The case is also likely to open can of worms as to how insurance companies in connivance with car companies
The government on Monday claimed to have found tax fraud of Rs 1,200-Rs 2,500 crore by the 16 insurance companies engaged in providing motor-vehicle insurance policies.
New Delhi: The government on Monday claimed to have found tax fraud of Rs 1,200-Rs 2,500 crore by the 16 insurance companies engaged in providing motor-vehicle insurance policies. The case is also likely to open can of worms as to how insurance companies in connivance with car companies and their dealers are milking the unsuspecting car buyers by selling them expensive polices, said experts.
The Chennai zonal unit of the Directorate General of Central Excise Intelligence has issued summons to 16 insurance companies engaged in providing motor-vehicle insurance policies, for wrongly availing cenvat credit on the bogus invoices of the car dealers. The finance ministry said that during the course of investigation, it was noticed that the car manufacturers enter into agreement with the insurance companies for appointing them as preferred car insurance companies (PICs) and instruct their car dealers to sell their insurance policies to PICs only. Such PICs pay commission on the value of the insurance policies to the car companies (in the range of two to three per cent) and the car dealers (in the range of 15-45 per cent).
The IRDA regulations do not allow any person other than insurance agents and insurance brokers approved by IRDA, to sell vehicle insurance policies. Further the maximum brokerage or commission payable for selling insurance policies is also capped at 10 per cent of the premium. To circumvent these regulations, finance ministry said the insurance companies ask the car dealers to raise invoices to show that the car dealers have provided the insurance companies services such as advertisement, renting of computers and printers, training and arranging customer awareness program among others.
“As these services were never provided by the car dealers, their invoices are not permissible documents under the CENVAT Credit Rules, 2004 and the Service Tax Rules, 1994 for availing Cenvat credit by the Insurance Companies,” said the ministry.
( Source : deccan chronicle )
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