Can You Claim GST Input Tax Credit (ITC) on Car Insurance?

What is GST on Car Insurance?

It’s an indirect tax levied on insurance services by the Indian government. Previously, every type of insurance attracted an 18% GST. It included health, life, and motor insurance plans. However, the GST on health and life insurance plans was reduced to 0% during the GST changes announced on 21st September, 2025.

Motor insurance continues to attract the GST rate of 18%, which can slightly inflate your premium payments. For example, if your annual car insurance premium costs ₹20,000 (exclusive of taxes), then you’ll have to pay ₹23,600, where the extra ₹3,600 is the GST component.

However, there’s an exception. If you have purchased third-party insurance for goods-carrying vehicles, then 5% GST will be applied on basic third-party insurance premiums instead of 18% GST.

Disclaimer: The example shared above is only for illustrative purposes. The final premium payment may be slightly higher if the insurer also levies administrative fees or other charges. Check with the insurer to gain clarity about full payment breakup.
 

How to Claim GST Credit on Car Insurance?

You can claim GST credit on car insurance if you meet all the eligibility conditions we’ve shared in the next section. If you qualify, here’s how you can claim ITC on car insurance.

• Check whether the insurance invoice mentions the GST amount, your GSTIN, and other key details.
• File your GSTR-3B. This form includes the option to claim ITC on car insurance. However, it can be done only after the insurer has paid the respective tax amount to the government, and it’s reflected in government records.
• As you fill the GSTR-3B form, check the ITC auto-populated from GSTR-2B to avoid mismatch.
• Finish the form and submit to claim GST credit on car insurance.

Disclaimer: Hire an experienced tax professional for GST filing if you don’t have enough knowledge about GST or haven’t filed GST returns before. They’ll help you with obtaining input GST claims on car insurance.
 

Who Can Claim GST Input Tax Credit on Motor Insurance? Eligibility Conditions

While every vehicle owner has to pay GST on motor insurance, not everyone is eligible to claim input tax credit. As per Section 17 (5) of the CGST Act, 2017, businesses with a valid GST registration can claim the GST paid on vehicle insurance. However, they must fall into any one of the following categories to qualify for the input tax credit –

• Businesses purchasing cars for further sales. The best example is a car dealership buying cars for resale
• Businesses providing passenger transportation services in exchange of money
• Driving schools purchasing cars for purely training purposes
• Businesses engaged in goods transportation
• Businesses owning commercial vehicles with a seating capacity of more than 13 people (excluding the driver).

While the current car insurance GST rules don’t permit businesses to claim ITC on cars purchased for office use, the government is considering a proposal to allow it. If the proposal is approved, then businesses purchasing cars for office use can also claim input GST credit on car insurance.
 

When Can GST on Vehicle Insurance be Claimed?

GST on vehicle insurance can be claimed if a vehicle is used for any eligible business activity. Generally, the input tax credit can be claimed in the following cases –

• Commercial vehicles used for goods transport
• Cars used by registered passenger transport operators
• Vehicles owned by driving schools for training purposes
• Vehicles held by dealers for resale
• Commercial vehicles with a 13+ seating capacity

Besides falling into one of these categories, the business must also own a valid GST registration number. You should also have relevant insurance invoices issued in your business name to claim GST on car insurance.
 

When Can You Not Claim GST Input Tax Credit?

You cannot claim GST input tax credit on cars purchased for personal use. Additionally, you cannot claim ITC on car insurance if you don’t meet the relevant eligibility criteria mentioned in CGST Act’s Section 17 (5). We’ve already simplified the qualifying criteria in the previous sections, so you can explore them to determine if you meet the eligibility criteria.
 

Documents Required for GST Input Tax Credit

A tax invoice mentioning the GST amount, your business name, GSTIN, and other key details is a crucial document that you’ll need to claim GST credit on car insurance. In addition, you may also need the following documents:

• Debit/credit note (whichever is applicable)
• An invoice by the Input Service Distributor (ISD)
• Bill of entry (required only for imported cars)

You may also be asked for other supporting documents, such as -

• Your business’s GST certificate
• Proof establishing the nature of vehicle use
• Previous GST returns
• Payment details of insurance premiums

In some cases, you may need additional documents. If you’re unsure which documents you’ll need, consult a qualified tax professional for personalised guidance.
 

GST on Motor Insurance: Important Things to Remember

While you’ve read all the crucial information about GST on car insurance, here’s a quick recap of the main takeaways:

• Car insurance plans attract a flat 18% GST rate in India. Whether you purchase a third-party, comprehensive, or standalone own damage policy, the GST rate remains the same.
• Private cars purchased for personal use cannot claim ITC on car insurance.
• Businesses qualifying for the criteria specified in the CGST Act’s Section 17(5) can claim input tax credit.
• You’ll need tax invoices, a valid GST certificate, and other key documents to claim input tax credit.
• ITC cannot be claimed if a business doesn’t have a valid GST registration.
   

Conclusion

Vehicle insurance plans attract a fixed GST rate, increasing the total premium payment. While it’s a mandatory tax payment, you can claim ITC on car insurance if you meet the requirements specified in Section 17(5) of the CGST Act, 2017.

We’ve simplified all the key rules around GST on car insurance in this blog, so you’re aware of your eligibility, claim process, and other key details. If you’re currently exploring a reliable Car Insurance plan for your four-wheeler, you can explore our Third-Party, Comprehensive, and Standalone Own Damage Insurance plans.
 

FAQs

Do all motor insurance policies attract an 18% GST?

No, not all motor policies attract 18% GST. If you have a goods-carrying vehicle with third-party insurance coverage, then you’ll attract a 5% GST rate on basic third-party insurance premium. For all other vehicles, the GST remains 18%.

Can I claim ITC on car insurance for my personal car?

No, you cannot claim ITC for cars purchased for personal use.

Do add-ons also attract 18% GST?

Yes, if you’re purchasing add-ons like zero depreciation or roadside assistance with a car insurance policy, then they’ll also attract 18% GST.

Are car dealerships and driving schools eligible for input tax credit on car insurance?

Yes, they’re usually eligible because they’ve purchased the vehicle for commercial and training purposes.

Can businesses without a valid GST registration number claim ITC on car insurance?

No, a valid GST registration is compulsory for businesses to claim ITC.