New GST on Vehicle Insurance Premiums
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 gst on vehicle insurance, 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).
New GST on Motor Vehicle Insurance Premium
| Type of Insurance | New GST Rate |
|---|---|
| Third-party motor insurance | 18% |
| Comprehensive vehicle insurance | 18% |
| Commercial vehicle insurance | 18% |
| Add-on covers (engine, tyre, zero dep, RSA, etc.) | 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.
Old GST on Motor Vehicle Insurance Premium
(Old GST Rates – Applicable Until 21st September)
As per the GST rules in India, insurance services fall under the 18% GST slab. So when you pay your vehicle insurance premium—be it third-party or comprehensive—you also pay 18% GST on it.
| Type of Insurance | GST Rate |
|---|---|
| Third-party motor insurance | 18% |
| Comprehensive vehicle insurance | 18% |
| Commercial vehicle insurance | 18% |
| Add-on covers (engine, tyre, etc.) | 18% |
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GST on Motor Vehicle Insurance Premium
- Insurance premium (base): ₹10,000
- GST @ 18%: ₹1,800
- Total payable: ₹11,800
So, when buying or renewing your car or bike insurance, the gst on motor vehicle insurance premium adds a significant amount to the final bill.
GST on Commercial Vehicle Insurance
The gst on commercial vehicle insurance also stands at 18%, similar to private vehicles. This includes:
- Trucks, buses, cabs, delivery vans
- Passenger and goods transport vehicles
- Fleets under business names
However, the key difference is that business owners can claim Input Tax Credit (ITC) on this GST, provided:
- The vehicle is used exclusively for business
- You are registered under GST
- The insurance invoice includes your GSTIN
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Can You Claim Input Tax Credit (ITC)?
| Scenario | Can Claim ITC? |
|---|---|
| Private car insurance | No ❌ |
| Commercial vehicle for business use | Yes ✅ |
| Insurance for fleet/cab operators | Yes ✅ |
| Insurance for employee vehicles | No ❌ |
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GST and Online Insurance Portals
- GST is included in the premium you pay
- The invoice will show a breakup of base price + 18% GST
- You can use this invoice for claiming ITC (if applicable)
- Ensure the provider is GST-registered and includes GSTIN on invoice
Conclusion
Understanding the gst on vehicle insurance helps you manage your premium payments better and make informed decisions—especially if you’re a business that can benefit from Input Tax Credit .
I am a chartered accountant with over 14 years of experience. I understand income tax, GST, and balancing financial records. I analyze financial statements and tax codes effectively. However, I also have a passion for writing, which is different from working with numbers. Recently, I started writing articles and blog posts. My goal is to make finance easier for everyday people to understand.