ICICI Lombard, a prominent insurance company in India, has found itself entangled in a tax-related dispute with the Directorate General of GST Intelligence (DGGI). The DGGI has issued a show cause notice to ICICI Lombard, dated September 27, demanding a substantial sum of over Rs 1,728 crore in taxes. This notice is related to alleged non-payment of Goods and Services Tax (GST) on specific financial transactions that occurred between July 2017 and March 2022.
The tax issues mentioned in the show cause notice pertain to two key aspects of ICICI Lombard's operations:
Co-insurance Premiums: The notice suggests that ICICI Lombard did not fulfill its GST payment obligations related to co-insurance premiums. These premiums are generally associated with co-insurance transactions and may have been treated as exempt from GST by the company.
Reinsurance Commissions: The DGGI also alleges that ICICI Lombard did not pay GST on reinsurance commissions for premiums ceded to both Indian and foreign reinsurance companies. This omission is said to have occurred over a substantial period of nearly five years.
The DGGI's show cause notice demands an explanation from ICICI Lombard as to why it should not be held liable for the unpaid GST amounting to over Rs 1,728 crore. The notice invokes Section 73(1) of the Central Goods and Services Tax Act, 2017, which deals with tax liabilities, along with interest charges as per Section 50 and penalties under Section 73(1) of the CGST Act, 2017.
In response to the notice, ICICI Lombard has stated its intention to submit an appropriate response within the "prescribed timelines." The company will rely on guidance from its advisors to address the allegations raised by the DGGI.
This isn't the first time ICICI Lombard has faced such tax-related scrutiny. In August, the company received another DGGI notice, involving a tax liability of Rs 273.22 crore. This earlier issue centered around the broader industry question of GST applicability concerning salvage adjustments and ineligible Input Tax Credit related to settled motor insurance claims. ICICI Lombard chose to deposit Rs 104,13,18,970 under protest at that time without accepting liability.
Additionally, in July, ICICI Prudential Life Insurance Company, a separate entity within the ICICI Group, was served a notice by the DGGI for non-payment of taxes amounting to Rs 492.06 crore spanning five years from July 2017 to July 2022.
These developments highlight the increasing scrutiny and complexity surrounding tax compliance in India's insurance sector, with major players like ICICI Lombard facing substantial potential liabilities and legal challenges as they navigate the country's evolving tax regulations.
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