Bajaj Allianz General Insurance Company Limited (BAGIC), an unlisted subsidiary of Bajaj Finserv, has been slapped with a ₹1,010 crore Goods and Services Tax (GST) demand notice by the Directorate of GST Intelligence. The notice, received on September 29, 2023, alleges that BAGIC failed to pay GST on co-insurance and re-insurance premiums during the period from July 2017 to March 2022.
In a stock exchange filing, Bajaj Finserv confirmed the receipt of the show-cause cum demand notice and stated that the company intends to file an appropriate response within the prescribed timelines.
This notice is part of a broader crackdown by tax authorities on insurance companies for their non-payment of GST on various insurance-related transactions. Other insurance firms have also received similar notices from the Directorate General of GST Intelligence (DGGI).
One such company is ICICI Lombard General Insurance, which recently disclosed that it had received a ₹1,728 crore GST demand notice from the DGGI. The notice pertains to non-payment of GST on co-insurance premiums in co-insurance transactions and non-payment of GST on reinsurance commission accepted on reinsurance premiums ceded to Indian and foreign reinsurance companies. ICICI Lombard clarified that these transactions occurred between July 2017 and March 2022.
The non-payment of GST on co-insurance and reinsurance premiums has been a contentious issue between insurance companies and tax authorities. The government has been cracking down on instances where GST has not been appropriately accounted for and paid.
These demand notices have significant financial implications for the affected insurance companies. BAGIC’s ₹1,010 crore GST demand notice is a substantial sum that could impact the company’s financials.
Insurance companies are expected to respond to these notices and work with tax authorities to resolve the issues. The disputes surrounding the payment of GST on insurance premiums are expected to continue as companies and authorities seek to clarify and enforce GST regulations in the insurance sector.
As the insurance industry navigates these challenges, it highlights the importance of clear and consistent tax regulations and compliance in the financial sector. Insurance companies will need to carefully review their past transactions and ensure that they are in compliance with GST regulations to avoid future disputes and demand notices. The resolution of these cases will have implications for the broader insurance industry and could set precedents for how GST is applied in the sector.
