Page 12 - Insurance Times November 2023

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LIC receives Rs. 84 crore Management and Avataar Ventures,
GST Council to clarify also invested in the latest funding
penalty order from I-T
life insurance premium State-run Life Insurance Corporation of round.

The GST Council will soon provide India (LIC) said it has received an order The funding will be used to beef up
clarity on input tax credit for life from Income Tax authority demanding tech capabilities, enhance marketing
efforts finance new initiatives like
insurers, following a recent Rs a penalty of Rs 84 crore. The penalty reinsurance, and pursue inorganic
290-crore demand on Life relates to assessment year 2012-13, growth plans.
Insurance Corporation - a move 2018-19 and 2019-20, LIC said in an
that is expected to come as a relief exchange filing. The insurer said it will The company raised $150 million from
file an appeal before the appellate investors led by US-based Goldman
for LIC.
authority. Sachs Asset Management and TVS
The complication on GST arises in Capital Funds as part of its Series A
case of traditional life policies or InsuranceDekho valued at round of funding in February this year.
endowment plans, where GST is It is also backed by other investors such
levied on only a portion of the $600 million in Series B as Investcorp, Avataar Ventures and
plan. As a result, on the first-year round LeapFrog Investments.
premiums, GST is levied at 4.5%, Insurtech startup InsuranceDekho said The company earns about 82% of its
while for subsequent years, it is it has raised $60 million in a Series B premium from Tier-II cities and
levied at 2.25%. funding round led by Japan's Mitsubishi beyond. It competes with the likes of
UFJ Financial Group (MUFG); insurer Acko, Turtlemint and PolicyBazaar, and
That is because these policies have
BNP Paribas Cardif through its claims to be present in about 1,500
two components - an insurance
insurtech fund managed by European towns, with more than 90% of its
component, which attracts GST,
investment major Eurazeo; Beams premium coming from tier-II regions
and a savings component, which is Fintech Fund; and Yogesh Mahansaria and beyond.
treated akin to deposits or Family Office.
investment in banks. Life insurance firms' new
A person aware of the transaction said
The issue relates to the input tax the investment valued the company, business declines 13% in
credit claimed on the portion of the insurance unit of used-car platform first half of FY24
premium that is exempted from CarDekho, at around $600 million.
The life insurance industry has
payment of GST. Since the While a large part of the funding round
premium itself is exempt, tax is equity, a small portion has been reported a lacklustre performance in
the first six months of the financial
authorities believe, the law does raised via debt, the company said. year 2023-24 (FY24) with the new
not allow companies to claim InsuranceDekho's existing investors, business premium falling 12.97 per
input tax credit. TVS Capital, Goldman Sachs Asset
cent, mainly due to the decline in
12 November 2023 The Insurance Times