Impact and rate changes of GST on two-wheeler insurance


09 Jun 2023

Understanding the GST Impact: Changes and Rates in Two-Wheeler Insurance

Since the implementation of GST in the country unified, numerous indirect tax rates have been changed. As a result, the premium cost of two-wheeler insurance has also been influenced by GST. Two-wheeler insurance is considered a service; therefore, it also comes under the GST regime.

Let's learn more about the impact of GST on two-wheeler insurance and the current GST rate for bike insurance.

How the new tax regime increased the bike insurance premiums?

The implementation of the GST or Goods and Services Tax in India has brought about significant changes to the tax structure for various products and services, including two-wheeler insurance. Before GST, the tax structure for two-wheeler insurance comprised multiple taxes, such as excise duty, value-added tax (VAT), and central sales tax (CST), among others, with a tax rate of 15%.

Under the new tax regime, GST rates for goods and services are divided into five categories (0%, 5%, 12%, 18%, and 28%). The GST Council, which is responsible for setting the tax rates for goods and services in India, has fixed the GST rate for two-wheeler insurance at 18%, which is a 3% increase from the previous tax rate. As a result, the premium for bike insurance has risen, but the impact is not the same for all types of insurance providers.

GST rate changes and their impact on insurance premiums

The GST on two-wheeler insurance was initially set at 15% and has since been revised to 18%. This increase in the GST rate has led to a corresponding increase in insurance premiums. Insurance companies have been forced to raise their premiums to accommodate the additional tax costs. As a result, two-wheeler insurance policies have become more expensive for consumers.

How does GST on two-wheeler insurance impact customers?

Goods & Services Tax (GST) is a tax levied on the supply and receipt of goods and services in India. The GST rate applicable to two-wheeler insurance premiums is 18%. This means that when customers buy two-wheeler insurance, they need to pay an additional 18% tax on the premium amount.

The impact of GST on two-wheeler insurance on customers can be summarised as follows:

  • Increased Premium Costs: With the addition of GST, the premium amount for two-wheeler insurance is likely to increase, and customers will have to pay more for the same insurance coverage.

  • Transparency: GST has increased transparency in the pricing of two-wheeler insurance, as customers can now see the exact breakup of the premium amount, including the GST component.

  • Standardization: GST has brought about standardization in the pricing of two-wheeler insurance across the country, as the same tax rate is applicable across all states and insurers.

  • Input Tax Credit: Businesses providing two-wheeler insurance can claim the input tax credit on the GST paid and services used for providing the insurance services. This helps reduce the overall cost of providing insurance, which may result in lower premiums for customers.

It's important to understand the impact of GST on two-wheeler insurance in India and choose a provider that best fits your needs. Whether you opt for a traditional insurance provider or a digital insurance company, it's crucial to compare the available options and make an informed decision.

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Team Kotak GIC

The content of this blog has been created and carefully reviewed by the esteemed team at Kotak General Insurance, with the sole purpose of providing valuable guidance and sharing insights on the importance of general insurance. Our objective is to assist users in making informed decisions when purchasing or renewing insurance policies for their cars, bikes, and health. Our expertly curated information aims to empower our readers with the knowledge they need to protect their valuable assets and financial interests.