GST authorities’ actions Show-cause notices for Reliance General Insurance totaling Rs 922 crore

The Directorate General of GST Intelligence has issued numerous show-cause letters totaling Rs 922.58 crore to Reliance General Insurance Company (RGIC), a Reliance Capital Ltd. subsidiary.

Sources claim that the business has got four letters from the DGGI requesting GST on the income from services like re-insurance and co-insurance totaling Rs 478.84 crore, Rs 359.70 crore, Rs 78.66 crore, and Rs 5.38 crore, respectively.

The RGIC auditors will have to include this sum as a potential obligation in its quarterly results ending September 30, according to a tax expert.

The gem in the crown of Reliance Capital, which is going through a debt settlement procedure via NCLT, is RGIC. Nearly 70% of Reliance Capital’s entire worth is made up by RGIC.

According to the sources, the DGGI issued RGIC a show cause notice on September 28 for Rs 478.84 crore over the application of GST on reinsurance commission booked on services ceded to different Indian and foreign reinsurance firms.

According to the GST Authority, as reinsurance commission is included in the company’s income reported in its books of accounts, GST is due on that amount.

They said that the business also got a second show-cause notice on September 28 regarding the application of GST on the co-insurance premium it received as a follower in co-insurance transactions, totaling Rs 359.70 crore.

According to the firm, the lead insurer has already satisfied its GST obligation on the total premium, hence the company is not required to pay GST on the realisation of Follower Premium.

Regardless of any co-insurance agreements, the GST department is of the view that there is no provision in the GST Act that allows one registered person to collect and distribute tax on behalf of another.

The insured has the opportunity to divide their risk among many insurers in a co-insurance transaction by distributing risk share to several insurers. While the other insurers sharing the risk are referred to as the participating co-insurers or followers, the firm carrying the highest portion of risk cover is known as the lead insurer.

According to sources, the DGGI launched a probe into the issue of marketing costs receiving input tax credits (ITC) without underlying services from July 1, 2017, to March 31, 2022, as part of the third show cause notice, which cost Rs 78.66 crore.

The firm has submitted the ITC sum of Rs. 10.13 crore in this case while objecting.

The fourth demand for justification that the firm has received from the DGGI relates to the import of reinsurance services from foreign reinsurers in relation to an exempted crop insurance plan between July 2017 and January 2018.

In this case, the GST Authority has issued a tax notice for Rs 5.38 crore, they continued.