ICICI Lombard’s ₹1,728.9 Crore GST Revenue Leak, Ongoing Investigations Unveil Tax Demand

In a development concerning the prevention of Goods and Services Tax (GST) revenue leakage, as per the central law enforcement agency tasked with preventing the leakage of Goods and Services Tax (GST) revenue, ICICI Lombard, finds itself facing a substantial tax demand of ₹1,728.9 crore. 

This demand comes following allegations that the insurance giant failed to remit GST worth this staggering amount over a span of five years, from July 2017 to March 2022. 

The general insurance company said in a stock exchange filing, “The alleged demand and the impugned Show Cause Cum Demand Notice pertain to non-payment of GST on the co-insurance premium accepted as follower in case of co-insurance transactions and non-payment of GST on re-insurance commission accepted on the re-insurance premium ceded to various Indian and Foreign re-insurance companies during the period July 2017 to March 2022,” 

ICICI Lombard, in response to the notice, asserted that these concerns are industry-wide and that they intend to provide a suitable response within the stipulated deadlines, guided by their tax advisors. 

The Whip 

This development aligns with a broader investigation initiated by the Directorate General of GST Intelligence, which, in July, revealed that it was probing 30 insurance companies for alleged GST evasion. 

As part of this investigation, 15 companies have already been scrutinized, uncovering discrepancies in input tax credits amounting to an astonishing ₹3,500 crore thus far; notices are now being sent to the remaining 15 companies, and the agency has set a November deadline to conclude the probe.

The controversy involving ICICI Lombard‘s tax woes escalated further in August when it received a show-cause notice from the Directorate General of GST Intelligence, demanding ₹273 crore in taxes. This particular demand relates to GST associated with salvage and ineligible tax credits pertaining to motor insurance claims, as detailed in another stock exchange notification. 

In response, ICICI Lombard made a deposit of ₹104 crore, albeit with a protest, without accepting any responsibility for the matter; moreover, the company disclosed yet another notice of demand, dated May 29, 2023, amounting to ₹94.14 crore.

This series of developments began gaining public attention back in September 2022 when investigations into potential GST input tax credit violations by insurance companies first surfaced, followed by similar probes by the Income Tax Department in January 2023. 

HDFC Life also found itself in the crosshairs, receiving a show-cause notice demanding ₹942 crore in taxes for the period spanning July 2017 to FY22.

The Legacy Of GST Liability

Likewise, in June 2023, ICICI Prudential got a notice for alleged GST liability of Rs 492 crore.

Official sources then had revealed that the central agency responsible for preventing GST revenue leaks has concluded its investigation into at least six of the 30 insurance firms under scrutiny, and it is in the process of issuing show-cause notices to them. 

Among those to have received such notices is ICICI Prudential, facing an alleged GST liability of nearly ₹492 crore for the period from July 2017 to July 2022. 

ICICI Prudential, in response, has declared its intention to contest the matter and has deposited ₹190 crore without admitting any liability in this regard.

The Viewpoint

However, as these investigations continue, the question to be asked is, if they are clean, have no liability and will contest the matter, then why have they deposited 190 and 250 crores with the DGGI?

ICICI Group of companies has been embroiled in several controversies and scandals over the years.

Chanda Kochhar Controversy

The Chanda Kochhar controversy was one of the most significant controversies involving ICICI Bank. Chanda Kochhar, the former CEO and Managing Director of ICICI Bank, faced allegations of impropriety and conflicts of interest related to loans given by the bank to the Videocon Group, whose promoter had business dealings with her husband. These allegations led to her resignation in October 2018; investigative agencies are probing the matter.

Corporate Governance Concerns

ICICI Bank also faced criticism related to corporate governance issues and questions about its board’s independence, especially in the context of the Chanda Kochhar controversy. The bank had to defend its corporate governance practices and make changes to its board composition.

Lending Practices 

Like many other banks, ICICI Bank had also faced criticism and regulatory scrutiny over its lending practices. The bank had to deal with issues related to non-performing assets (NPAs) and the quality of its loan book. Regulatory changes and increased oversight were implemented to address these concerns.

Money Laundering Allegations

There were reports of ICICI Bank being investigated for alleged violations of anti-money laundering laws and related issues. 

ICICI Lombard & ICICI Prudential 

Scrutiny over GST violations and Tax evasions

The Last Bit, As investigations into GST revenue leakage continue to unfold, the demands for substantial sums in alleged unpaid taxes, coupled with the broader industry-wide scrutiny, have raised crucial questions about tax compliance, corporate responsibility, and the intricacies of the GST framework. 

The outcome of these investigations will undoubtedly have a ripple effect across the insurance sector and may lead to reforms aimed at plugging the leaks in India’s GST revenue system. 

While they maintain that they are clean, have no liability and will contest the matter, why do they deposit crores with the DGGI?