LIC challenges Rs 290 crore GST demand from Bihar Tax Authority.

The Life Insurance Corporation of India (LIC), one of the country's largest and most prominent insurance companies, has found itself in the midst of a financial challenge. Recently, LIC received an order under the BGST (Bihar Goods and Services Tax) and CGST (Central Goods and Services Tax) Act of 2017 from the Bihar Additional Commissioner State Tax. This order demands a payment of Rs 290.5 crore in Goods and Services Tax, along with interest and penalties. This development has significant implications for both LIC and the Indian insurance sector as a whole.

 

Understanding the Situation

The demand for Rs 290.5 crore in GST, along with interest and penalties, has put LIC in a challenging position. The company has stated its intention to appeal this order before the GST Appellate Tribunal, following the prescribed timelines for such actions.

 

The Violations

The order issued to LIC specifies certain violations that have led to this substantial GST demand:

1. Non-Reversal of Input Tax Credit (ITC): LIC has been charged for not reversing the Input Tax Credit availed and utilized on items that are not subject to GST. This primarily pertains to the portion of the premium received by LIC from policyholders.

2. Agent's Commission: LIC has also been found in violation for not reversing the ITC related to the portion of the agent's commission on items that are not liable to GST. This is in connection with a portion of the premium and exempted policies.

 

 

Financial Implications

The financial implications of this demand are noteworthy. In August, LIC reported a staggering increase in its standalone net profit for the quarter ending in June 2023, amounting to Rs 9,544 crore. This is a remarkable rise from the Rs 683 crore net profit recorded in the same quarter of the previous year. However, it's essential to consider that on a sequential basis, LIC's net profit witnessed a 29% decline from the Rs 13,428 crore reported in the previous quarter. This fluctuation highlights the potential impact of the GST demand on LIC's financial performance.

Additionally, LIC's net premium income remained relatively stable at Rs 98,363 crore in the reporting quarter, compared to Rs 98,351 crore in the same period of the previous year. The fact that the net premium income did not see a significant change despite the substantial rise in net profit could be attributed to various factors, including the impact of the ongoing COVID-19 pandemic on insurance operations.

 

FAQS

1. What is LIC?

LIC stands for Life Insurance Corporation of India. It is a government-owned insurance company in India and is one of the largest and most prominent insurance providers in the country.

2. Why did LIC receive a demand for Rs 290.5 crore GST payment?

LIC received this demand as a result of an order issued by the Bihar Additional Commissioner State Tax under the BGST and CGST Act of 2017. The demand includes the payment of Goods and Services Tax (GST) along with interest and penalties.

3. What violations led to this GST demand on LIC?

The GST demand on LIC is due to violations that include the non-reversal of Input Tax Credit (ITC) on items not subject to GST, particularly related to premium payments from policyholders. It also involves the non-reversal of ITC on agent's commissions for policies not liable to GST.

4. What is LIC's response to the GST demand?

LIC has expressed its intention to file an appeal before the GST Appellate Tribunal to challenge the order demanding the GST payment. They will do so within the prescribed timelines.

5. How has LIC's financial performance been impacted by this development?

In August, LIC reported a significant increase in standalone net profit for the quarter ending in June 2023. However, on a sequential basis, the net profit saw a 29% decline from the previous quarter. The demand for GST payment could potentially impact LIC's financial performance, and stakeholders are closely monitoring the situation.

6. What is the significance of this GST demand for LIC and the insurance sector in India?

This GST demand has significant implications for LIC and the broader insurance sector in India. It underscores the importance of compliance with GST regulations and highlights the potential financial impact on insurance companies. The outcome of this case will be closely watched by industry observers.

 

The demand for Rs 290.5 crore in GST payment, along with interest and penalties, presents a significant challenge for LIC. The company's decision to appeal this order reflects its commitment to resolving the issue through appropriate legal channels. The outcome of this case will not only have implications for LIC but also serve as a notable development in the broader context of GST compliance and regulation in India's insurance sector. As LIC navigates these challenges, stakeholders and industry observers will be closely monitoring the proceedings and their potential ramifications.