The Union Government’s Goods and Services Tax (GST) went into effect on July 1, 2017. GST is a value-added tax that aimed to replace the complex, multi-tiered, and indirect consumption tax system that existed prior to 2017. Central Excise Duty, Interstate Sale of Goods (CST), Service Tax, Value Added Tax (VAT), Entry Tax, Luxury Tax, and Purchase Tax were all part of this system. The GST is divided into many slabs, with the majority of commodities falling within the 18% tax bracket. But, in December 2018, the GST rates for some commodities were reduced from 18% to 12% by the government, and third-party car insurance also fell into this slab.
Third-Party Car Insurance
The Indian government has established the law of possessing minimal third-party car insurance under the Motor Vehicle Act, 1988, in order to operate the vehicle without any difficulty. If any person is determined to be in violation of the law, he/she must pay the fines. The traffic officials may potentially take legal action against such individuals. As a result, in order to avoid all of these issues, you need to obtain third-party car insurance.
Third-party car insurance principally protects you against financial ramifications resulting from losses or damages to a third party or their property. Although many companies offer automobile insurance, you should go with a trustworthy brand for a hassle-free experience and to reap the benefits of features such as 24/7 claim help, an online option for insurance renewal, cashless settlement, and so on.
GST on Vehicle Insurance
The Insurance Regulatory and Development Authority of India (IRDAI) sets the prices for third-party automobile insurance. By adding the car insurance GST rate to the advertised cost of the policy, all insurers charge the same amount for third-party insurance. And, now that the car insurance GST has been reduced in accordance with the new rule, the final third-party insurance prices will be diminished as well.
Benefits of GST Rate Reduction on Vehicle Insurance
Here are the several benefits for the rate reduction of GST on vehicle insurance:
Lower Premium Charges
People will have to pay less amount as their car insurance GST due to the rate reduction. As a result, their overall premium will also be reduced.
Many people do not get car insurance because of their limited budget. The new applicable GST on vehicle insurance will allow such kinds of people to purchase the insurance, and that too within their budget.
Most of the car owners opt for comprehensive coverage instead of a third-party plan. The decreased car insurance GST will increase the awareness and may leverage them to choose third-party insurance.
Car owners may be able to save money due to the rate reduction of the GST on vehicle insurance.
Besides the car insurance GST rate reduction, there are a few other rules regarding the four vehicles implemented by the government that you must be aware of.
Establishment of Long-Term Insurance
Long-term insurance for new four-wheelers requires automobile owners to spend more money in one go than they would have if they had annual coverage.
Following Pollution Rules
To renew the car insurance, the Pollution Under Control certificate (PUC) of the vehicle must be renewed.
Apart from the rules around personalized number plates, several car owners are delighted since the GST rate has been reduced. The government made this decision to encourage individuals to get insurance policies so that vehicles driving over Indian roads have at least third-party insurance coverage.