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GST on Car Insurance

As per the Motor Vehicles Act of 1988, it is compulsory for every car owner to have a four-wheeler insurance plan. When you get this policy, you will be asked to pay a premium price. This premium price will include a goods and services tax which is regulated by the Central Government of India. It is a consumption tax based on the credit invoice method where the value addition at each stage is taxed. 

 

The GST rates for goods and services have been placed in four categories of 5%, 12%, 18% and 28%. GST on car insurance falls in the 18% category. The GST on car insurance premiums replaced the previous services tax which was levied at the rate of 15%.

 

Pre-GST 

Insurance Premium

Service Tax (%) 

Service Tax (amount) 

Total amount

₹10, 000

15%

₹1,500

₹11,500

Post-GST

Insurance Premium

GST (%) 

GST (Amount) 

Total amount

₹10, 000

18%

₹1,800

₹11,800

Impact of GST on Car Insurance Premium

The impact of GST is stated as follows:

 

  • Increase in the premium price of the policy

  • Increase in taxes by 3% as compared to pre-GST taxation

  • Pre-GST taxation included 14% service tax, 0.5% Swachh Bharat cess, and 0.5% Krishi Kalyan cess

 

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Conclusion

If you own a four-wheeler, you are required by law to own car insurance as well. The GST imposed on the premium of this car insurance is 18%. While this does increase your car insurance premium price, it is also a duty that every responsible citizen must fulfil. Moreover, getting car insurance can be very beneficial for you and your finances. 


Starting at just ₹2,094/year, four-wheeler insurance can come with perks like third-party coverage, personal accident insurance, add-on covers, cashless garage services, etc. This financial protection can help you in times of accidents, natural calamities, man-made disasters, and other eventualities. Hence, while GST on insurance when added to premium prices can seem hefty, the perks of getting car insurance are worth it. Explore a plethora of car insurance plans on Bajaj Markets to find your ideal policy.

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FAQs - GST on Car Insurance

What is the GST on car insurance?

The car insurance GST rate is fixed at 18%. The GST on car insurance policy is to be paid by the consumer of the service.

Why do I have to pay GST on car insurance?

Car insurance is categorised as a service under the GST system for which the consumer has to pay the tax.

 

Can I add my GST number to the car insurance policy?

Yes, you can add your GST identification number to the car insurance policy.

 

Can I claim GST on car insurance for income tax?

No. You cannot claim GST on car insurance for income tax as you are a private car owner. 

 

Is it fine to not purchase car insurance?

It is legally mandatory to have, at least, a third party insurance cover for your car. Comprehensive car insurance is optional but comes with a wide range of benefits and securities. If your car is not insured, you are liable for fine, imprisonment, or both.

Can a GST number be added to a car insurance policy?

GST number is a 15-digit unique code called GST Identification Number, or GSTIN. It is allotted to a company or person registered under the GST system. The GSTIN can be obtained by all eligible tax-payers and is used to file GST returns. If you have purchased a car insurance policy and paid GST on the car insurance premium, you can contact the customer care team of the insurance company and ask for the GSTIN. You can then add the GSTIN to your car insurance policy.

 

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