The tax authorities are probing a section of automobile dealers who have supposedly generated fake invoices without providing any service. This move is a punishable offense under goods and services tax (GST) law. The authorities are going to question the car dealers to explain the services they provided to general insurance companies. The investigators are suspecting that automobile dealers pitched for insurance schemes that gave them commissions in excess of those insurance regulations permit, according to a business daily.
Without an underlying supply of services, the dealers raised fake invoices and on the basis of those, insurance firms claimed input tax credit, two officials privy to the probe said.
Notably, the limit is 15%-20%, depending on the products prescribed by the Insurance Regulatory and Development Authority of India (IRDAI). Effective from April 1, IRDAI separated limits for commission and has imposed an overall ceiling on operating expenses and commissions.
With this, there is a 100% penalty and the registration of the fake invoice issuer could be also cancelled. The offense is not bailable. In the GST regime, issuing an invoice without supply means a jail term up to five years, if the amount involves INR 5 crore or above. Along with that, there is a 100% penalty.
“The tax evasion in this case is suspected to be around INR 12,500 crore, which is much higher than the earlier estimate of INR 1,000 crore. As the probe progresses, we could see a nexus between insurance companies and lots of such intermediaries flouting regulations to avoid tax. The matter is to be decided soon,” a senior government official told the business daily
The move is to widen the investigation the Directorate General of GST Intelligence (DGGI) has launched against 16 insurance companies since September last year, for allegedly paying commissions as high as 60%-70% to intermediaries like these, and then availing themselves of input tax credit on the bills raised in the name of marketing and sales services.
Source: Business Standard
