The Directorate General of GST Intelligence (DGGI) has issued multiple show-cause notices to Reliance Capital’s subsidiary Reliance General Insurance amounting to ₹922.58 crore.

The company has received four show cause notices requiring GST payment of ₹478.84 crore, ₹359.70 crore, ₹78.66 crore, and  ₹5.38 crore respectively, on revenue from services like re-insurance and co-insurance.

Reliance General will have to provide for this amount as ‘contingent liability’ in its financial results for the quarter ended September 30, sources said. 

The general insurance company’s parent Reliance Capital is currently undergoing corporate insolvency proceedings, wherein Reliance General is estimated to be a key subsidiary, accounting for bulk of the parent’s valuation.

Multiple claim

The show cause notice of ₹479 crore is against applicability of GST on re-insurance commission booked services ceded to various Indian and foreign reinsurers, which according to the GST authority forms part of the revenue recorded by the company and is then liable to be taxed.

The other show cause notice amounting to ₹360 crore has been issued on the applicability of GST on the co-insurance premium received as a follower in co-insurance transactions. Reliance General has contended that the lead insurer has already paid GST on the entire premium and thus there is no taxation on the realisation of Follower Premium whereas DGGI said that there is no provision for a registered entity to collect and disburse tax on behalf of another, regardless of any co-insurance arrangement.

The third notice of ₹79 crore pertained to availing Input Tax Credit without underlying services with regard to marketing expenses, whereas the fourth notice of ₹5 crore was due to non-payment of GST under reverse charge basis on the import of re-insurance services from foreign reinsurers in respect of exempted crop insurance scheme.

Reliance General has, under protest, deposited ₹10.13 crore as input tax credit.

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