When you purchase a car insurance policy, you must pay GST (goods and services tax), which is set at 18%. It is a mandatory cost levied by the government of India. The GST increases the overall car insurance cost, and you pay a higher premium. However, if you have a GST number, you can add it to your car insurance policy and claim it back while filing your ITR (income tax returns). If you are unsure how it works, you have come to the right place. This blog discusses GST and its impact on your car insurance premium.
What is GST and GST number?
GST is a unified indirect tax system, which was introduced by the government of India in 2017 to replace the 17 indirect taxes. The government levies fixed GST rates of 0%, 5%, 12%, 28% and 28% on all goods and services, and the tax rate varies depending on the type of goods and services you avail. For instance, if you are buying a new car, you may have to pay 28% GST. For electric vehicles, the GST applicable is 5%.
GST number, aka GSTIN (goods and services tax identification number), is a unique identification number granted to individuals or entities registered under the GST Act. The tax authorities use the GSTIN to monitor and keep track of the GST payments made by individuals and business entities.
Impact of GST on car insurance
Since the GST is introduced, the overall car insurance cost has increased. Now, you must pay both the monthly premium and the GST, which is applicable at 18%. Many people feel that the increase in the tax rate has made car insurance costlier than necessary and believe it could be the reason to dissuade people from buying or renewing a car insurance policy.
On the other side, with increasing premium prices, insurance companies are now offering better services and special discounts on online purchases of car insurance policies. Also, insurers now offer better customers and value-added services. For instance, some insurers now provide roadside assistance service as part of the base policy rather than offering it as an add-on cover.
Can you add the GST number to your car insurance policy?
Many car insurance holders wonder if they can add a GST number to their policy. Well, the answer is YES. You can add the GST number to your car insurance policy. The process to add the GST number to your car insurance is simple. You must call the customer care service of your insurance company or the insurance broker and ask them to add the GST number to your car insurance policy. Provide them with the necessary information they need, and they will do the needful.
The introduction of the GST has made the previous complex tax system in India simple and unified. However, when it comes to taxes relating to the purchase of cars and car insurance policies, GST has led to an increase in the overall premium cost. The silver lining is that you can claim the GST by including the GST number in your policy while filing your ITR.