DGGI sends show cause notices over tax evasion concerns worth Rs 2,250 crore

The Directorate General of GST Intelligence (DGGI) has sent show-cause notices to some insurance companies, such as HDFC Bank, Go Digit Insurance, and Policybazaar, for issuing fake invoices to claim input tax credit without providing any service. According to a report in The Economic Times, the show-cause notices, which were sent by regional offices of DGGI, claimed that these companies issued fake invoices for many insurance companies without providing any service. Under GST law, doing such a thing is a punishable offence. 

DGGI officials have sent out summons and notices to these intermediaries in the last 15 days. At least 120 insurance intermediaries and aggregators from across the country are under scrutiny. 

The DGGI started its investigation in 2022 and authorities have reportedly found evasion to the tune of Rs 2,250 crore and are centered on invoices raised from 2018 to March 2022, as per the report. 

“Our investigation has revealed that the insurance companies availed input tax credit without the underlying supply of goods and services, based on fake invoices provided by these insurance intermediaries. We have sent notices,” an official said. 

As per the GST law, under Rule 16 of the CGST Act, 2017, a buyer must have an invoice on which GST has been paid, and such a buyer must have received the goods or services, for availing of input tax credit. 

Officials said that these entities had formed an arrangement to pass on ineligible Input Tax Credit in the guise of marketing services and fraudulent invoices were produced. 

In a separate case, tax authorities have sent notices and summons to insurance companies and made recovery of tax in some cases, they said. So far, the official said Rs 700 crore had been collected as pre-deposit from these companies. The DGGI has issued summons to 12 insurance companies, the officials said. 

Earlier, DGGI sent notices to about 10-12 mutual fund houses seeking details of their past transactions. In February, DGGI said these mutual funds have booked certain expenditures, against which they have claimed wrongfully input tax credit (ITC) to lower their GST liability. DGGI alleged that this pertains to mutual funds claims in 2017-18, where it has found discrepancies in accounting by Asset Management Companies for expenses, capped at 2.25 per cent of assets under management (AUM). 

It alleged that mutual funds wrongfully accounted for the scheme of cost as capital expenditure to claim these credits. DGGI had sought recovery of the so-called wrongful ITC that was claimed by these mutual fund houses. 

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