GST Impact on Bike Insurance and Rate Changes
In order to unify multiple indirect taxes, the Goods and Services Tax (GST) was introduced, which is levied on almost everything that is offered as a service. And since motor insurance falls in the service category, the tax reform is applicable to the motor insurance premiums as well. Here is a complete guide to understanding the impact of GST on two-wheeler insurance and the recent GST hike.
Prior to the implementation of GST, the tax rate for two-wheeler insurance was 15%, which included the VAT (Value Added Tax), Excise Duty, and Central Sales tax (CST). Post implementation of the GST rate, bike insurance is set at 18%, which is a hike of 3%. For instance, insurance that is priced at Rs.1,000 would cost you Rs. 1150 under the former tax system, while with the implementation of the new tax rate, it would now cost Rs.1180. Although there is a hike in the taxes, the same can be compensated by buying motor insurance online. Let’s know how.
GST Impact on Bike Insurance
The bike insurance premium has increased slightly with the implementation of GST. However, reputed insurance companies offer good price for bike insurance when purchased online. Irrespective of whether you opt to buy comprehensive motor insurance, third party insurance, or own damage insurance, you can buy insurance online directly from the insurance companies.
In India, having third-party insurance is a must for every vehicle plying on the road. While third party liability is a mandatory requirement, having an own damage insurance is necessary to provide financial coverage to your vehicle in case of any damages. Buying both insurances separately will cost you higher than buying a comprehensive insurance policy.
As comprehensive motor insurance includes both own damage insurance and third-party insurance, the GST rate is calculated as an aggregate of both the insurances, that is 18%. So, when buying comprehensive insurance, you would just need to pay one-time GST rather than paying it twice but withdraw the benefit of two insurance plans.
Also, buying a comprehensive insurance plan gives you the provision to enhance the plan with add-ons/riders that you can customize as per your need. The underlying fact is just the implementation of GST, and a 3% hike should not refrain you from buying a motor insurance policy that can provide you financial support in case of any damage to your vehicle.
Impact of GST on the two-wheeler industry
Although the GST has increased slightly in the case of premiums, the GST on the sale of two wheelers has been in favour of the masses. The tax for two wheelers with less than 350 CC was 30%, but after the GST implementation, it reduced to 28%. In the case of two wheelers that are above 350 CC, there is a slight increase of 1% from previous tax rates. For Electric Bikes, the GST has been slashed to 5% from 12%, which is in effect from August 2019. For Used or Old bikes, the GST rates have been slashed to 12%, and the cess levied on the previous GST rates of 28% has also been removed.
In a Nutshell
Despite the slight increase in the tax rates of two-wheeler insurance, buying a comprehensive insurance policy is always beneficial. It provides wider coverage for the vehicle with own damage insurance and also covers the third-party liability. The experience of buying insurance online and settling claims online has made the process seamless with no paperwork.