Premiums on car insurance subject to GST
How does GST work?
The indirect federal sales tax that is imposed on certain products and services is the goods and services tax (GST). In addition to adding GST to the product price, the business also charges GST to customers when they buy the product. Businesses or sellers are responsible for collecting and remitting the GST portion. In some countries, it is also known as Value-Added Tax (VAT).
July 1, 2017 marked the start of the Goods and Services Tax (GST) instituted by the Union Government. It was the most sweeping change to taxation in the country47. Before 2017, there was a complicated, multi-tiered and indirect consumption tax system. GST is a value-added tax that replaces that. A number of taxes were imposed in this system, including Central Excise Duty, Interstate Sale of Goods Tax (CST), Service Tax, Value Added Tax (VAT), Entry Tax, Luxury Tax, and Purchase Tax.
As a result of the GST reform, it will be a source-based tax where the final consumer will only be responsible for paying the taxes levied by the last provider in the supply chain. Based on the type of item or service involved, the central GST, state GST, and Integrated GST are levied at uniform rates of 0%, 5%, 12%, 18%, and 28%. The GST has led to price drops in some sectors, while more competitive pricing has emerged in others since it was implemented.
In particular, the insurance industry has been impacted as it falls within one of the higher tax slabs, resulting in a rise in premium costs.
The advent of GST on vehicle insurance
In the past, service tax was incorporated into car insurance premiums. Currently, GST has replaced the service tax, so it’s imperative to know how it has affected your car insurance premium. Vehicles are subject to a different rate of GST than life insurance policies. An endowment plan, for example, imposes a higher GST in the first year and a lower tax in subsequent years. But for car insurance, the GST is constant. Due to the implementation of GST, you have to pay 3% more on four-wheeler insurance charges.
As a result, policyholders will be required to pay higher premium rates to cover the higher tax rate. Increasing taxes have created a highly competitive environment for the insurance industry. All insurance companies strive to offer attractive deals such as comprehensive insurance, excellent customer service, and coupons for online purchases. With Secure Cover, you don’t have to worry about the cost of getting your car repaired.
It is pertinent to note that GST has increased the premium amount by 3%, but you cannot avoid buying the policy because of the strict motor vehicle law. Furthermore, driving an uninsured vehicle when you can receive excellent customer service and quality products from our company is a humongous loss! Conduct a thorough analysis before buying auto insurance. Insurers charge a high GST, but being insured comes with many benefits!
The impact of GST rates on vehicle insurance premiums can be examined in more detail. A 15% service tax was levied on car insurance premiums prior to the introduction of the GST rate. Service tax for the transaction was 14%, KrishiKalyan Cess was 0.5%, and Swachh Bharat Cess was 0.5%. The GST percentage for car insurance increased to 18% after the amended law came into force. Because of this, insurance companies had to charge policyholders 3% more in premiums than they would have if GST hadn’t been imposed, not taking inflation into account.
Driving a vehicle on Indian roads requires at least third-party insurance. It is more expensive to have this minimal level of coverage due to the higher GST rates. To counteract the higher car insurance GST rates, service providers have enhanced insurance products with features such as comprehensive benefits, free parking, customizable plans, special offers, etc. With Secure Cover, you can avail all these benefits and more when you choose your car insurance plan today!
Let’s Wrap Up!
There is no doubt that the advent of GST has resulted in higher insurance premiums. This criterion should not be the sole criterion by which the reform is judged. Due to its wider purpose, it was intended to simplify India’s convoluted tax structure.
Moreover, third-party car insurance does not protect the policyholder’s vehicle from damage if it is damaged by third parties as comprehensive insurance does. Hence, you can find the appropriate coverage for you at the best price by comparing multiple policies from a variety of service providers.
On our marketplace, we provide motor insurance plans for cars and two-wheelers that provide optimum benefits, fast claim resolution, and 24/7 customer service. If you take out these products through Secure Cover, your application and claims process will be entirely online, reducing the time it takes to process and approve your claim.