HDFC Life trades flat after GST demand notice of Rs 942 crore

This is an industry-wide issue and the company will take appropriate steps to reply to the show-cause notice and contest the matter, the insurer has told exchanges

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Shares of HDFC Life Insurance were trading marginally up in the morning on June 26. The company has told exchanges that it received a Goods and Services Tax (GST) demand notice of Rs 942 crore for the period between July 2017 and March 2022.

The private sector life insurer had on June 23 informed the bourses that it received a show-cause-cum-demand notice from the Directorate General of GST Intelligence, Mumbai Zonal Unit. The GST office asked the company “why a tax of Rs 942,18,46,028 pertaining to the period July 2017 to FY22, should not be demanded from the company”, the filing said.

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The matter is related to claims of an input tax credit against the supply of services, which the authority believes are ineligible. The company has been advised by its legal and tax counsel that it has a good contestable case, it said.

“This is an industry-wide issue and the company will be taking appropriate steps in due course to reply to the show-cause notice and contest the matter. It may be noted that Rs 250 crore has been deposited under protest with the authority in this matter in the past,” HDFC Life added.

In September 2022, the Mumbai unit of the Directorate General of GST Intelligence (DGGI) said that an input tax credit of Rs 824 crore was availed by 16 insurance companies on the basis of fake invoices. Out of this, insurers had voluntarily paid Rs 217 crore after the DGGI investigation.

DGGI investigations revealed that these insurers were paying commissions beyond the Insurance Regulatory and Development Authority of India’s permissible limit to their corporate agents in the garb of expenses related to marketing and brand activation.

The GST law doesn’t allow availing of such input tax credit as the supply of said service did not actually take place.

In a filing on June 23, the company also said the insurance regulator had approved the transfer of shares of HDFC Life from HDFC Ltd to HDFC Bank. This comes ahead of the merger between HDFC and HDFC Bank.

“We also wish to inform that IRDAI vide its said letter has also granted its approval for HDFC Limited to acquire additional shares in HDFC Life so as to hold more than 50 percent of its total share capital,” HDFC Life said.

At 11 am, HDFC Life was trading 0.55 percent up at Rs 630.40 on BSE.

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