In June 2017, the Indian government introduced the Goods and Services Tax (GST) to simplify the tax system in India. The GST replaced several other taxes that were previously in place, including the Value-Added Tax (VAT) and Service Tax. One of the most confusing aspects of GST for many people was the requirement to include your GST number on invoices and other documents. This was a new requirement that many businesses were not familiar with, especially when it came to car insurance.
When purchasing car insurance, it is important to include your GST number. This is because the GST will be applied to the total cost of your policy. In some cases, you may be exempt from paying GST on your car insurance policy. However, in order to take advantage of this exemption, you must include your GST number when you purchase coverage.
What is GST?
GST (Goods and Services Tax) is a unified system applicable to the supply of services and goods. The GST has replaced different types of taxes like interstate product sales, central excise duty, value-added tax, service tax, entrance tax, purchase tax, and luxury tax.
GST can be divided into two parts, including CGST and SGST. The CGST is the central GST charged by the central government, while the SGST is the state GST levied by state governments. Apart from that, the central government also collects Integrated GST (IGST) when goods or services are exchanged between states.
The GST amount for car insurance is fixed at 18%. Due to the addition of GST, the price of a car insurance policy increased by 3%.
Impact of GST on Automobile Insurance
• Increased Taxes
Due to the implementation of GST, car insurance premium is subject to an increased taxes. Before GST, the service tax for automobile insurance policies was 14%. Apart from that, policyholders also had to pay a 0.5% Swachh Bharat cess and 0.5% Krishi Kalyan cess.
Thus, Car or vehicle insurance premium attracted 15% as Service Tax under the previous taxation system; however, With the advent of GST, it is at 18%. Therefore, this has resulted in a total 3% increase in your car insurance premium.
Suppose you have a car insurance policy of Rs 10,000. Before the GST, your total premium would be Rs 1,500. The total premium amount would be Rs 11,500 after adding taxes. But the introduction of the GST attracts an 18% tax. It means that you will have to pay Rs 11,800 as the GST.
• Simpler cost structure of Policy
The GST for car insurance has, undoubtedly, had an impact on car insurance premiums in India. However, a single tax on car insurance has made the costing structure of policies simpler.
Should You Add Your GST Number to the Automobile Insurance Policy?
Several people are in the dilemma of adding their GST number to their automobile insurance policy. A GST number includes 15 digits and is called the GSTIN or GST Identification Number. It is allotted to every person who is registered under GST. You will need your PAN card to register under GST since the identification code generated is based on your PAN number.
Business entities, suppliers, and dealers who are eligible taxpayers can register under GST. People apply for the GST number to claim input credit GST. Therefore, adding your GST number to your car insurance policy is quite prudent.
The advent of GST requires you to pay high insurance premiums. But the silver lining is that you get back a portion of your paid amount. Therefore, do not shy away from obtaining car insurance because of the high premiums.
The only thing you need to do is to get your GST number added and call up your insurance provider. Let them know that you want to add your GST number in case you didn't do it while filling up the insurance application. The customer care service of your insurance provider will add the number to your insurance policy in no time.
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.