How will GST Impact your Motor Insurance Premium?

How will GST Impact your Motor Insurance Premium? | The GST bill, which rolled out from July 1st, 2017 can be counted as the single biggest financial reform the nation has seen since its indian Independence. The changes are made in tax structure in the state and center. GST seeks to improvise on VAT and remove the effect of double taxation from the goods and services price below the value chain.

The latest GST under the updated GST structure is 18% on indian insurance policies. Well, but this is not good news for policy holders. In the GST regime, motor, health, life insurance would be more expensive, as taxes are increased.


How the motor insurance industry is impacted by GST?

The motor insurance industry has been impacted by GST. The industry had earlier attracted a service tax of 15%. This has increased to 18% from July 2017. The GST makes purchasing of insurance a bit expensive.

This also calls for an adjustment from the insuramce holder end so that compliance can be met at all times with regards to financial accounting, getting GST registration, updating book keeping, and knowing about the nitty-gritty such as input tax credit. For a car owner the GST impact on car insurance is marginal and will entail an increase of 3% on taxes for the policy purchased.

On a positive note, the cross border double taxation and compliance issues has been ironed out as a nation-wide one tax regime making things simpler on an operational level for the insurance companies.

The GST impact on third party insurance premium has seen a rise of 3% in-line with the change in indian taxation system for overall general insurance. This is a cost that will be borne by the final customers in the form of an increased in premium amount.

How GST impacts the customers?

he Indian insurance industry is currently going through a temporary phase of adjusting to the GST impact on car insurance. Earlier, the policyholder used to pay service tax on the premium. This has been replaced by a GST of 18%.

For Example, Mohan was paying a premium of Rs. 10,000 with a service tax of Rs. 1,500 earlier he was paying in total Rs. 11,500. Under the new regime, Mohan is now paying Rs. 11,800 – an impact of Rs. 300 more.

However this marginal increase in taxes shouldn’t be a deterrent for a car owner to not take coverage. The value car insurance offers, out weighs the costs or increase in taxes. Hence, it still remains mandatory for vehicle owners to go for life insurance policy coverage.