with supporting documents proving rendering of services. The summons were issued in connection with the Directorate General of GST intelligence (DGGI) probe launched in 2022 against at least 16 insurance companies for allegedly availing input tax credit in a fraudulent manner.

These intermediaries allegedly generated bogus invoices in the guise of marketing and sales in collusion with insurance companies. “The summons have been issued under section 70 of the Central GST Act to some of the intermediaries,” a source privy to the matter told Business Standard.

“Some of them provided partial information, but in many cases they failed to prove the services rendered against which invoices were raised,” the source added. The GST authorities recently launched prosecution proceedings against a listed e-intermediary. “The matter is still ongoing and the company concerned sought some time to furnish details,” the source said.

Meanwhile, the income tax department has also started questioning officials of some of these intermediaries seeking information on the money they received as “commission” from the insurance companies and whether it was disclosed fully in their tax filing.

“Chief financial officers of some of these firms were questioned last week. They have been asked to provide a slew of documents related to their tax filing, particularly the revenue these intermediaries received from top insurers of the country,” said an official.

The I-T department is learnt to be examining their tax returns for the past three to five years, they said.

At least 120 insurance intermediaries and aggregators from across the country are under scrutiny, mainly from Mumbai, Gurugram and Bengaluru.

Sources said that the I-T team would soon reach out to insurance companies after collating all data from the intermediaries. The department suspects industry-wide irregularities in paying commission to their brokerages and intermediaries.  

Under the GST regime, issuing an invoice without supply attracts a jail term up to five years if the amount involved is Rs 5 crore or above. The offence is not bailable. The DGGI probe allegedly found that the insurance firms were paying commissions as high as 70 per cent to intermediaries like these and even offline agents.

 Notably, the limit is 15-20 per cent depending on the products prescribed by the Insurance Regulatory and Development Authority of India (Irdai).

The GST team is tracking the ineligible input tax credit, while the tax department is looking at possible tax evasion while issuing fake invoices, the sources cited above said.

The practice is systematically planned and executed in collusion with insurance companies, they underlined. The investigators are examining invoices raised by both online insurance marketplaces and offline brokerages. Last year, the DGGI detected tax evasion of Rs 824 crore by 15 life and non-life insurance companies and others as part of its probe.

WIDENING THE PROBE

• At least 120 insurance intermediaries and aggregators are under scanner
• Intermediaries allegedly generating bogus invoices in the name of marketing and sales service in collusion with insurers 
• Investigators examining invoices by both online insurance marketplaces and offline brokerages
• I-T dept examining tax returns of last three to five years; to reach out to insurers after collating data