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The GST Intelligence Authority (DGGI) has recently sent show-cause notices to several insurance firms, such as HDFC Bank, Go Digit Insurance, and Policybazaar, for producing counterfeit invoices to obtain input tax credits without rendering any real services. Engaging in such fraudulent activities is a punishable violation under existing GST laws.

During the last 15 days, DGGI officials have actively served summons and notices to the accused intermediaries. Presently, investigations encompass at least 120 insurance brokers and aggregators nationwide. The DGGI’s inquiry commenced in 2022, with authorities reportedly discovering tax evasion totaling Rs 2,250 crore. The investigation’s focal point is invoices from 2018 to March 2022.

An official revealed that the insurance companies procured input tax credits without the necessary provision of goods and services, relying on fabricated invoices from insurance intermediaries. According to the CGST Act, 2017’s Rule 16, a buyer must possess a legitimate invoice with paid GST and receive the goods or services to claim input tax credits.

It has been disclosed that the accused companies devised arrangements to transfer ineligible Input Tax Credits, masquerading as marketing services, and created fraudulent invoices along the way. In another instance, tax authorities have issued notices and summonses to insurance firms, resulting in tax recovery in some cases. To date, Rs 700 crore has been amassed as pre-deposits from the involved companies, with the DGGI issuing summonses to 12 insurance firms.

Additionally, the DGGI previously dispatched notices to around 10-12 mutual fund houses, requesting details about their historical transactions. In February, the DGGI alleged that these mutual funds had erroneously claimed input tax credits (ITC) to minimize their GST obligations by misclassifying specific expenditures. This situation relates to claims made in 2017-18, where accounting discrepancies were identified in Asset Management Companies’ expense records, limited to 2.25% of assets under management (AUM). Consequently, the DGGI demanded the recovery of wrongfully claimed ITC from these mutual fund houses.