< Back

Motor

blog-6cfbdabd8ab7a60adacbfff0000d284de

In July 2017, several taxes across India were unified under the Goods & Services Tax, which is popularly called GST. It’s definitely been the biggest tax reform in India, as it helped remove the effect of double taxation.

Before we get into the nitty-gritties of the impact of GST on motor insurance, let’s take a closer look at what exactly GST is. The Goods & Services Tax is the single, unified tax replacement for a number of indirect taxes that were previously levied at the state and central level. GST has two components, CGST (Central) and SGST (State). Depending on the kind of good or service being offered, there are 4 tax brackets – 5%, 12%, 18%, and 28%. Insurance has been allotted to the third category, so the GST on insurance premiums is 18%. Earlier, however, insurance premiums had a service tax of 15%. So, ever since July 2017, there has been a 3% increase in the taxes that individuals have to pay on their insurance premiums.

As soon as GST was implied, policyholders saw an increase in the total premiums that they ended up paying, due to the increased rate of taxation. We can understand the impact of GST on car insurance with the help of an example.

Let’s say Mr. Kumar has recently bought himself an SUV. For an insurance policy that offers comprehensive cover, his premium has been calculated atRs.15,000.

Let’s take a look at the amount Mr. Kumar had to pay before 1st June, 2017:

Premium Tax % Tax Amount Total Amount to Pay
Rs.15,000 15% Rs.2,250 Rs.17,250
 

But, now that GST has been implemented, let’s see how much Mr. Kumar has to pay:

Premium Tax % Tax Amount Total Amount to Pay
Rs.15,000 18% Rs.2,270 Rs.17,700
 

Initially, the 3% additional tax amount had to immediately be taken care of by the insured party. However, over the last year, insurance companies have restructured their policies to offer better cover at lower premiums, so that the overall amount that the customer has to shell out remains unchanged..

Even in cases where the premiums have increased slightly, it’s important to remember that a small cost ofRs.450 per year is definitely worth paying for the protection of your car. Remember, in India, it is mandatory to have at least third-party insurance under the Motor Vehicles Act. However, third-party liability is hardly enough to help you deal with the kind of wear and tear and accidental damages that take place. So, if you’re looking for better cover for your beloved vehicle, click here

Disclaimer: The content provided is for education and informational purpose only, none of the information contained in our blog amounts to any form of opinion or advice. Please go through policy related documents carefully or consult an expert before making any insurance-related decisions.

RELATED ARTICLES

Car Insurance Benefits

Motor

Benefits of car insurance

A car insurance can help you offset substantial financial loss that you may incur because of damage caused to your car

Add-on covers for Car Insurance

Motor

Must have Add On Covers for Car Insurance

A basic comprehensive car insurance covers damage to car, 3rd party liability and theft & loss of vehicle.

Car insurance

Motor

Right time to buy vehicle insurance

Buying a vehicle insurance is an important decision and you need to ensure that you make a timely purchase of vehicle insurance

know-how-car-insurance-premium-is-calculatedcde

Motor

Know How Car Insurance Premium Is Calculated

Car insurance premium calculation is based on various important factors. Learn about these factors.

rules-to-follow-for-safe-driving-th

Motor

Rules to follow for safe driving

Know About The Important Road Safety Rules To Follow

 

 

significance-of-a-motor-vehicle-insurance-policy

Motor

Significance of a motor vehicle insurance policy

Apart from financial security, know in what all ways a motor insurance policy is significant.

maintenance-tips-for-car-engine

Motor

Maintenance tips for car engine

Follow these maintenance tips and buy a car insurance with engine protection cover to keep engine secure.

Monsoon Tips Car

Motor

Monsoon Tips for Car

Simple tips to help you stay safe and keep your car moving ahead during monsoon.

What is Zero Depreciation Cover

Motor

What is Zero Depreciation Cover

Read on to understand what is zero depreciation car insurance cover and how it works.

Questions Regarding Motor Insurance Policies

Motor

Questions Regarding Motor Insurance Policies

Essential questions answered about motor insurance policies in India.