ICICI Lombard faces ₹273 crore GST notice

ICICI Lombard General Insurance has been slapped with a Goods and Services Tax (GST) show-cause notice, demanding a substantial ₹273.4 crore in taxes along with accrued interest.

This development came to light as the insurance giant recently notified the Bombay Stock Exchange (BSE) about the notice it received.

The Show Cause Notice (SCN), dated July 26, was issued by the Directorate General of GST Intelligence located in New Delhi.

The notice, invoking Section 74(1) of the Central Goods and Services Tax (CGST) Act, 2017, claims that ICICI Lombard owes ₹273.4 crore in taxes. Additionally, it demands interest under Section 50(1) of the same Act and a penalty under Section 74(1) in conjunction with Section 122(2)(b) of the Act.

The crux of this issue lies in a broader industry concern relating to the applicability of GST on salvage-adjusted cases and ineligible Input Tax Credits related to motor claims settlements.

In response, ICICI Lombard has taken a cautious stance by making a deposit of ₹104 crore under protest.

This financial move by the company has been duly noted in its Fiscal Year 2022-2023 Financial Statements under the "Notes to Contingent Liability" section.

Despite the deposition, ICICI Lombard remains steadfast in not accepting liability and has declared its intention to submit a comprehensive response to the SCN within the stipulated timeframe.

On a separate front, ICICI Bank – the parent company of ICICI Lombard – secured the green light from the Reserve Bank of India (RBI) to enhance its ownership stake in the insurance subsidiary.

The RBI's approval allows ICICI Bank to gradually raise its ownership by a maximum of 4% over multiple phases. This move has been made public through official notifications to Indian stock market exchanges.

It's important to emphasize that the RBI's endorsement is subject to fulfilling specific regulatory prerequisites. This strategic manoeuvre by ICICI Bank signals its confidence in the insurance sector's growth potential and its subsidiary's role therein.

As the situation unfolds, market watchers eagerly await ICICI Lombard's comprehensive response to the GST notice, which is expected to shed more light on the intricacies of the alleged tax demand.