A automobile insurance policy provides financial protection to the policyholder in the event of damage to a third party or one’s own vehicle. When purchasing car insurance, policyholders must pay GST, or goods and services tax, which is currently fixed at 18%. As a result, the cost of car insurance has soared. If you have a GST number, you can add it to your auto insurance policy and claim it back when you file your taxes. Continue reading to learn everything there is to know about the GST and how it affects vehicle insurance rates.
What is GST, and how does it work?
GST (goods and services tax) is a unified indirect tax system in India that has replaced 17 different forms of indirect taxes. The luxury tax and the central excise duty are examples of indirect taxes. Other taxes include the value-added tax and others. GST is a tax collected by the national and state governments on the sale of goods and services in India. A GST bill was enacted in the Lok Sabha and Rajya Sabha in 2017, and the law went into effect on July 1, 2017. The tax is collected by the central government in the case of the Central GST (CGST), and by the state government in the case of the SGST.
The GST is collected by the federal government when goods and services are exchanged between states. Depending on the goods and services you obtain, fixed GST rates of 0%, 5%, 12 percent, 18 percent, and 28 percent apply. For example, if you buy a car, you’ll have to pay a 28 percent GST.
The effect of the Goods and Services Tax (GST) on vehicle insurance premiums
The GST premium used to be levied at 15% under the former tax system, but now it is charged at 18% under the new GST. The 3 percent increase in GST resulted in policyholders paying higher premiums.
For example, a car insurance premium of Rs. 10,000 at a 15% GST rate would be Rs. 1500 under the old tax regime. The entire premium would be Rs. 11,500, including tax. However, after the implementation of the GST regime, car insurance premiums are subject to an 18% tax. The premium of Rs. 10,000 is subject to 18 percent GST, bringing the total to Rs. 11,800. As a result of the introduction of GST, car owners are paying higher rates.
Services that are better
Insurance firms are now offering discounts on online purchases, improved cashless garage facilities, and excellent customer service as a result of the price hike. Despite the fact that the GST has increased car insurance costs, motor vehicle owners are required to have a legal auto insurance coverage in order to operate on Indian roadways. Automobile insurance is a legal obligation.
Is it possible to include a GST number in your vehicle insurance policy?
Every person who is registered for GST is assigned a 15-digit unique identity number. Eligible taxpayers, such as businesses, dealers, and suppliers, can get this unique number. The number is based on your PAN number and can be used to file GST returns. It is possible to include the GST number.