Rs 2,250 crore tax evasion concern: DGGI sends show cause notices to HDFC Bank, Go Digit, Policybazaar

The Directorate General of GST Intelligence (DGGI) has widened its probe against the insurance companies for wrongful claim of input tax credit. It has served show cause notices to multiple insurance intermediaries including HDFC Bank, Go Digit Insurance, Policy bazaar, people familiar with the development said.

The notices, sent by the Mumbai, Ghaziabad, and Bengaluru offices of DGGI, alleged that these companies issued fake invoices for many insurance companies without providing any service, which is a punishable offence with prosecution under the GST law.

Officials have sent out summons and notices to these intermediaries in the last 15 days. At least 120 insurance intermediaries and aggregators from across the country are under scrutiny.

“Our investigation has revealed that the insurance companies availed input tax credit (ITC) without the underlying supply of goods and services, based on fake invoices provided by these insurance intermediaries. We have sent notices”, an official said.

Email and text queries sent to HDFC, Policybazaar and Go Digit did not elicit any response till press time.

Rule 16 of the CGST Act, 2017 states that a buyer must have an invoice on which GST has been paid, and such a buyer must have received the goods or services, for availing input tax credit.

Officials claim these entities had formed an arrangement to pass on ineligible Input Tax Credit in the guise of marketing services and fraudulent invoices were raised by following a systematic modus in connivance with each other.

Companies will be liable to a 100% penalty, the official said.

The investigation was initiated in 2022 and so far, authorities have detected evasion to the tune of Rs 2,250 crore and is centred on invoices raised from 2018 to March 2022.

Separately, tax authorities have sent notices and summons to insurance companies and made recovery of tax in some cases, they said. The official said so far Rs 700 crore had been collected as pre-deposit from these companies.
The DGGI summons have already been issued to 12 Insurance companies, officials said.

Three investigations, an official said, were in the final stage and the report would be finalised soon.

The income tax department is also conducting a separate probe in the matter. The IT department is learnt to be examining tax returns of the insurance companies to investigate wrongful claim expenses towards payment of commission to these intermediaries.

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