As reported in Money Control, Certain industry practices have been leading to non-payment of the tax, due to which clarity needs to be brought in, a government official told Moneycontrol. The GST authorities have completed investigations into insurance companies for tax evasion.
Goods and Services Tax (GST) co-insurance and re-insurance are likely to be discussed at the next meeting of the GST Council, after the issue is examined by the fitment committee, a senior government official told Moneycontrol. Certain industry practices have been leading to non-payment of the tax, due to which clarity needs to be brought in, the official explained.
The GST authorities have completed investigations into insurance companies for tax evasion that has resulted in cases on three counts, due to higher commission paid to agents, coinsurance and reinsurance. In all the three cases, the department has sent out notices to insurance companies.
“On certain issues in insurance that have become industry practice, they may be taken up by the GST Council. On coinsurance and reinsurance, the matter may be examined by the fitment committee and placed before Council at the next meeting. The stakeholders have also sent representations to the GST authorities in this regard seeking clarifications, the official told Moneycontrol.
The next GST Council meeting is likely to be held before March-end. “The issues have to be dealt with, so certain issues will be taken up by Council and clarified,” he said.
Coinsurance is wherein 4-5 insurance companies provide insurance and are ready to bear the liabilities in some proportion. The practice here is for only one of the companies to pay GST—tax authorities need to clarify that each insurance company has to pay GST proportionately, he said.
In reinsurance, once the consumer takes insurance and pays a premium, the insurance company transfers the risk to another company to reduce the likelihood of large liability payouts for a claim. The Council may discuss if the difference in the amount paid by the consumer and the company is a commission or a discount on the insurance premium.
Reinsurance and coinsurance GST Notices
State-owned Life Insurance Corporation of India had received a GST notice of Rs 806.3 crore last month for various compliance-related shortcomings in FY 2017-18. LIC did not observe various rules, such as reversal of input tax credit availed from reinsurance, GST officials had said.
In 2023, Star Health and Allied Insurance received a GST demand notice of Rs 38.99 crore. The alleged demand and the impugned (disputed) Show Cause Cum Demand Notice pertains to non-payment of GST liability on the premium received by the company as a follower insurer under a coinsurance arrangement during the period from July 2017 to March 2023, the company filing had said.
ICICI Lombard General Insurance received a GST notice in 2023 for not paying tax of around Rs 1,730 crore from July 2017 to March 2022. The alleged demand show cause cum demand notice pertains to non-payment of GST on the co-insurance premium accepted and non-payment of GST on reinsurance premium ceded to various Indian and foreign reinsurance companies during the period July 2017 to March 2022, the company had said.
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