The Directorate General of GST Intelligence (DGGI) has issued multiple show-cause notices seeking tax demands of Rs 922.58 crore from Reliance General Insurance Company (RGIC), a subsidiary of former Anil Ambani group company Reliance Capital (RCap).
The move gains importance as RCap, which is currently under a debt resolution process through National Company Law Tribunal (NCLT), constitutes almost 70% of RCap’s total value.
RGIC has received a total of four show-cause notices – of Rs 478.84 crore, Rs 359.70 crore, Rs 78.66 crore and Rs 5.38 crore – on revenues generated from its services such as re-insurance and co-insurance, sources close to the development said.
The company has contested all the notices, they added.
A final approval from the NCLT’s Mumbai bench and then from the Supreme Court are now needed to complete RCap’s insolvency process.
On September 28, RGIC received a show-cause notice from DGGI amounting to Rs 478.84 crore on applicability of GST in re-insurance commissions booked. This is based on re-insurance services ceded to various Indian and foreign reinsurance companies.
The authority’s contention was that re-insurance commission forms part of the revenue recorded by the company in its books of accounts and thus it needs to pay GST for the same.
On the same day, RGIC received another notice for Rs 359.70 crore for co-insurance premium the company received. The company’s contention is that the lead insurer has already paid GST liability on the entire premium and, therefore, there was no need for RGIC to pay GST.
A third notice of Rs 78.66 crore was issued based on an investigation into the matter of availing Input Tax Credit (ITC) from July 1, 2017-March 31, 2022. RGIC has contested the notice stating that the amount in case is Rs 10.13 crore.
The authority has issued fourth a tax notice of Rs 5.38 crore for non-payment of GST under reverse charge basis on the import of re-insurance services from foreign reinsurers. This is in respect of exempted crop insurance scheme for the period July 2017 to January 2018.
The dates of the third and fourth notices could not be immediately ascertained.
Earlier RGIC as had sought an “urgent” capital infusion of ₹600 crore from RCap to pursue growth as it continued to lose business to rivals and was impacted by “borderline” insolvency. Later in July, RCap agreed to infuse Rs 200 crore into RGIC, while the insurance firm will raise an additional Rs 400 crore, mostly through debt, for its growth plans.