Directorate General of Central Excise Intelligence (DGCEI), conducted a tax survey operations at the head offices of General Insurance Companies based out of Chennai, Pune and Mumbai. The tax officers seems to have discovered a huge service tax fraud in motor vehicle insurance, with unproven tax filing for the service tax paid to the automobile dealers which is around Rs 3,000 crore.
When the customer visits a showroom to buy a car, he is uninformed about the insurance company to insure his car with, the dealers’ guide the customer about the insurance policies and in return the insurers offers them the commissions/incentives or even bears the cost of advertisements for their showrooms, such commissions offered to the dealers are taxable.
The focus issue is – DGCEI officials have inspected the automobile dealers and learnt that dealers have not provided most of the services the insurance companies claimed credit to reduce their service tax dues. To present the case, the DGCEI officials have collected statements from automobile dealers and some officials working with insurance companies.
The general insurance companies had challenged the raids and have decided to approach finance minister Arun Jaitley to protest against the raids, they also said that the tax officials wrote the allegations as per their accord and forced officials of the companies to sign such allegations.
Bajaj Allianz, HDFC Ergo, ICICI Lombard and Reliance General, approached the insurance regulator to support them in their protest. However, T.S. Vijayan, the chairman of IRDAI had decided not to get involved and the insurance companies should handle it on their own, but, would appeal to review the tax operations freshly.
