09-Oct-2023
2 mins read
Reliance General Insurance Company (RGIC), the leading subsidiary of Reliance Capital Ltd, has found itself in the limelight for reasons other than its business operations. The Directorate General of GST Intelligence (DGGI) recently issued a series of hefty show-cause notices to RGIC over Goods and Services Tax (GST) dues.
Rs 478.84 Crore on Re-insurance Commission
The most significant notice among the four revolves around the GST dues on the re-insurance commission. This commission was booked through the re-insurance services ceded to multiple Indian and international entities. The tax amount in question is a whopping Rs 478.84 crore.
Co-insurance Premium Tax
Another major area of contention is the tax associated with the co-insurance premium. This amount was booked by RGIC when it acted as a follower entity in various co-insurance transactions. The tax due for this segment stands at Rs 359.70 crore.
Dues of Rs 78.66 Crore
The third notice by DGGI pertains to an amount of Rs 78.66 crore. This involves a case where RGIC allegedly availed input tax credit without the necessary underlying services related to marketing expenses. This discrepancy spans from July 2017 to March 2022. Interestingly, RGIC has already paid Rs 10.13 crore concerning this, albeit under protest.
Tax on Reverse Charge Basis
Last but not least, there’s a notice regarding a sum of Rs 5.38 crore. This pertains to the non-payment of tax on a reverse charge basis, especially concerning the import of reinsurance services from foreign entities. Intriguingly, this is tied to an exempted crop insurance scheme and is relevant for the period from July 2017 to January 2018.
Impact on Reliance Capital’s Financial Landscape
With RGIC forming around 70% of Reliance Capital’s total valuation, these notices are likely to stir some waves. The parent company, Reliance Capital, is already amidst a debt resolution process overseen by the National Company Law Tribunal. How this series of notices affects the overall trajectory of Reliance Capital’s resolution remains to be seen.