DGGI issues notices to Bajaj Allianz, ICICI Prudential et al.

As part of an investigation involving 16 insurers and over $610 million in unpaid dues, the Indian tax administration has delivered show-cause warnings to Bajaj Allianz Life Insurance and ICICI Prudential Life Insurance for dodging taxes since 2017, according to the report.

The investigation, which was launched in September of last year, targets the insurance sector’s practice of classifying all sales commissions above the regulator-mandated threshold as marketing and advertising expenses and then claiming tax credits as a result.

The report indicated that since July 2017, when India imposed the goods and services tax (GST), tax authorities believe that 16 insurance businesses collectively owe the government nearly 50 billion rupees ($610 million) in unpaid taxes, interest, and penalties.

According to the report, India’s Directorate General of Goods and Services Tax Intelligence (DGGI) is currently delivering show-cause letters to more insurance providers.

The Insurance Regulatory and Development Authority of India (IRDAI), the industry regulator, might, however, retroactively apply a new rule regarding commissions, rendering the complaint without substance.

With effect from April 1, the IRDAI has eliminated specific commission-related limits and set a general cap on both operating costs and commissions.

According to the report, the insurance industry is requesting that the regulator implement this adjustment in the past. The sources further stated that if such occurs, the case would no longer be valid.

In order to learn more about the procedures insurance companies use, the tax authorities have also questioned some banks that function as corporate agents and sell insurance products to their clients.

For feedback and suggestions, write to us at editorial@iifl.com