What is the Impact of GST on Car Insurance Policies?
Updated On Oct 15, 2023
This article is about how GST has impacted car insurance policies. It begins with an introduction of what GST means and then mentions the details of its impact on car insurance policies on 3 points.
The Goods and Services Tax (GST) is a unified tax regime where the Central Government of India charges and collects taxes from the State Governments on the supply of goods and services, including central excise duty, interstate sale of goods, service tax, value-added tax, entry tax, luxury tax and purchase tax. Car insurance falls under the services category of GST and the sale of goods and services is charged at a fixed rate of 18%. The rate of car insurance under GST has increased by 3% from earlier times and the price is borne by car insurance holders by paying a slightly higher premium. While this is just one aspect of how GST has affected car insurance, in this article we are going to talk about how it has compositely affected car insurance over the years.
Impact of GST On Car Insurance Policies
The following list will help you to understand how GST has affected car insurance policies -
Increased Service Tax -
The introduction of GST has levied a greater service tax on car insurance. Earlier the service tax amount was 14% and included 0.5% as Krishi Kalyan cess and 0.5% as Swachh Bharat Cess. Nowadays, this service tax rate has increased to 18%, consequently a 3% hike in overall tax rates. This has impacted the rate of premiums sharply excluding inflation and other factors.
More Premium -
The GST potentially attracts greater premium on car insurance than before. Car insurance policies have to pay the GST as per new norms and taking into consideration the hike in computation and administrative costs, the rate of service tax for car insurance has also increased. While earlier the rate of service tax on car insurance premium was 15%, it has now become 18%. As the amount of tax has increased, so has the amount of premium to be paid by potential car insurance holders.
Incorporates Greater Features -
The incorporation of car insurance under GST has led several car insurance providers to offer better features with an increased rate of premium. You can now avail a host of innovative services such as greater coverage, online discounts and efficient client management. Along with this, many car insurance companies also provide a cashless garage facility to their insurance holders to amplify their customer service.
These are the most crucial aspects in which the GST has affected car insurance policies. While you might have to pay a higher premium amount for basic facilities, you must not forget that with the higher pay comes better facilities that you did not receive earlier. It is not wise to shy away from buying car insurance because of its cost. Whenever you buy a car, you should secure it with an insurance policy as it will guarantee a stable financial protection against any kind of damages sustained on its body or parts.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.