CBIC initiates investigation of insurance companies for alleged wrongful availment of ITC



Quick Summary
The GST wing of the CBIC has launched an investigation into more than ten insurance companies suspected of wrongly claiming input tax credits amounting to approximately £1 billion. Officials are examining two years of company documents and plan to issue show cause notices. The probe, which expands on a previous investigation from 2022, focuses on apparent mis-selling of commissions and invoices raised for services not rendered. Penalties under the CGST Act for such offences can include fines and imprisonment.

The GST wing of the Central Board of Indirect Taxes & Customs (CBIC) is investigating over a dozen insurance companies for allegedly claiming wrongful input tax credits of amount pegged at Rs 1000 crore.

CBIC officials are analysing documents of the past two years of insurance companies and are in the process of issuing show cause notice to the companies.

"We have noticed mis-selling in terms of the commission paid to agents as per IRDAI rules, and invoices being raised for services that are not being rendered," a CBIC official told on the condition of anonymity.

Earlier in 2022, the Directorate General of GST Intelligence had also probed the matter. The scope of that probe is now being expanded, the source added.

CBIC Probes Insurers for £1bn ITC Fraud

According to Section 122 of the Central GST Act, "issuing an invoice without supply attracts a penalty and imprisonment up to five years if the amount involved is Rs 5 crore or above". The offense is not bailable.

Officials added that the department is dealing with alleged fake claims through data analysis and is ramping up its audits. "Last year we were able to do close to 4,000 audits and we will ramp it up gradually," said an official.

The scale up of audits is aimed at improving GST collections. The department is also exchanging data with its direct tax counterparts so as to plug any loopholes.

FAQ :

The CBIC is investigating insurance companies for allegedly claiming wrongful input tax credits (ITC) and for mis-selling commissions and issuing invoices for services not rendered.

The amount of input tax credit allegedly claimed wrongly is pegged at approximately £1 billion (Rs 1000 crore).

CBIC officials are analysing documents from the past two years of the insurance companies.

According to Section 122 of the Central GST Act, issuing an invoice without supply attracts a penalty and imprisonment up to five years if the amount involved is £5 crore (Rs 5 crore) or above. The offence is not bailable.

No, the Directorate General of GST Intelligence had also probed the matter in 2022, and the scope of that probe is now being expanded.

The department is ramping up its audits, aiming to conduct more than the close to 4,000 audits completed last year, and is exchanging data with direct tax counterparts to plug loopholes.




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Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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