Indian authorities have ordered British insurance company Aviva's Indian unit Aviva India to pay back taxes and fines of $7.5 million or Rs 65.3 crore. An investigation found that Aviva India created fake invoices to pay illegal commissions and claimed incorrect tax credits. According to Reuters, Aviva's India business reported a net profit of only $10 million in FY23-24. Aviva is facing tough competition from competitors in India's insurance market.
According to Reuters, Indian tax authorities said in a notice in August 2024 that to boost its business, Aviva India made payments of about $26 million between 2017 and 2023 to vendors who allegedly provided marketing services. But they were merely a pretext to pay additional commissions to Aviva's agents beyond regulatory limits.
How much tax was evaded
Authorities allege that Aviva evaded $5.2 million in taxes by using a secret and illegal system of fake invoices and cash payments to falsely claim tax credits. After hearing Aviva's arguments, Joint Tax Commissioner Aditya Singh Yadav ruled that the company had evaded taxes worth about Rs 32.6 crore ($3.8 million), which the company must pay along with a 100% penalty, a total of Rs 65.3 crore, or $7.5 million, Reuters reported.
The order issued on February 5 said that "the vendors were mere puppets who were playing a role in providing undue advantage of fake tax credit to Aviva. It said that the vendors were used as a front to hide the manipulation of input tax credit. In a statement to Reuters, Aviva India said that it will contest the new order through an appeal. The order will have no impact on its operations."
Aviva's business in India is through joint venture
Aviva runs its business in India in a joint venture with Dabur Invest Corp. After increasing its stake from 49% in 2022, Aviva now owns 74% of the business. The order said that Aviva denied any wrongdoing before the tax authority and said that the allegations were false. It also said that the vendors were not fake and they had genuinely provided services to the company.
