Mumbai, February 1, 2025 – ICICI Lombard General Insurance Company Limited (BSE: 540716, NSE: ICICIGI) has received an order from the Additional Commissioner of CGST & Central Excise, Palghar Commissionerate, confirming a tax demand of ₹2,734.45 crore. The order also imposes an equivalent penalty, bringing the total liability to over ₹5,468.90 crore, excluding interest.
Background and Regulatory Action
The dispute originates from a Show Cause Notice (SCN) issued in August 2023, alleging non-compliance with Goods and Services Tax (GST) regulations for the period between July 2017 and March 2022. The Central Goods and Services Tax Act, 2017 (CGST Act), under Section 74, has been invoked for the tax demand and penalty.The core issues highlighted in the order include:
- GST Applicability on Salvage Sales: The company deducted the value of salvage (scrap/wreck) from motor claim payouts, which the tax authority considers as a taxable supply under Section 7 of the CGST Act.
- Input Tax Credit (ITC) on Motor Claims: The insurer allegedly availed and utilized ineligible ITC on invoices from repairers and garages, which was not permissible.
Financial Impact and Company Response
ICICI Lombard had already deposited ₹1,041.32 crore under protest before the final order. However, with the order confirming the tax demand, the deposited amount is set to be appropriated by the authorities.The company has stated that the issue is industry-wide and plans to challenge the order before appellate authorities. It is also exploring legal options, including filing a Writ Petition.
Investor Outlook
The financial implications of this ruling are significant, as the tax liability will be reflected as a contingent liability in the company's financial statements. Investors will be closely monitoring the outcome of legal proceedings, which could set a precedent for the insurance industry.ICICI Lombard’s stock performance may see short-term volatility due to this development, depending on market reaction to regulatory risks and the company's legal strategy.