ICICI prudential gets over Rs 130 cr tax notice
New Delhi: The Finance Ministry has asked private sector insurer ICICI Prudential to cough up over Rs 130 crore for alleged evasion through non-payment of service tax.
The Directorate General of Central Excise Intelligence (DGCEI) has issued a show-cause-cum-demand-notice recently to the firm alleging irregularities including fudging records of commission paid to field agents or channel partners in lieu of policies being sold by them among others, official sources said.
Officials of the DGCEI, an investigative arm of Revenue Department under the Ministry, verified the accounts book of the company for the last five years--2007-08 to 2011-12--and claimed to have found irregularities vis-a-vis adherence to service tax laws.
The officials found non-payment of appropriate service tax on the commission paid to their channel partners for the generation of life insurance business and collection of service tax from their corporate agents without any authority in law and not depositing the same to the government exchequer, they said.
"The DGCEI has raised a demand for payment of about Rs 136 crore on account of alleged service tax evasion to ICICI prudential," a source said.
An ICICI Prudential spokesperson said the company will respond to the notice issued to it.
"The department has followed procedure by issuing the showcause notice. We will respond to the notice within the stipulated time period," an official company spokesperson told PTI in an email response.
The officials alleged that the company was paying huge sums of money to their channel partners under different heads in lieu of commission, thereby not paying service tax on the correct amount paid.
In some instances, up to 80 percent of the premium paid by the unsuspecting customers was given to the channel partners as commission for the sale of life insurance products in gross violation of Insurance Regulatory and Development Authority (IRDA) norms.
The DGCEI, which began probe last year to unearth alleged service tax evasion by various life insurance firms, is likely to issue show-cause-cum-demand notices to other firms also, the sources said.
Investigations have found alleged service tax evasion of at least Rs 300 crore by private sector life insurance companies. The insurance companies under probe are found to be allegedly maintaining wrong data of commission paid and not paying service tax being deducted from their corporate agents, they said.
All life insurance companies are required to pay service tax at the rate of 12.36 percent on the total commission paid to the corporate agents and the individual agents under the reverse charge mechanism, where as brokers and referrals are individually liable to pay service tax at the rate of 12.36 percent on the commission amount received from the insurance companies.
At present, there are 24 general insurance companies including the Export Credit Guarantee Corporation (ECGC) and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country.