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 government taxes into one single tax slab known as GST (Goods and Services Tax). After a long journey, the GST bill was passed in Lok Sabha in August 2016, GST makes the entire process of taxation 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 registered office will pass the state GST to the customers, insurers also effect with administrative cost and inter-branch service taxation.
The current service tax rate is 15% (breakup of 14% basic service tax levy, 0.5% Krishi Kalyan Cess, 0.5% Swachh Bharat Cess) but, under GST cost of insurance will increase to 300 points i.e., 3%. With this higher tax limit, vehicle insurance plans and life insurance will have an adverse effect. This new revolutionary reform increases insurance premiums to 3%, which makes a major impact on an insurance policy.
From the past 8 years, life insurance analyzed a downtrend 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 premiums.
Car insurance policy compare
For a middle-class family increase in GST would make an immediate effect in increasing the 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 a low insurance premium.
The below table presents the GST rate:
||Current Tax Rate
Get risk-free settlement by these additional Add-ons:
Engine protection: If you are in a geographical area with frequent rainfalls and prone to cyclones. It is advisable to get an engine protection add-on with your insurance.
Consumables cover: Get your car with the consumable cover in case of wear and tear of spare parts or damage repairs additional costs for nuts, bolts, screws, engine oil, lubricant oil, etc will be claimed by consumables cover.
Passenger cover: A passenger add-on reduces the financial liability of passengers met with an accident. Coverage depends on the severity of injury to the passenger.
Due to the extensive safety features of the, a car owner will be befitted in terms of premium. Concluding all the risk factors and safety features inclusive insurance policy ranges from basic 1,39,000 up to 2,26,000 depending on the feature add-ons a policyholder chooses for the car.
As insurance cost in India is higher comparatively due to an increase in GST slab for the insurance sector. Get quotes inclusive of GST from PolicyBachat and compare insurance quotes to purchase the cheaper insurance policy.
Types of Car Insurance Policy
1. Third Party Car insurance:
Third party car insurance or “ liability only” car insurance or “Act only” car insurance is the compulsory car insurance in India as per the Motor Vehicles Act. Any party other than the insurance company and the customer of the car is referred to as a third party, hence the name third party car insurance.
The death, disability, and damage to goods or property of the third party liabilities are covered under the TP policy of the car insurance. The claim amount in case of Third-party claims would be decided by the honorable courts and direct the general insurance companies to settle the claim amount to the third parties on behalf of the car owner. This is the basic type of car insurance policy available in India and is compulsory to be taken for any car to ply in public places.
The premium to be paid under the Third-party type of insurance policy is decided by the Governing body for insurance, IRDA known as the Insurance Regulatory and Development Authority of India. The car insurance rates in the Third-party premium type of car insurance are subject to be revised each year depending on the loss ratio and other factors which are decided by the IRDA.
2. Comprehensive Insurance:
The other type of car insurance policy in India is the “Comprehensive Car Insurance” which includes the Own damage section as well as the Third-party section. The Own damage section covers any loss or repairs to the car owned by the insured due to an insured peril.
The premium to be paid by the customer under the own damage section is decided by the insurance company, unlike the third party insurance premium which is decided by the IRDA. The own-damage premium rates are given by the IRDA and the insurance companies can decide the premium within those rates.
Insurance companies take utmost care while deciding the premium rates for own damage type of car insurance such that too high price may result in failure of the product and too less price might impact the profits of the insurance company.
How to compare Car insurance cost
Before buying a motor insurance premium, get multiple car insurance quotes from different insurers to conclude the best policy. Make your research in finding the right policy online. Compare car insurance prices online with the benefits insurer caters, PolicyBachat is the right platform to get the best insurance for a car, crosscheck the premium amount with features and confirm your policy.
However, we can't overrule Government regulation of Goods and service tax, it's better to renew or buy a 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.
Visit PolicyBachat and get the best car insurance, two wheeler insurance, health insurance, etc quotes from the top general insurance companies and you can also check the details on risk factors terms conditions, and please read the sales brochure carefully before concluding a sale. Need Help? call Policy Bachat at 1800-123-4006 or 1800-123-4003 and our insurance specialist will be there to assist you.