Introduction - What is GST on Bike Insurance in India?

Before Goods and Services Tax (or GST) came into effect, the tax structure applicable to two-wheeler insurance consisted of Central Sales Tax (or CST), Value-Added Tax (or VAT), Excise Duty and more. Collectively, these levies totalled a 15 percent tax rate for two-wheelers. The new tax regime outlined under GST, which kicks in when goods and services are sold, is split into five varied tax rates i.e., 0 percent, 5 percent, 12 percent, 18 percent and 28 percent. Bike insurance (also called two-wheeler insurance) is bracketed under the services category. The GST rate on bike insurance amounts to 18 percent.

Effect of GST on Two-Wheeler Insurance Market

As far as the insurance sector is concerned, the GST council has fixed the two-wheeler insurance GST rate at 18 percent. This is 3 percent higher than the previously imposed 15 percent taxation rate. This hike in taxation is passed forward to the customer in various forms; one of them in the form of a higher premium on their insurance. This means that bike insurance is set to become more expensive than it was.

 

That being said, the introduction of GST has triggered competition between different insurance providers. Each insurer tries to set itself apart from the competition by offering competitive pricing and a host of benefits to their policyholders.

Impact of GST on the Two-Wheeler Industry

Ever since GST came into place, a number of sectors have stood to benefit from the same. One of these sectors happens to be the two-wheeler industry. Previously, the tax rate applicable when purchasing a new two-wheeler amounted to 30 percent. With the introduction of GST, the tax applicable has shrunk to 28 percent. This holds true only for two-wheelers that have an engine capacity below 350 ccs. Two-wheelers that have an engine capacity exceeding 350 ccs have a GST rate amounting to 31 percent.

 

It is worth noting that several motorbikes such as the Royal Enfield have witnessed a drop in their prices up to INR 7000. The ultimate price of a motorbike depends upon where it is purchased and the model that has been opted for. While bikes that have engine ccs that exceed 350 have witnessed a change in their prices, most bike prices have fallen with the introduction of GST.

Impact of GST on the Two-Wheeler Insurance Premium

As discussed above, prior to GST, the tax applicable on bike insurance amounted to 15 percent. The 15% was made up of - 14 percent Service Tax, 0.5 percent Swachh Bharat Cess and 0.5 percent Krishi Kalyan Cess. Under GST, the tax levied amounts to 18 percent. The 3 percent hike which resulted in a rise in premium prices has been balanced out by the additional coverage offered by insurance providers.

 

In order to understand the impact of GST on the two-wheeler insurance premium is, consider the following example -

 

Let us assume you have to pay INR 3000 (before tax) as the premium for your bike insurance policy. With the previous taxation rate, you would have had to pay a total premium of INR 3450. Now, owing to GST being implemented, you will have to pay INR 3540. This means that you need to pay INR 90 more than you previously needed to. However, this hike in premium price has meant that insurance providers have provided you with additional coverage. For instance, several insurers now provide basic two-wheeler insurance policyholders with roadside assistance.

GST Rate on Electric Bikes

Electric bikes (e-bikes) are a more environmentally friendly method of transportation in comparison to fuel operated motorbikes. To encourage the purchase of e-bikes, the government has reduced the GST applicable to them. While the previous tax was 12 percent, GST on bike insurance for electric vehicles now amounts to 5 percent. This means that electric bikes are now more affordable as their prices have fallen.

GST on Used/ Old Bikes

The previous bike insurance GST rate applicable to ‘Used and Old bikes’ which amounted to 28 percent is now 12 percent. The previously levied Cess applicable under the old GST Act has been removed under the new GST Act.

GST Impact on Bike Insurance Premium/Rate

Prior to the GST era, the tax structure on two wheeler insurance included the Excise Duty, Value Added Tax (VAT), Central Sales Tax (CST), etc., and the tax rate for two-wheeler insurance was 15%.

 

Under the new tax regime, the GST rates for the sale of goods and services are broken into five different rates (0%, 5%, 12%, 18%, and 28%). As the bike or two-wheeler insurance falls under the services category, the GST on bike insurance premium is 18%.

Conclusion

Understanding the impact of GST on a 2-wheeler insurance plan is useful as it lets you anticipate your expenses. While different types of two-wheelers attract different premiums, the introduction of GST has resulted in motorbike insurance providers stepping up their game and providing policyholders with enhanced coverage. If you haven’t already availed of a valid bike insurance plan for your two-wheeler, head on over to the Finserv MARKETS website and check for viable plans.

Check Out Bike Insurance Plans Available at Finserv MARKETS

FAQs

  • ✔️Has the introduction of GST altered the premium applicable to two-wheeler insurance policies?

    Yes, the introduction of GST has resulted in the premium applicable to two-wheeler insurance policies rising in comparison to the previous tax structure. Those in the market for such a policy need not worry though as this hike can be negated by selecting a cost-efficient two-wheeler insurance plan such as those available on Finserv MARKETS.

  • ✔️By what percent has the tax rate applicable to bike insurance risen under GST?

    Under GST, the tax rate applicable to bike insurance has risen by 3 percent resulting in a move from 15 percent to that of 18 percent.

  • ✔️Why is the goods and services tax applicable to bike insurance policies?

    Goods and services tax is essentially applicable to the sale of all goods and services sold across India. Since bike insurance is a purchased service, GST is applicable to it.  

  • ✔️Are the GST tax rates fixed or not?

    GST taxation rates are fixed and range from 0 percent to 28 percent.

  • ✔️Can I add a GST number to my bike insurance policy?

    Yes, you can add a GST number to your bike insurance policy. This unique 15-digit number is allotted to everyone that registers themselves under Goods and Services Tax. The GST number is based on your PAN number and can be used to file your GST return. If you run a business, you are entitled to avail of a GST number so that you can claim a return for the GST you pay. In order to add your GST number to your two-wheeler’s insurance policy, you must contact your insurance provider’s customer care service and ask for this number to be added.

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