GST – A Boon and Bane
The Goods and Services Tax (GST) is the largest tax reform in Indian history since India got its independence. GST is a value-added tax that abolished intermittent tax consumption on the price of goods and services. The following are indirect taxes people were paying before the GST regime brought uniformity and a single tax structure.
- Central Excise Duty
- Interstate Sale of Goods (CST)
- Service Tax
- Value Added Tax
- Entry Tax
- Luxury Tax,
- Purchase Tax
Since the time it was implemented in 2017, many sectors were impacted and the insurance sector was also impacted. With the implementation of GST, service tax has become a part of GST and it is applicable on the premium rates of the insurance policies. Premiums on both life and general insurance policies are subject to 18% tax as per GST.
Insurance comes under the services category and holds great significance in securing an individual’s well-being. Motor insurance is mandatory for every individual who owns a vehicle as per the Motor Vehicles Act of India. This is important for the protection of the insured, third party, and the vehicle. With the implementation of GST, the service tax charged on the vehicles has increased from 15% to 18%. Motor insurance requires renewal and with the impact of GST and renewability of insurance policies, the insured has to pay an increased amount of premium.
Impact of GST on Car Insurance
Everyone looks at the downside of how the costs have gone up but, on the brighter side, the quality of the services has improved. Insurers are offering advanced and innovative features and excellent customer service to encourage more people to come under the umbrella of insurance and also to continue their insurance investments for prudent financial planning. Since the vehicle owners are mandated to pay a basic coverage, insurance service providers have enhanced their products with features like more coverage, flexible plan structures, cashless garages, and discounts on online purchases. The table below shows how GST has impacted the premium.
|Motor Insurance Premium||Pre-GST Rate||Service Tax||Total Premium|
Impact of GST on two-wheelers
The tax on two-wheelers has been segmented based on the engine capacity. Vehicles with an engine capacity of less than 350cc used to pay 30% earlier and have to pay a GST of 28% now. Two-wheelers with more than 350cc used to pay 30% and with an increase of 1%, have to pay 31%.
Though the cost of living has gone up considerably, one must not compromise on safety of self and of the people around them. This is why one must get the right insurance policy for one’s vehicles.
Why get Auto Insurance?
- It pays for damages caused due to accidents
- It covers medical expenses
- Reduces financial and legal damage caused by a third-party liability
In times like these, where there is uncertainty of lives and safety, one can make the wise choice of buying their insurance online. It is an easy and smart process since one can compare various policies and choose what fits the best according to their financial comfort.