The Directorate General of GST Intelligence (DGGI) has initiated action against several insurance companies, including HDFC Bank, Go Digit Insurance, and Policybazaar, for allegedly issuing fake invoices to claim input tax credit without providing any services. DGGI officials have sent show-cause notices and summons to at least 120 insurance intermediaries and aggregators across the country in the last 15 days, after a year-long investigation revealed evasion of Rs 2,250 crore through fraudulent invoices raised from 2018 to March 2022, according to reports.
According to an official from DGGI, the investigation has uncovered that insurance companies obtained input tax credit without receiving actual goods or services, relying on fraudulent invoices provided by insurance intermediaries. Notices have been sent in response to this finding. As per the GST law, a buyer must have an invoice on which GST has been paid, and must have received the goods or services to avail input tax credit, as per Rule 16 of the CGST Act, 2017.
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Furthermore, officials disclosed that these entities had devised schemes to transfer ineligible input tax credit by disguising them as marketing services, and they had generated fraudulent invoices as a means to evade taxes. In a separate case, tax authorities have also sent notices and summons to insurance companies, and in some cases, recovery of tax has been made. According to officials, a total of Rs 700 crore has been collected as pre-deposit from these companies, and summons have been issued to 12 insurance companies by DGGI.
Previously, the DGGI had issued notices to approximately 10-12 mutual fund houses, requesting information regarding their past transactions. In February, the DGGI accused these mutual funds of improperly claiming input tax credit in order to reduce their GST liability, by recording specific expenses in 2017-18 in a way that did not align with the accounting practices mandated for expenses capped at 2.25 percent of assets under management (AUM) by Asset Management Companies.
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