The General Insurance Council, a self-regulatory body of non-life insurance companies in India, has strongly protested the initiation of action against 16 insurance companies on the charge of wrongly utilising Cenvat credit of nearly ₹2,500 crore on bogus invoices of car dealers, by the Directorate-General of Central Excise Intelligence, Ministry of Finance.

R Chandrasekaran, Secretary General, GI Council expressed deep disappointment that such charges were made against insurance companies without giving them an opportunity to explain their side of the case.

He said the insurance companies should not be tarred with such charges for what may be the work of a few errant auto dealers. Pointing out that the general insurance industry pays over ₹10,000 crore as service tax, Chandrasekaran rebutted the ministry’s claim that insurance companies were circumventing regulations that capped commission payable for selling policies at 10 per cent. Drawing a distinction between selling activity (for which there is a cap on commission for procuring the business) and policy servicing (which involves administrative and clerical activity), he said some payments are made for such work (policy servicing) according to the guidelines provided by the regulator, IRDA.

He further pointed out that input credit for such service tax payments was allowed for insurance companies from 2004 onwards.

The GI council has written to the CBEC chairman seeking an opportunity to present its point of view. Chandrasekaran said that he had also appealed to the IRDA to intervene in the matter.

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Published on August 11, 2015