Impact of GST on Two-Wheeler Insurance Market!
Goods and Services Tax, or what we commonly call as GST, happens to be the biggest tax reform in the country since independence. It was rolled out on 1st July, 2017 as a unified tax for the entire nation. It replaced a bunch of indirect and direct taxes like service tax, VAT, luxury tax etc. The move has resulted in significant changes in the central as well as the state tax structure. Prior to GST, a product used to include various types of taxes that the consumers ware not even aware of. GST has cut down multiple taxes and simplified the taxation system of India. It has immensely impacted several industries, but its impact on the auto insurance industry, especially the two-wheeler insurance market has been quite prominent.
Impact on Motor Insurance
Motor insurance policies come under the category of general insurance. Before the launch of GST, insurance was taxed at 15%. Post GST, the tax rate went up to 18%, making an increase of 3% in the cost of premium. On the positive for policy holders, GST has triggered a competition between the insurance companies resulting in insurers mulling over offering competitive pricing and greater benefits.
Impact on Two-Wheeler Insurance
Being a part of the motor insurance industry, the two-wheeler insurance market also witnessed a 3% hike in the service tax. The revised rate has been passed on to the customers in the form of a higher premium cost. However, it has not brought much difference in the prices. For instance, if you were paying Rs 10,000 as your term insurance premium, now you will have to pay a premium up by Rs 300.
Impact on Two-Wheeler Pricing
The revised tax rates on two-wheelers are in favour of the mass market. Post GST rollout, the taxes on scooters and bikes have been categorized based on their engine capacity. Bikes and scooters with an engine of capacity less than 350cc are paying 28% GST, 2% less than the previous 30%. And two-wheelers having an engine capacity of over 350cc are now paying 31% GST, 1% higher than before.
Even though the premium rates have been increased, the two-wheeler owners are advised to always consider buying a comprehensive insurance cover so that their dear ones do not require to run after other asking for financial help after an uninvited incident or accident occurs. As GST has increased the number of insurance products in the market; it is advisable to everyone to buy the one that matches their needs the best. When buying a term plan, ensure that you are comparing premiums, including and excluding GST for all insurers. Lesser premium should never be the key deciding factor, rather more stress should be given on the extent of coverage.