Top insurers are preparing for a long-drawn legal battle with GST authorities over a potential tax liability that could exceed Rs5,500 crore, an Economic Times report said on Wednesday. The report stated that the Adjudicating Authority of GST has confirmed a Rs 2,400 crore demand against prominent insurer HDFC Life Insurance. Authorities have alleged that insurers wrongfully claimed tax credits on agent commissions.
Citing an unnamed senior government official, the ET report mentioned that the demand against HDFC Life Insurance could set a precedent, potentially pushing the tax liability of the entire insurance sector in India beyond Rs 5,500 crore.
The report further stated that the GST department has issued show cause notices to as many as 30 insurers regarding the input tax credit (ITC). This demand, based on an investigation by the Directorate General of GST Intelligence, amounts to approximately Rs 5,500 crore. Officials claim that insurers wrongfully claimed ITC.
Confirming the development, HDFC Life also stated that GST authorities have raised a demand notice totaling Rs 2,422 crore. As per an exchange filing, the insurer noted that the demand, or “corrigendum,” pertains to the period between 2017 and 2022. HDFC Life further mentioned that it is in the process of filing a rectification and has already deposited Rs 250 crore.
The Adjudicating Authority, in its order, stated that HDFC Life officials had “confirmed” that invoices for “fabricated marketing activities” were raised by vendors. The GST authority also alleged that HDFC Life directed commission payments beyond regulatory norms to corporate agents. This was reportedly done under the pretext of advertising expenses through marketing vendors.
