Insurance companies on the radar of the tax department, be careful if the turnover is more than 12000 crores

Insurance Companies : Turnover of over Rs 12,000 crore by more than a dozen insurance companies is under the scanner of the Income Tax Department. Goods and Services Tax (GST) officials are probing several commission agents of insurance companies for tax evasion. income tax department LIC officials say these transactions were carried out by alleged shell companies that the insurance companies allegedly paid commission to the agents far in excess of the limit prescribed by the insurance regulator.

Investigation against fake companies

In November last year, the department had carried out searches at the premises belonging to the agents after the Goods and Services Tax (GST) officials were informed about alleged malpractices by over a dozen insurance companies while allocating commission to their agents. The Directorate General of GST Intelligence (DGGI) is probing these companies for allegedly shelling out for paying high commission to agents and reducing the tax outgo under other heads for these payments.

Expenses shown as advertising expenses

These companies, which include both life and non-life insurers, are under the scanner of tax authorities for allegedly showing bogus expenses to shell entities to pay extra commission, a senior government official alleged. . Therefore, while around 15% was paid through legitimate channels, the additional amount was given to firms and shown as advertising expenses. These companies made fake invoices, and GST is the only law that treats a fake invoice as a document.

Companies had shown fake expenses

Another person close to the investigation claimed that these shell companies were probed and in some cases they have admitted that they did not provide any advertising or promotional services. Scrutiny of these expenses revealed that these were bogus expenses and nothing more. In the GST case, insurance industry executives claimed that the authorities had misinterpreted expenses related to marketing and sales as commission on services and were demanding the tax.