New GST on Vehicle Insurance Premiums
Quick Summary
- Vehicle insurance premiums now include an 18% GST for both private and commercial vehicles.
- The GST applies to all types of vehicle insurance, including third-party, comprehensive, and add-ons like zero depreciation.
- Businesses using commercial vehicles can claim Input Tax Credit (ITC) on the GST if the vehicle is used exclusively for business.
- Private car insurance does not qualify for ITC, but commercial vehicles for business use and fleet operators can claim it.
- When buying or renewing insurance, invoices will show the base price plus 18% GST, and they must include the GSTIN to claim ITC.
Buying a vehicle is not complete without insurance. Whether it’s for your personal car or a fleet of commercial vehicles, insurance premiums now include Goods and Services Tax (GST) . This blog breaks down the vehicle insurance gst rate, how it’s calculated, and what it means for your expenses.
The Government of India is updating GST rates effective after 22 Sep 2025. Below are the expected new GST rates for motor insurance services (no compensation cess).
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GST on Motor Vehicle Insurance Premium in India
Motor vehicle insurance premiums are taxable under GST. In most cases, private motor insurance, comprehensive motor insurance, and most add-on covers continue at 18% GST. However, third-party insurance of goods carriage is a specific exception and is now taxed at 5% GST with ITC from 22 Sep 2025.
New GST Rate for Motor Vehicle Insurance
| Type of Insurance | New GST Rate (After 22 Sep 2025) |
Old GST Rate (Before 22 Sep 2025) |
|---|---|---|
| Third-party motor insurance for private vehicles | 18% | 18% |
| Comprehensive vehicle insurance | 18% | 18% |
| Commercial vehicle insurance - general / comprehensive | 18% | 18% |
| Third-party insurance of goods carriage | 5% | 12% |
| Add-on covers such as engine protect, tyre protect, zero dep, roadside assistance | Generally 18% | Generally 18% |
Notes: The 12% slab is discontinued under the rationalised schedule; motor insurance remains at the standard 18%. Rate applies on the premium (including add-ons) as the taxable value per policy terms.
(After 22 Sep 2025) 18%
(Before 22 Sep 2025) 18%
(After 22 Sep 2025) 18%
(Before 22 Sep 2025) 18%
(After 22 Sep 2025) 18%
(Before 22 Sep 2025) 18%
(After 22 Sep 2025) 5%
(Before 22 Sep 2025) 12%
(After 22 Sep 2025) Generally 18%
(Before 22 Sep 2025) Generally 18%
GST on Motor Vehicle Insurance Premium
For a normal motor insurance premium taxed at 18% GST:
- Insurance premium: Rs 10,000
- GST @ 18%: Rs 1,800
- Total payable: Rs 11,800
For third-party insurance of goods carriage taxed at 5% GST:
- Insurance premium: Rs 10,000
- GST @ 5%: Rs 500
- Total payable: Rs 10,500
So the amount of GST depends on the type of vehicle and the kind of policy, not just on whether it is called motor insurance.
GST on Commercial Vehicle Insurance
Commercial vehicle insurance should be stated carefully:
- Commercial vehicle insurance is not automatically 18% in every case
- Third-party insurance of goods carriage is now 5%
- Other commercial motor insurance products, including many comprehensive policies, generally remain at 18%
Can You Claim Input Tax Credit (ITC)?
ITC on motor insurance is not available just because the vehicle is used for business. It depends on the type of vehicle and the applicable GST restrictions.
A better version of the table is:
| Scenario | Can Claim ITC? |
|---|---|
| Private car insurance for routine business use | No |
| Insurance of goods vehicles used for transportation of goods | Yes |
| Insurance for fleet / cab operators used for passenger transport | Yes |
| Insurance for passenger vehicles used for further supply / dealer use in eligible cases | Yes |
| Insurance for employee cars not covered by a specific exception | No |
