GST on car insurance is 18% in 2026, and GST 2.0 did not change it. The reform that took effect on 22 September 2025 made individual life and health insurance GST-free, cut GST on many new cars, and left car insurance at 18%. What can change is the premium that the 18% is charged on, because a lower car price can mean a lower Insured Declared Value (IDV) and a lower own damage premium.
What is GST on car insurance?
Goods and Services Tax (GST) is a unified indirect tax that replaced various central and state levies, including service tax, VAT, and cess. The system operates through a dual structure comprising three components:
GST Component | Description |
Central GST (CGST) | Collected by the central government on intra-state supplies (transactions within the same state) |
State GST (SGST) | Collected by the respective state government on intra-state supplies |
Integrated GST (IGST) | Collected by the central government on inter-state supplies |
Car insurance falls under the 18% GST category. This rate applies uniformly across all types of car insurance policies, including third-party liability coverage, comprehensive policies, and standalone own-damage covers .
What is the GST rate on car insurance in 2026?
The GST rate on all car insurance in India is 18%. It applies to the full premium you pay, whether you buy a comprehensive policy , a stand-alone own damage policy or third-party cover only.
What you buy | GST rate |
|---|---|
Third-party liability cover | 18% |
Own damage cover | 18% |
Comprehensive policy | 18% |
Add-on covers such as zero depreciation, engine protection and roadside assistance | 18% |
Before 1 July 2017, insurance premiums carried a 15% service tax. GST replaced it on that date at 18%, and the rate has not changed since. Depending on the place of supply, the 18% is charged as CGST and SGST of 9% each, or as 18% IGST.
What did GST 2.0 change, and what stayed the same?
GST 2.0 took effect on 22 September 2025. It changed the tax on several things a vehicle owner deals with, but not the tax on car insurance.
Item | Before 22 September 2025 | From 22 September 2025 |
|---|---|---|
Individual life and individual health insurance, including family floater | 18% | Exempt (0%) |
Car insurance, all types | 18% | 18% |
Petrol, CNG and LPG cars up to 1,200cc and 4 metres | 28% plus cess | 18% |
Diesel cars up to 1,500cc and 4 metres | 28% plus cess | 18% |
Larger cars and SUVs | 28% plus cess | 40%, no cess |
Only individual life and individual health policies were exempted. Group health cover and general insurance, including car, stay at 18%.
Reasons Why Car Insurance Still Attracts 18% GST
There are three reasons why car insurance still attracts 18% GST, even after GST 2.0 cut tax on many other things:
Classified as a general insurance service: Car insurance is an insurance service under GST and sits in the standard 18% slab. GST 2.0 exempted only individual life and individual health policies. General insurance, including car insurance, was not part of that exemption.
One rate on every part of the premium: A car insurance premium has several parts: third-party, own damage and add-ons. GST is charged at 18% on all of them together. Third-party base premiums are fixed by the Motor Vehicles Rules, 2022, so the tax is added on top and does not change them.
Limited input tax credit for business use: The rate is the same for every buyer, but a business cannot always offset it. Input tax credit is blocked on insurance for most cars used for ordinary business travel, so a GST-registered owner does not get relief automatically.
No change to the GST rate on car insurance has been notified as of 30 September 2026. Any change would need a decision by the GST Council.
The car price cuts do not lower the tax on your policy. They can lower the premium the tax is charged on, as the next section shows.
How does GST 2.0 affect your car insurance premium?
The 18% on your renewal is the same as before. What may differ is the premium. Your IDV is worked out from the manufacturer's listed price of your car's model, less depreciation for its age. A lower listed price can therefore lower your IDV and your own damage premium, and 18% is then charged on a smaller amount.
If you are buying a new car that became cheaper after GST 2.0, the same logic applies from day one: a lower ex-showroom price means a lower starting IDV, a lower own damage premium and less GST.
Third-party premium does not move with the car's price. It is fixed by engine capacity for petrol and diesel cars and by motor power in kilowatts for electric cars, so the GST 2.0 price cuts do not change it.
Here is an illustration, not a quote. Take an own damage premium of ₹15,000 and add-ons of ₹2,000. The total payable is ₹20,060, of which GST is ₹3,060. If a lower listed price brings the own damage premium down to ₹13,500, the total falls to ₹18,290, of which GST is ₹2,790.
What do third-party premiums and GST add up to?
The table below shows the third-party base premium for private cars, with 18% GST added.
Private vehicle | Base premium (₹ a year) | GST at 18% (₹) | Total (₹) |
|---|---|---|---|
Petrol or diesel car up to 1,000cc | 2,094 | 376.92 | 2,470.92 |
Petrol or diesel car above 1,000cc up to 1,500cc | 3,416 | 614.88 | 4,030.88 |
Petrol or diesel car above 1,500cc | 7,897 | 1,421.46 | 9,318.46 |
Electric car up to 30 kW | 1,780 | 320.40 | 2,100.40 |
Electric car above 30 kW up to 65 kW | 2,904 | 522.72 | 3,426.72 |
Electric car above 65 kW | 6,712 | 1,208.16 | 7,920.16 |
Third-party base premiums are set under the Motor Vehicles (Third Party Insurance Base Premium and Liability) Rules, 2022, and are the same for every insurer. Amounts are as on 30 September 2026.
