Taxation
Insurance companies under lens for tax evasion of over Rs300 crore

An initial probe has found that insurance companies are evading taxes at the time of renewing old policies or refunding amounts on policies surrendered before the maturity period


New Delhi: Insurance companies have come under the scanner of a government intelligence agency for allegedly evading service tax of over Rs300 crore, reports PTI.
 
The Directorate General of Central Excise Intelligence (DGCEI) has initiated a probe following complaints of the service tax evasion by various insurance providers.
 
“There have been some instances of tax evasion by insurance companies. An enquiry is being conducted by the officials,” a senior DGCEI official, who did not wish to be identified, told PTI.
 
He said the records of insurers are being cross-verified to ascertain any irregularities.
 
“The inquiry so far has found service tax evasion of at least Rs300 crore. The investigations are underway and the amount is likely to be higher,” the official said without divulging names of insurance companies under the lens.
 
All general policies including insurance against risk of loss to assets like motor vehicle are charged service tax at 12.36% on the annual premium paid, while the rate of service tax for life insurance varies on the part of premium taken towards risk coverage, according to a Mumbai-based service tax expert.
 
According to another DGCEI official, most of the irregularities have been detected in payment to insurance brokers or agents by the companies.
 
“During our enquiry, we found that some companies were deducting service tax from agents who were selling their products. But failed to show it on their accounts book for government scrutiny,” the official said.
 
Besides, there have been instances where the companies were giving incorrect data of the total policies sold or renewed by them to evade tax, he said.
 
The total annual premium income of the insurance industry comprising life, non-life and health, is around Rs3.5 lakh crore, as per the Insurance Regulatory and Development Authority (IRDA) data. 
 
According to DGCEI, initial probe has found that companies were evading taxes at the time of renewing the old policies or refunding amounts on policies surrendered before the maturity period.
 
“There are also instances where the firms are evading service tax net in cases where the insurer is charged an amount for shifting from one insurance company to another,” the official said.
 
According to analysts, there are two types of frauds in the insurance sector. One is committed against the insurance companies by the brokers and the external constituents.
 
The second is the fraud committed by the insurance companies on the shareholders, regulators and tax authorities.
 
Tax evasion falls under the second category. Under this, commission is clubbed as other expenses to circumvent service tax payments.

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Monsoon: Will it play havoc again?

With 70% of India not having received adequate rainfall so far, the government faces tough challenges on food prices, inflation, water situation and agriculture. Are we prepared to face the eventualities? 


The Indian Meteorological Department’s (IMD) predictions are as uncertain and unreliable as the weather and our monsoon is already affecting the aam aadmi. Around 70% of India has not received adequate rainfall so far. The situation, though nobody wants to publicly admit, is grim.
 
According to the Central Water Commission’s reports published recently, against the live storage capacity of 154.421 billion cubic metres (cbm) average storage of water, till 5th July was only 25.191 billion cbm in 84 major reservoirs monitored by the CWC.
 
Unfortunately, this is the lowest in the last 10 years. With continued poor rains in catchment areas, this is a grim situation.
 
Ashok Gulati, chairman of Agricultural Costs and Prices (CACP), in a recent interview has stated, “We have adequate foodgrain stocks” to tide over monsoon failure.  He contends that food inflation is higher due to vegetable prices, particularly that of onion and potatoes!
 
He further explains that some four to six months ago, potatoes were thrown on the road at Rs2 a kg; today, at the farmer’s level, it is Rs8-Rs10 a kg and the consumer pays Rs15-Rs20.
 
In reality, this if far from the truth, as the aam aadmi pays much more than these when he/she buys from the market. In fact, the price of essential commodities varies at various levels or locations from where one sources these. The price in the wholesale market is different from retail; from Hopcoms and the vegetable cart vendor to the kirana shop next door!
 
Besides, whoever depends upon eating just potatoes? Rest of the vegetables as also foodgrain are just as important. The government may employ MSP (minimum support price) to ensure that the wiling farmer gives his produce, but nothing has really been done to control the menace of the chain of middlemen who usurp the profit at every stage before the produce reaches the ultimate consumer!
 
All said and done, what are the immediate plans of the government?  
 
Apparently, it has ordered its seed division to make alternate seeds available; crop division to roll out an alternative crop plan if the poor rainfall continues; to report on the drinking and irrigational water requirements; to review fertilizer demand pattern; set up contingency plans for meeting the fodder shortage that will occur in affected areas and to review location-wise storage of potatoes and onions and, presumably, take measures to check rising vegetable prices.  
 
To support this, even the consumer price index has gradually moved from 7.65 to 10.36 in May while the wholesale price index has reached 7.55 in May as against 6.89 in January as per Central Statistical Organisation data.
 
Of course, some parts of the country have had more than adequate rain and floods likely if situation continues. The sowing season is delayed because of the rains, and it is essential that the government now comes forward to provide urgent and immediate aid to farmers in the form of free supply of seeds, fertilizers and expedite plans for releasing of stocks of foodgrain in affected areas to avoid starvation and suicides by farmers.
 
In the meantime, we do have continuance of river water disputes, while millions of cusecs of water are being discharged into the sea wastefully without being tapped for use in the parched lands of the country. Isn’t that a shame? 
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected])

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Taxsmile partners with Cafe Coffee Day for automated tax filing

Taxsmile will install 50 automated tax filing machines at Cafe Coffee Day joints, from where a tax payer can file his/her tax returns


Taxsmile.com India Pvt Ltd said it partnered with Cafe Coffee Day (CCD) and would set up 50 automated tax filing (ATF) machines in CCD joints pan India. 
 
ATF is one of the multiple channels aimed at facilitating tax filing in the neighbourhood of the tax payer. Operating ATF is as simple as doing a transaction at a bank ATM. Any person can file income tax return on his own at any of the ATF machines being set up across CCD joints in all major metros, Taxsmile.com said in a release.  
 
"With ATF in place, consumers no longer need to worry either about waiting for Tax Professionals or about Internet connections. They can just visit the nearest ATF, scan their documents and leave the rest to Taxsmile," said Ravi Jagannathan, Vice Chairman, eMudhra Consumer Services Ltd. Taxsmile.com is a unit of eMudhra.
 
Vishal Davda, executive director, Taxsmile said, "The current direct tax ecosystem benefits in faster refunds, encourages tax payers to take the online route in relation to their return filing. With the recent changed mandates for all tax payers to e-file for income more than 10 lakh per annum, our ATF kiosks lends end-to-end online support to file their tax returns in a simple do-it-yourself mode."

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