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What is the GST Effect on Car Insurance?
GST’s effect on car insurance is increased premiums. The Indian government applies a fixed 18% GST rate on your car’s base premium amount, increasing the total premium amount you pay to the insurer. As of 2026, all types of car insurance policies are subject to a flat 18% GST.
Hence, if the base premium amount of your four-wheeler insurance costs approximately ₹10,000, you’ll have to pay around ₹11,800 as the premium. The additional ₹1,800 is the GST on car insurance.
Why GST Applies to Insurance Premiums
You can understand the reason behind charging GST on car insurance premiums if you understand the following two points carefully:
- GST is charged on ‘services’
- Insurance is treated as a service under the Indian tax system
So, when an insurance company provides car insurance coverage, they’re essentially giving you a financial service that protects you against risks. This provision of risk coverage for a premium is viewed as a service, which is why GST applies to car insurance premiums.
Current GST Rate for Insurance
The current GST rate on car insurance in India is 18%. This 18% GST rate is uniform across every type of car insurance policy.
So, whether you’re planning to purchase a third-party car insurance or a comprehensive one, you’ll have to pay 18% GST on the premium in both cases. GST was also applied to premiums for health and life insurance plans, but it was reduced to 0% in 2025.
How GST Impacts Vehicle Insurance
The GST impacts vehicle insurance both directly and indirectly. You can see the direct impact in the form of increased premiums. The indirect impact usually comes from changes in car prices. The 56th GST Council meeting in September 2025 reduced GST rates on certain cars, particularly EVs and small cars.
It resulted in a reduction in the market value of select cars, directly lowering the Insured Declared Value (IDV). Lower IDV reduces your insurance premiums to some extent. However, this benefit will be limited to new-car buyers, not to existing or older-car owners.
What is the Status of Car Insurance Tax in India
In India, car insurance continues to be taxed at 18% under GST, with no recent reductions or exemptions for individual policyholders. While health and life insurance segments have received taxation relief, car insurance policies did not qualify for any such relief.
Hence, if you’re a car owner, GST will continue to remain a consistent part of your insurance premiums. Even if you receive any cost reduction, it’s more likely to come from changes in vehicle pricing rather than tax policy.
Final Thoughts
Tax has always been an inseparable part of car insurance premiums in India, with only the types of tax applied changing over time. As of 2026, GST remains a part of every car insurance premium you pay to insurers. The result of this GST on car insurance is increased premiums for car owners.
If you’re more focused on getting enhanced coverage rather than the unchangeable taxation part, you should explore the different Car Insurance plans at Shriram General Insurance.
FAQs
1. Does GST apply to comprehensive car insurance policies?
Yes. In fact, GST applies to all types of car insurance policies, including third-party, comprehensive, and own-damage.
2. How much GST is applied to car insurance premiums?
As of 2026, an 18% GST is applied to car insurance premiums.
3. Is GST charged on add-ons, such as zero-depreciation cover?
Yes, the GST is charged on all add-ons that you include in your standard policy.
4. Why is car insurance taxed, but health insurance is not?
Health insurance is considered essential, which is why it attracts 0% GST on premiums. Car insurance is still categorised as non-essential; hence, it attracts 18% GST.
5. Does GST affect the base premium amount?
No, GST is added after the insurer calculates the base premium.