How is GST calculated on your car insurance premium?
GST is charged on the combined amount of your base premium and the add-ons you choose.
Total premium payable = (own damage premium + third-party premium + add-on covers) × 1.18
A comprehensive policy has its own damage part and a third-party part. Here is a worked example with a third-party premium for a 1,000cc to 1,500cc car.
Component | Amount (₹) |
|---|---|
Own damage premium | 10,000 |
Third-party premium | 3,416 |
Add-on covers | 1,500 |
Taxable amount | 14,916 |
GST at 18% | 2,684.88 |
Total premium payable | 17,600.88 |
This is an illustration, not a quote. If you add or remove a cover during the policy year, the premium is recalculated and GST changes with it. For a policy that runs for more than one year, GST is charged upfront on the premium for the whole term.
Can you claim input tax credit on car insurance?
Input tax credit (ITC) lets a GST-registered business set off the GST it pays on business purchases. For car insurance it is limited. Section 17(5) of the CGST Act blocks ITC on general insurance for motor vehicles that carry up to 13 people including the driver, unless the vehicle is used for one of a few specified purposes.
How the vehicle is used | ITC on GST in the insurance premium |
|---|---|
Personal use | Not available |
Business use in a private car, such as staff or client travel | Not available |
Sold as stock by a vehicle dealer | Available |
Taxi or cab service carrying passengers for a fee | Available |
Driving school | Available |
Vehicle carrying goods | Available |
A company car used for ordinary business travel does not qualify, even if the company is GST-registered. If your case is not clear, ask a chartered accountant before you claim.
How can you keep your premium in check?
The 18% rate is fixed, but the premium it is charged on is not. These steps can bring it down.
Set your IDV close to market value. GST is charged on the whole premium, so a higher IDV raises both the premium and the tax. Choose a figure near your car's current market value.
Protect your No Claim Bonus. NCB takes 20% off the own damage premium after one claim-free year, rising to 50% after five. A lower premium means less GST.
Renew before the policy lapses. NCB is kept only if you renew within 90 days of expiry. You can renew your policy online in a few steps.
Choose a voluntary deductible you can afford. A higher voluntary deductible lowers the own damage premium. Make sure you can pay that amount if you make a claim.
Pick add-ons on purpose. Every add-on adds to the taxable premium. Zero depreciation , engine protection and roadside assistance suit different cars and drivers, so add the ones you will use.
Check the estimate before you buy. The premium calculator shows the premium for your car and add-ons.
Conclusion
GST on car insurance is 18% on third-party, own damage, comprehensive and add-on premiums, and GST 2.0 left it there. The reform exempted individual life and health insurance and lowered tax on many new cars. Its effect on car cover comes through the premium, not the tax rate: a lower listed price can mean a lower IDV, a lower own damage premium and less GST. Third-party premium, and the GST on it, did not change. Input tax credit is limited to vehicles used for the specified purposes.
Frequently asked questions
What is the current GST rate on car insurance in India?
The GST rate on all car insurance in India is 18%. It applies to third-party, own damage and comprehensive policies and to every add-on cover. It has stayed at 18% since GST began on 1 July 2017, including after GST 2.0 on 22 September 2025.
Did GST 2.0 reduce GST on car insurance?
No. GST 2.0 exempted individual life and individual health insurance, but car insurance stays at 18%. The reform did lower GST on many new cars, which can lower a premium indirectly through a lower IDV.
Will my car insurance premium fall after GST 2.0?
Not because of the tax rate, which is unchanged. Your own damage premium can be lower if a lower listed price for your car's model reduces your IDV. Third-party premium is fixed by engine capacity or motor power, so it does not change.
Is GST charged on third-party insurance?
Yes. Third-party insurance carries 18% GST like every other car policy. For a private car of 1,000cc to 1,500cc, the base premium of ₹3,416 becomes ₹4,030.88 after ₹614.88 of GST.
Can I claim GST paid on my car insurance if I use the vehicle for business?
Yes, if you are registered under GST and use the vehicle exclusively for business purposes, you may be eligible to claim Input Tax Credit. Consult with a qualified chartered accountant to verify your eligibility based on your specific business circumstances and GST registration status.
Does GST reduce my claim amount?
No. GST is charged on the premium you pay. Your claim is settled on the repair cost or IDV under your policy terms, and the GST you paid on the premium does not reduce the payout.
What happens to GST if I change or cancel my policy midway?
GST is recalculated on the revised premium when you add or remove a cover. If you cancel, the refund is worked out on the premium for the unexpired period, and the GST on that part is adjusted with it, as per your policy terms and IRDAI guidelines.
Will the GST rate on car insurance be reduced in the future?
No reduction for car insurance has been notified as of 30 September 2026. Any change needs a decision by the GST Council, so check official GST notifications when you renew.
Explore more on car insurance
Easy access to more, check out these quick links
