Buying a car insurance policy can come with a lot of ambiguity. However, if you take a step-by-step approach to getting car insurance, you can navigate the process easily. A car insurance policy can protect your car from all losses and damages. Some policies even cover third-party liabilities along with own damages, and in India, it is mandatory to buy third-party car insurance that covers third-party liabilities.
As you must be aware, when you buy a product or pay for a service, you also need to pay GST. GST stands for Goods and Services Tax, and like any other product, it applies to your car insurance policy. You might wonder if you can add your GST number to your car insurance policy. Well, the answer is yes! Once you get the GST number added to your policy, the entire taxes payable on the policy will be streamlined. This guide will help you understand how GST can be added to the car insurance policy.
Understanding GST
Earlier in India, several indirect taxes were applied to different products and services. However, with the implementation of the Goods and Services Tax, all of these indirect taxes have now become a single tax.
The GST Act came into effect in 2017. Since then, all the products where the government charges a tax has been converted into GST. Like every other product, GST is also applicable to car insurance policies.
What is a GST Number?
Before you buy car insurance, you need to understand the concept of GST numbers. The GST number is also known as GSTIN. It is an identification number given to businesses and individuals registered under the GST Act.
The primary purpose of a GSTIN is to keep track of the tax payments of all the individuals and businesses covered under the GST Act. Earlier, people used to have a Tax Identification Number or a TIN which GSTIN now replaces. According to the tax laws, every company or an individual registered and part of the GST Act must have a copy of their GSTIN, and they must also add this number to add the invoices they bill to different stakeholders.
GST on Car Insurance Policies
Before you add your GSTIN to your insurance policy, let's understand how a car insurance policy is taxed under the GST system.
Buying car insurance is a service; hence, a GST applies when you purchase a car insurance policy. The GST amount gets added to your premium payments, and you will have to pay the entire amount on the date mutually decided between you and your provider every month.
When you buy a car insurance plan, an 18% GST is levied on the amount that you pay for the insurance coverage. Earlier, a 15% tax was applicable on car insurance plans but post the implementation of GST, the rate has increased by 3%, and it now stands at 18%.
The Impact of GST on Car Insurance Premiums
Once the GST is levied on your premiums, you will have to pay the total amount, i.e., the monthly EMI + GST. The increase in the tax rate on car insurance premiums has made it more expensive for people, and the subscriber of the insurance policy will bear the entire amount.
For example, if your car insurance premium stands at INR 20,000, a 15% tax is levied on the premium payments. In this case, you must pay a tax of INR 3,000. Hence, the total amount payable to the car insurance provider is INR 23,000. However, with the implementation of GST, the tax rate has gone up to 18%, and now the insurance holder has to pay a tax of INR 3,600; hence the premium amount increases to INR 23,600. The burden of the additional INR 600 has to be paid by the car insurance policyholder.
However, car insurance providers have tried their best to compensate auto insurance buyers. In many cases, they have provided additional benefits like cashless garage services and extra coverage to their customers. Several providers are also offering lucrative discounts if you buy car insurance online.
Adding the GST Number to Your Car Insurance Policy
To add a GST number to your insurance policy, you must have a valid GSTIN or a GST number. A GST number is a 15-digit unique code issued by the government to the people and entities registered under the GST Act.
The generated number is based on your unique PAN number, and you can use this number while filing your GST returns. Generally, the number is issued to people in a certain kind of business like dealers, suppliers, etc. However, if you have a GST number, you can claim returns for the GST that you have paid.
You can get your valid GST number added to your car insurance plan. You can contact your service provider via e-mail or call their customer care number. You can also reach out to your insurance broker if you have one. You can let them know your GST number and ask them to add it to the policy. They will do the needful in a couple of days. You can also add it when buying a new policy or during your car insurance renewal.
Wrapping Up!
You might feel that implementing GST has made car insurance policies more expensive, but on the flip side, it has streamlined the entire taxation process for the insurance industry. Also, when you get your GST number added to your car insurance policy, you can claim a return for the amount while filing your GST returns.
When you pay more for your insurance premiums, the insurance provider ensures that they give you the best services and increase your coverage. They provide car insurance add-ons that add to the list of benefits.
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