Reliance General Insurance Company (RGIC), a subsidiary of Reliance Capital, is grappling with fresh Goods and Services Tax (GST) demands from the Directorate General of GST Intelligence (DGGI). The company received multiple Show Cause Notices (SCNs) amounting to Rs 922.6 crore ($123 million) today.
The SCNs are linked to several issues, including GST on re-insurance commission and co-insurance premiums that involve a lead insurer and follower. They also pertain to an investigation by the Input Tax Credit (ITC) and non-payment of GST under a reverse charge basis related to an exempted crop insurance scheme. In response to the investigation, RGIC has deposited Rs 10.13 crore ($1.35 million) under protest and received a separate tax notice of Rs 5.38 crore ($716,000).
This development could potentially impact the pending acquisition of RGIC by the Hinduja group. The all-cash offer of Rs 9,800 crore ($1.3 billion) for RGIC constitutes nearly 70% of Reliance Capital's value but has defaulted on Rs 22,000 crore ($2.93 billion) loans.
The deal is currently awaiting approval from the Supreme Court due to a challenge from the Torrent group. The plea hearing is scheduled for October 11.
RGIC has been undergoing debt resolution since November 2021 and this new tax demand adds another layer of complexity to the ongoing process. The company's financial difficulties have been further highlighted by its inability to pay off its substantial loan defaults.
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