The GST rate on third-party motor insurance premium of goods carrying vehicles has been brought down from 18 per cent to 12 per cent.
In the 31st meeting of the Goods and Services Tax (GST) council, the GST rates of various items have been brought down, including third party (TP) motor insurance. The GST rate on third-party motor insurance premium of goods carrying vehicles has been brought down from 18 per cent to 12 per cent.
The general insurance industry has welcomed the decision to cut the GST rate on third party insurance premium of ‘goods carrying vehicles’. According to experts, it will benefit the policyholders as it will reduce their overall premium amount.
Says Subrata Mondal, Executive Vice President, IFFCO Tokio General Insurance: “It is a welcome move considering it will bring down the premium rate for vehicle owners. The reduction has brought relief to vehicle owners at a time when the cost of insurance recently went up due to mandatory long-term TP cover.”
It is seen that people are also very reluctant to buy third-party motor insurance policies as they see it as an avoidable expenditure. Because of short traveling distances, riders consider buying such a policy to be futile.
Third party motor insurance cover is mandatory for all vehicles and someone who does not have one can be detained until such time as insurance documents are produced. Experts believe this move will also help the insurance industry improve the penetration of motor third party insurance cover.
The Insurance Regulatory and Development Authority of India (Irdai) had also revised the premium for third-party insurance earlier this year, for cars with an engine capacity of less than 1,000 cc.
Third-party insurance, however, covers only the damage done by your vehicle to other vehicle or property. In a car accident, the damage caused to others is covered under the third-party insurance, which is mandatory. While a TP cover is the very least that a vehicle owner should buy, it is advisable that those who can afford one should buy a comprehensive motor cover, as third-party insurance does not cover accidents, theft or damage to your vehicle.