ICICI Lombard gets Rs 1,730-crore tax notice, second in 3 months; stock down 2%

ICICI Lombard gets Rs 1,730-crore tax notice, second in 3 months; stock down 2%

The ICICI Lombard General Insurance stock experienced a 2 percent decline in its opening on September 28, following the news that the insurer had received a notice from the Directorate General of GST Intelligence (DGGI). The notice pertained to alleged non-payment of tax amounting to Rs 17,28,86,10,803 (approximately Rs 1,730 crore) for the period from July 2017 to March 2022.

In an exchange filing, ICICI Lombard confirmed that it had received a “show cause-cum-demand notice” from the Directorate General of GST Intelligence, Pune Zonal Unit, under Section 73(1) of the Central Goods and Services Tax Act, 2017. This notice, dated September 27, 2023, claimed a substantial tax liability of Rs 1,730 crore.

Such notices and tax-related disputes can significantly impact a company’s financial position, as well as investor sentiment. ICICI Lombard will likely need to address this issue through legal and regulatory channels, and the outcome of these proceedings will be closely monitored by both the company and the market.

Investors and stakeholders will be keenly interested in how ICICI Lombard responds to this tax demand and any potential financial implications that may arise as a result.

ICICI Lombard General Insurance’s stock, trading at Rs 1,277.25 on the National Stock Exchange at 9:20 am, experienced a 2.02 percent decline from the previous close on September 28. This drop in stock price came in the wake of the company receiving a notice from the Directorate General of GST Intelligence (DGGI) regarding alleged non-payment of GST amounting to Rs 1,730 crore for the period from July 2017 to March 2022.

The timing of this development is noteworthy, occurring just two days after the appointment of Sanjeev Mantri as the new Managing Director and Chief Executive Officer of the company. ICICI Lombard confirmed that the alleged demand and the show cause cum demand notice (SCN) relate to non-payment of GST on co-insurance premiums accepted as follower in coinsurance transactions and non-payment of GST on reinsurance commission accepted on reinsurance premiums ceded to various Indian and foreign reinsurance companies during the specified period.

These allegations and the resulting notice from the DGGI can have significant financial and operational implications for the company. ICICI Lombard will likely need to engage in legal and regulatory proceedings to address this issue and clarify its position. Investors and stakeholders will closely monitor how the company responds to these allegations and how it navigates this situation in the coming weeks and months.

ICICI Lombard General Insurance has clarified that the show cause cum demand notice (SCN) it received pertains to matters related to industry-wide issues and is based on the advice of its tax advisers. The company has stated that it will take appropriate steps in due course to respond to the SCN and contest the matter.

It’s worth noting that this is the second tax notice that ICICI Lombard has received in just three months. In July, the company received another notice for a tax liability of Rs 273.44 crore under Section 74(1) of the Central Goods and Services Tax Act. This earlier notice included interest charges and a penalty.

Receiving multiple tax notices within a short span can add complexity to a company’s financial and regulatory landscape. ICICI Lombard will likely continue to engage with tax authorities and legal experts to address these matters and determine the appropriate course of action.

Investors and stakeholders will closely follow the developments surrounding these tax issues to assess their potential impact on the company’s financial health and market performance.

The tax notices received by ICICI Lombard General Insurance and ICICI Prudential Life in recent months have added complexity to the regulatory landscape for ICICI’s insurance companies. In June, ICICI Prudential Life received a notice from the Directorate General of GST Intelligence (DGGI) for alleged non-payment of tax amounting to Rs 492.06 crore for a period of five years starting from July 2017.

Despite these regulatory challenges, ICICI Lombard General Insurance reported a net profit of Rs 390.4 crore for the quarter ended June 2023, marking a 12 percent increase compared to the same period in the previous year. Additionally, the insurer experienced a 19.7 percent year-on-year growth in gross premium, reaching Rs 6,622.1 crore in the first quarter of FY24, up from Rs 5,530 crore in Q1 FY23.

Furthermore, ICICI Lombard’s combined ratio for the quarter improved to 103.8 percent, compared to 104.1 percent in the same period a year ago. The combined ratio measures the sum of incurred losses and operating expenses as a percentage of earned premiums. A lower combined ratio suggests improved financial performance and efficiency.

Despite the regulatory challenges and tax notices, ICICI Lombard’s positive financial results indicate its ability to navigate the complex insurance market in India. Investors and stakeholders will likely continue to monitor the company’s performance and its efforts to address the regulatory issues it faces.