Commonly referred to as the GST, the Central Goods and Services Act of 2017 is one of the biggest tax reforms since India got independence. The act will have a magnitude of implications on different industries including the two wheeler insurance industry. The move will result in a significant change in the central and state tax structure. Prior to the GST implementation, a product would include several kinds of taxes that we are not even aware of. GST would cut down multiple taxes and would simplify the taxation system of the whole country. Read on to know how GST implementation has affected the insurance industry.
Impact Of GST On Motor Insurance
For the insurance sector, the tax rate has been set at 18% by the GST council. This has been a 3% higher than the previous 15% tax rate. Eventually, this will be passed down to the customer who will have to pay a higher premium on insurance.
A falls under the general insurance category. While a third-party liability cover is the basic form of insurance mandated by the law, a comprehensive insurance cover gives the insured a greater scope of protection and includes third-party liability cover as well. However, the premium to be paid for a comprehensive insurance policy is higher than a basic third-party liability cover. GST on two wheeler insurance premium has been set at a flat 18%, 3% more than the previous rate of 15%. This will make bike insurance more expensive than it previously was. The same would be the effect on all other general insurance products such as health insurance,
However, if we look at the positive side, the GST implementation is going to trigger a competition between the insurance providers and we may see competitive pricing as well as greater benefits offered by the insurers in the days to come. The GST will affect our lives in significant ways and will definitely influence the way we plan our finances.
How Should You Purchase A Two Wheeler Insurance?
If you are looking to buy a bike insurance policy online, the premium paid by you will be higher than what you would have paid last year after applying a GST of 18%. While you look for a policy, do not go only by the lesser premium, do check the kind of coverage offered by the insurer. You might go to different third-party neutral insurance websites and compare the available policies based on the extent of coverage and the premium.
GST Rates On Two-Wheeler Insurance Before & After GST
|Product||Pre-GST Rate||Post GST Rate||Applicability|
|Premium For Two-Wheeler Insurance||15||18||Applicable on entire premium|
GST: After Effects
A two-wheeler is one of the important necessities for many people in India. Getting your two-wheeler insured too is a necessity as you never know when an unfortunate event knocks you down. In any such incident, a bike insurance policy acts as a financial backup and backs you during tough times. An increase of 3% in the tax rate for two-wheeler insurance will not make as much impact as it will make in case of a car insurance. And this minor increase in the premium cost should not be a reason for avoiding the insurance. The benefits that a motorcycle insurance will offer you are surely far worthy than any percentage of tax.
Whenever you buy a two-wheeler insurance policy, there are several things that you must look out for. A lesser premium is not always the best thing. Your policy should be able to cover you sufficiently during a variety of unfortunate events. You must carefully understand the scope of the policy, the sum assured, its benefits and features, terms and conditions, and the exceptions to it. So even if you have to pay a little more GST, don’t compromise on the core coverage that your policy provides you.
Certainly, due to rise in the premium cost, there has been a rise in the competition in the insurance market and insurers are in a race to improve their products and offer more to customers. While this could be a good thing for insurance seekers like us, we must not get carried away by their promotions and logically analyse the products offered by them in comparison to other products available in the market. This can be easily done using various neutral third party insurance and finance websites.
A Word Of Advice
Well we cannot deny that insurance has become expensive post GST implementation, but it is not a reason enough to do away from getting our two-wheelers insured. If you are looking to get your vehicle insured, don’t let the premium alone be the deciding factor and look for the overall coverage that the policy offers you along with the add-ons and the exceptions.