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How will GST impact on your Car Insurance Premium?

Car insurance is categorised as a service provided by an insurance service provider. So, it comes under the purview of the Goods and Services Tax (GST). A flat rate of 18% GST is applicable on your car insurance premium. 

The impact of the levy of GST on car insurance premium is that it directly leads to an increase in the premium you have to pay towards the policy. However, although the GST is an added expense, the benefits provided by a comprehensive car insurance policy far outweigh this negligible increase in the car insurance premium. 

So, the next time you purchase or renew your car insurance, make sure to account for the effect of GST on the premiums. 

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GST on Car Insurance - Overview

Let’s understand how GST for car insurance policy has changed the premium rate and its impact on policyholders:

Before GST:

Car Insurance Premium (taxes excl.)

Pre-GST Rate

Service Tax

Total

₹10,000

15%

₹1,500

₹11,500

After GST:

Car Insurance Premium (taxes excl.)

Car Insurance GST Rate

Service Tax

Total

₹10,000

18%

₹1,800

₹11,800

 

The premium amount after GST comes out to be ₹11,800 which was previously ₹11,500. This is ₹300 more than you would have paid in the time before GST on car insurance was levied. However, safety for you and your vehicle is just as crucial, if not more, due to the uncertainty on the road.

Impact of GST on Car Insurance Premium

The impact of vehicle insurance GST rates can be broken down further. Prior to the introduction of the car insurance GST rate, the service tax on car insurance premiums stood at 15%. The total tax levied amounted to 14% as service tax, 0.5% as Krishi Kalyan cess and 0.5% as Swachh Bharat cess. After the new system came into force, the car insurance GST percentage stood at 18%. This resulted in policyholders having to pay 3% more on premiums than they would have prior to GST without accounting for inflation and other factors.

Conclusion

The implementation of GST on motor insurance has resulted in higher premiums. However, this should not be the only criteria by which GST must be judged. The broader purpose of this reform is to simplify the convoluted tax structures in India that preceded it.

The motor insurance plans for cars and bikes available on the Bajaj MARKETS platform provide comprehensive coverage, swift claim settlement, round the clock assistance and excellent customer service. Choosing to avail these through Bajaj MARKETS allows your application and claim process to be entirely digital, significantly reducing the time taken for processing and approval.

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FAQs on GST on Car Insurance

✔️Can I claim GST on car insurance for income tax?

No. As a private car owner, you cannot claim GST on car insurance. This benefit might be available for motor vehicle dealers and similar businesses.