GST Authority Issues Show Cause Notices To Reliance General Insurance

Reliance General Insurance Company (RGIC), a subsidiary of Reliance Capital Ltd, received several show cause notices from the Directorate General of GST Intelligence, amounting to Rs 922.58 crore.

According to sources, the company has received four notices from the DGGI demanding GST of Rs 478.84 crore, Rs 359.70 crore, Rs 78.66 crore, and Rs 5.38 crore respectively, on the revenue generated from the services like re-insurance and co-insurance, according to a PTI report.

According to a tax expert, the RGIC auditors will have to provide for this amount in its quarterly results ending September 30, as a contingent liability.

RGIC is the crown jewel of Reliance Capital which is undergoing a debt resolution process through NCLT. RGIC constitutes almost 70 per cent of the total value of Reliance Capital, stated the PTI report.

RGIC received a show cause notice from the DGGI on September 28, amounting to Rs 478.84 crore in the matter of applicability of GST on re-insurance commission booked on the re-insurance services ceded to various Indian and Foreign Reinsurance companies, the sources said.

The GST Authority's contention is that re-insurance commission forms part of the revenue recorded by the company in its books of accounts and thus it needs to pay GST on the same, PTI reported

Similarly, another show cause notice, amounting to Rs 359.70 crore, was received by the company on September 28, in the matter of applicability of GST on the co-insurance premium received as a follower in the co-insurance transactions, they said.
The company's contention is that the lead insurer has already discharged its GST liability on the entire premium, therefore, there is no need for the company to pay GST on the realisation of Follower Premium, as per the PTI report.

But, the GST department is of the opinion that there is no provision in the GST Act where one registered person can collect and disburse tax on behalf of another, regardless of any co-insurance arrangement, added the PTI report.

In the co-insurance transaction, the insured has an option to spread their risk amongst more than one insurer by allocating risk share to multiple insurers. The company bearing the largest share of risk cover is termed as the lead insurer, while the other insurers sharing the risk are called to the participating co-insurers or followers.