Impact Of GST On Your Car Insurance Premium
What is GST
Merging of all indirect taxes like sales tax, excise duty, service tax and other state taxes into one single tax slab known as GST (Goods and Services Tax). After a long journey, GST bill passed in Lok Sabha on August 2016, GST makes the entire process of taxation into easy and transparent. In long run, there will be a reduction in prices for the exchange of goods and services in a local market.
Impact on insurance
GST will eliminate cascading effect or double taxation effect on the cost of goods and services, with the service tax regime GST spree will be anticipated to 18%. An insurance company will pass the GST to the customers, insurers also effect with administrative cost and inter-branch service taxation.
Current service tax rate is 15% (breakup of 14% basic service tax, 0.5% Krishi Kalyan Cess, 0.5% Swachh Bharat Cess) but, under GST cost of insurance will increase to 300 points i.e., 3%. By this higher tax limit, car insurance policy and life insurance will have an adverse effect. This new revolutionary reform increases insurance premium to 3%, which makes a major impact in insurance policy.
From the past 8 years, life insurance analyzed down trend from 4.6 in 2009 to 2.6% in 2016, with the escalation of insurance premium from 15% to 18% due to Goods and service tax, buying cost and renewal rate increases progressively. This will make a major impact on life insurance premium.
Car insurance policy compare
For a middle-class family increase in GST would make an immediate effect in increasing premium on an insurance policy with the implementation of Goods and service tax. Families who opt for life and car insurance policy will have to pay 1100 annual premium additionally, this makes a considerable effect on middle-class families. Compare car policy and lower your premium by removing unnecessary add-on to get low insurance premium.
Below table presents the GST rate:
||Current Tax Rate
However, we can't overrule Government regulation of Goods and service tax, it's better to renew or buy new car insurance policy end of June 2017 and get rid of the additional tax rate. It is very important to secure your vehicle from damages, compare car insurance policy and scrutinize the GST slab, in order to skip from future unexpected accidents.