Reliance General Insurance Company (RGIC), a subsidiary of Reliance Capital Ltd, is facing significant tax challenges as it has received multiple show cause notices from the Directorate General of GST Intelligence, totaling Rs 922.58 crore. These notices pertain to GST demands on revenue generated from services such as re-insurance and co-insurance.
Show Cause Notices Breakdown
The notices received by RGIC include demands for Rs 478.84 crore, Rs 359.70 crore, Rs 78.66 crore, and Rs 5.38 crore, respectively. These demands are based on the GST Authority’s assertion that re-insurance commission and co-insurance premium should be subject to GST since they form part of the company’s recorded revenue.
Controversies Surrounding Re-Insurance
One of the notices, amounting to Rs 478.84 crore, questions the applicability of GST on re-insurance commission booked for re-insurance services ceded to various Indian and Foreign Reinsurance companies. RGIC argues that the lead insurer has already paid GST on the entire premium, negating the need for further GST payment. However, the GST department contends otherwise, asserting that GST cannot be collected and disbursed by one registered person on behalf of another.
Input Tax Credit Investigation
In another notice totaling Rs 78.66 crore, the Directorate General of GST Intelligence is investigating the availing of input tax credit (ITC) without underlying services related to marketing expenses. RGIC has deposited Rs 10.13 crore under protest in response to this matter.
Non-Payment of GST on Reinsurance Services Import
The fourth notice involves the non-payment of GST under reverse charge basis for the import of reinsurance services from foreign reinsurers concerning an exempted crop insurance scheme. The GST Authority has issued a tax notice of Rs 5.38 crore in this regard.
These show cause notices pose financial challenges for RGIC, which is a crucial asset for Reliance Capital, currently undergoing debt resolution proceedings through the National Company Law Tribunal (NCLT). RGIC represents a significant portion of Reliance Capital’s total value, making these tax disputes of utmost importance.
