Tax authorities have decided to extend their scrutiny to all life insurance companies to examine discrepancy in financial reporting, if any. Tax authorities have asked insurers to provide details of their income and expenditures to assess the extent of loss.
Preliminary investigations by the Directorate General of Central Excise Intelligence have revealed that several life insurers have provided incorrect audit information, thereby avoiding part payment of service tax.
Tax authorities have already initiated investigations in the books of ICICI Prudential Life and MetLife India to examine discrepancies in their financial reports. HDFC Life and Reliance Life could be next in line.
Assessment of the books of MetLife India and ICICI Prudential Life have indicated, likely service tax loss of Rs 50 crore. However, if more companies found to be avoiding payment of service tax, then the loss could be much higher.
However, MetLife India has said that it has provided all necessary details. And this is a part of routine exercise carried out by central excise department.
Life insurance companies pay commission to channel partners including corporate agents and insurance brokers for business provided by them. The service tax on commission is paid by insurance companies. Few companies have shown a fraction of the total commission paid by them to channel partners in their books of accounts to avoid payment of full service tax. And the rest is shown as expenses under different heads in order to evade service tax.
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