Insurance firms under lens for tax evasion of over Rs 300 crore
Tags:
Insurance companies have come under the scanner of a government intelligence agency for allegedly evading service tax of over Rs 300 crore.
The Directorate General of Central Excise Intelligence (DGCEI) has initiated a probe following complaints of the service tax evasion by various insurance providers.
"There have been some instances of tax evasion by insurance firms. An enquiry is being conducted by the officials," a senior DGCEI official, who did not wish to be identified, told media persons.
He said the records of insurers are being cross-verified to ascertain any irregularities.
"The inquiry so far has found service tax evasion of at least Rs 300 crore. The investigations are underway and the amount is likely to be higher," the official said without divulging names of insurance companies under the lens.
All general policies including insurance against risk of loss to assets like motor vehicle etc is 12.36 per cent on the annual premium paid.
Whereas, the rate of service tax varies on the part of premium taken towards risk coverage for life insurance, according to a Mumbai-based service tax expert.
According to another DGCEI official, most of the irregularities have been detected in payment to insurance brokers or agents by the companies.
"During our enquiry, we found that some companies were deducting service tax from agents who were selling their products. But failed to show it on their accounts book for government scrutiny," the official said.
Besides, there have been instances where the companies were giving incorrect data of the total policies sold or renewed by them to evade tax, he said.
The total annual premium income of the insurance industry comprising life, non-life and health, is around Rs 3.5 lakh crore, as per the Insurance Regulatory and Development Authority (IRDA) data.
According to DGCEI, initial probe has found that companies were evading taxes at the time of renewing the old policies or refunding amounts on policies surrendered before the maturity period.
"There are also instances where the firms are evading service tax net in cases where the insurer is charged an amount for shifting from one insurance company to another," the official said.
According to analysts, there are two types of frauds in the insurance sector. One is committed against the insurance companies by the brokers and the external constituents.
The second is the fraud committed by the insurance companies on the shareholders, regulators and tax authorities.
Tax evasion falls under the second category. Under this, commission is clubbed as other expenses to circumvent service tax payments.
Post new comment