Reliance General Insurance Company (RGIC), a subsidiary of Reliance Capital Ltd, has been served with multiple show cause notices by the Directorate General of GST Intelligence (DGGI), amounting to Rs 922.58 crore. These notices demand GST payments of Rs 478.84 crore, Rs 359.70 crore, Rs 78.66 crore, and Rs 5.38 crore, respectively, relating to revenue generated from services such as re-insurance and co-insurance.
A tax expert has noted that RGIC’s auditors will need to provision for this amount as a contingent liability in its quarterly results ending on September 30. RGIC, considered the crown jewel of Reliance Capital, accounts for approximately 70% of the total value of Reliance Capital.
The first show cause notice, dated September 28, amounts to Rs 478.84 crore and pertains to the applicability of GST on re-insurance commission recorded on re-insurance services provided to various Indian and foreign reinsurance companies.
The second notice, also dated September 28, amounts to Rs 359.70 crore and concerns the applicability of GST on co-insurance premiums received as a follower in co-insurance transactions. RGIC argues that the lead insurer has already paid GST on the entire premium, thus absolving the company from GST on the realized Follower Premium.
The third notice, amounting to Rs 78.66 crore, pertains to the investigation into availing input tax credit without underlying services for marketing expenses between July 1, 2017, and March 31, 2022. The company has already deposited an ITC amount of Rs 10.13 crore under protest.
The fourth notice concerns non-payment of GST under reverse charge basis on the import of reinsurance services from foreign reinsurers for an exempted crop insurance scheme between July 2017 and January 2018. The GST Authority has issued a tax notice of Rs 5.38 crore in this matter.
RGIC is a significant subsidiary of Reliance Capital, which is currently undergoing a debt resolution process through NCLT.
