Life Insurance Corporation (LIC) of India, one of the country’s leading life insurers, recently received a significant demand and penalty order related to Goods and Services Tax (GST) for the financial year 2019-20 (FY20). The total amount demanded is a staggering ₹605.5 crore. This development was disclosed in a regulatory filing by LIC to the stock exchanges.
What’s the Issue About?
According to LIC, the order is related to the wrong availment and short reversal of Input Tax Credit (ITC) and interest on late payments. Essentially, the company has been penalized for errors in claiming tax credits and delays in payment. The demand order, issued by the Deputy Commissioner of State Tax, Mumbai, can be appealed before the Joint Commissioner of State Tax (Appeals) in Mumbai.
Breakdown of the GST Demand
The total GST demand of ₹605.5 crore is broken down as follows:
- GST: ₹294.43 crore
- Interest: ₹281.70 crore
- Penalty: ₹29.44 crore
This notice follows another significant demand issued in March 2024, when LIC was asked to pay a penalty of about ₹178 crore by the Additional Commissioner of Central GST and Central Excise in Jamshedpur for short payment of GST over two financial years.
Financial Impact on LIC
Despite the size of the demand, LIC has stated that there will be no material impact on its financials, operations, or other activities. This is crucial for stakeholders to note, as the insurer’s robust financial position allows it to absorb such demands without significant disruption.
LIC’s Recent Financial Performance
In recent financial news, LIC has shown strong performance. The company recently handed over a dividend cheque of ₹3,662.17 crore to Finance Minister Nirmala Sitharaman. This dividend, presented by LIC’s CEO and MD, Siddhartha Mohanty, is part of the total ₹6,103.62 crore paid to the central government for the year 2023-24, including an interim dividend of ₹2,441.45 crore paid earlier on March 1, 2024.
LIC’s asset base is also formidable, standing at over ₹52.85 lakh crore. The company reported a nine per cent increase in consolidated net profit, reaching ₹10,544 crore. Furthermore, LIC’s total income rose to ₹2,10,910 crore during the June 2024 quarter, compared to ₹1,88,749 crore in the same period the previous year.
Key Growth Drivers
LIC’s impressive net profit growth in the June quarter was driven by the increasing sales of high-margin non-participating policies and robust growth in its group business. The company also saw an increase in its first-year premium income, which rose to ₹7,470 crore, up from ₹6,811 crore in the same quarter the previous year. Renewal premiums also saw a rise, reaching ₹56,429 crore compared to ₹53,638 crore a year ago.
Moreover, LIC’s net income from investments during the June quarter grew to ₹96,183 crore, a notable increase from ₹90,309 crore in the year-ago period. This growth in investment income further solidifies LIC’s position as India’s largest and most stable insurer.
Conclusion
The GST demand and penalty imposed on LIC highlight the complexities and challenges large corporations face in managing tax obligations. However, LIC’s financial resilience and strong performance indicate that the company is well-equipped to handle such setbacks without significant disruption to its operations or financial stability. As LIC continues to grow and expand its services, it remains a crucial player in India’s insurance sector.
