LIC slapped with ₹805 cr tax notice; shares down

Shares of Life Insurance Corporation (LIC) of India fell 1.44% in the early morning trade on Tuesday after the state-owned insurer received a Goods and Services Tax (GST) notice worth ₹365 crore, along with penalty and interest worth ₹440 crore.

The deputy commissioner of state tax, Mumbai, Maharashtra, has said the company allegedly violated rules on non-reversal of input tax credit u/r 42 & 43 of CGST Rules, 2017.

Other violations of laws by LIC include the reversal of ITC availed from reinsurance; interest on delayed payment made with GSTR-3B; interest on advance (proposal deposit) received; less RCM liability disclosed in GSTR-9/3B than shown by suppliers in GSTR-1. 

LIC, however, says the violation order will have no "material impact on financials, operations or other activities of the corporation", and that the corporation will file an appeal before the commissioner (appeals), Mumbai, against the said order within the prescribed timelines.

This is the second time in over a month that LIC has received a GST demand notice from the authorities. On December 11, 2023, LIC received a GST notice worth ₹183 crore from the Telangana government, which comprised pending dues, penalties and interest, from the Telangana arm of the taxation authority. 

The filing states demand order-cum-penalty notice pertains to FY 2017-18. Out of the total tax demand, ₹81 crore is in the form of pending GST dues, along with a penalty of around ₹93 crore, and interest of around ₹8 crore. 

The LIC share opened a gap down 1.39% at ₹852.10 today and fell to an intraday low of ₹844, down 1.6% on the BSE. At the current share price of ₹846.80, the scrip is down 1.8% as compared to a 52-week high touched on Monday i.e. January 1, 2024. The scrip has traded 37% from a one-year low of ₹863 touched on March 29, 2023. With this, LIC's m-cap stands at ₹5.3 lakh crore.

In the past year, the stock has given a 19.37% return, while the six-month return stands at 34.64%. On the past month and week basis, the LIC shares have surged 17.8% and 7.22%, respectively.

In a relief to the company, the government last month gave LIC a 10-year exemption to achieve a 25% minimum public shareholding. The insurance giant can now comply with the minimum public shareholding rule of capital markets regulator SEBI by May 2032.

The government rules say the company, where the outstanding listed shares are two crore or more and the m-cap is ₹1,000 crore, has to mandatorily maintain public shareholding of at least 25%.

For the second quarter that ended September 2023, LIC reported a 50% decline in net profit at ₹7,925 crore as compared to ₹15,952.5 crore in the year-ago period. The net premium income fell 19% YoY to ₹1.07 lakh crore from ₹1.32 lakh crore in the same fiscal period. The gross non-performing assets (GNPAs) declined to 2.43% as against 5.60% in the previous year, while the net NPA remained nil during the quarter under review.