Impact of GST on Two Wheeler Market
- Author :
- TATA AIG Team
- Published on :
One of the major tax changes following India's independence is the Central Goods and Services Act of 2017, also known as the GST. The bike insurance business was one of many industries that the act will significantly impact. The move significantly altered the federal and state tax systems. Before the introduction of the GST, a product would be subject to numerous taxes that people were unaware of. Multiple indirect tax rates were combined under the Goods and Services Tax (GST). Through the GST, as many as 17 federal and state levies were consolidated into a single tax structure. GST applies to the cost of insurance for bikes because it falls within the services sector. If the GST percentage for bike insurance goes up, so does the bike's price.
Even if the effect of GST on bike insurance is that the bike price goes up, you still need to buy insurance for bikes to utilise your bike. Under Indian laws, you are required to have bike insurance; if you do not have your insurance, you will be penalised. You will have to pay a high price as fines, could have your licence revoked, or even be imprisoned if you are a serial offender. So if you wish to drive your bike on Indian roads, you must have valid insurance for your bike. The thing you need to think about is which insurance provider you want to choose.
If you are thinking about which bike insurance to buy, you should consider Tata AIG’s insurance for bikes. We offer you comprehensive insurance policies at affordable rates. You also get other benefits, like a wide network of cashless garages, roadside assistance, and the ability to buy your bike insurance online. Since our plans are customisable and we offer you an entire range of plans to choose from, we always suggest you compare two-wheeler insurance plans before you make a purchase. So if you want to buy insurance for your bike, think Tata AIG!
Keeping all of this in mind, let us look at what GST is and the effect of GST on bike insurance.
What is GST?
All the taxes imposed by the federal and state governments, including excise duty, VAT, luxury tax, service tax, entertainment tax, etc., have been replaced by GST. All these taxes have been combined into a single tax, with the State GST and the Central GST being its two components. For instance, if you pay a GST of 10% on a given service, the state GST would be 5%, while the central GST would likewise be 5%. As a result, you will pay a single tax amount lower than before for any items or services you purchase. In most industries, the cost of commodities has decreased while services have gone up. However, it has largely lessened the customers' pressure in this aspect.
Effect of GST on Bike Insurance
Before the introduction of the GST, general utility tax, Krishi Kalyan, and Swachh Bharat cess were all part of the 15% tax on bike insurance. However, the GST percentage for bike insurance due is now 18%, which is a 3% increase compared to the tax before the application of the bike insurance GST rate. As a result, the cost of the customer's bike insurance policy would be greater.
The real premium that a consumer pays towards the coverage is lower if they purchase third-party insurance, which is the minimum statutory required per the law. However, if a person purchases a comprehensive plan, the actual premium is greater, owing to the higher degree of coverage, making it considerably more costly.
Since more than 60% of bikes are uninsured, the IRDAI is having trouble convincing two-wheeler users to purchase at least third-party insurance. The higher bike insurance GST rate is one of the factors that vehicle owners frequently mention in research done by various insurance firms. Even though the government, IRDAI, and insurers are becoming more concerned about this issue and are looking into the GST rate on bike insurance, it is still illegal to operate a two-wheeler or any other motor vehicle without insurance. In addition, a person can stand to lose their registration if they do not have their insurance documents in place.
Necessity of a Bike Insurance
One of the basic needs for many individuals in India is a two-wheeler. It is essential to insure your two-wheeler because you cannot tell when an unexpected incident may take you by surprise. A bike insurance plan is a financial safety net and supports you in such a situation. The effect of a 3% bike insurance GST rate hike will be less noticeable than it will be on car insurance. And you shouldn't forego insurance because of this slight rise due to bike insurance's GST percentage. The advantages that a bike insurance policy will provide you are unquestionably far more valuable than any increase in vehicle insurance GST rate.
There are three different kinds of insurance for bike plans: standalone own-damage bike insurance, comprehensive bike insurance, and third-party bike insurance. Individuals who own costly bikes and want total coverage in case of an accident buy a comprehensive policy. Comprehensive insurance is more expensive than third-party insurance but offers far greater coverage.
Customers may switch from comprehensive to third-party plans due to the GST rate on bike insurance leading to higher premiums. It is advised not to choose a two-wheeler insurance coverage solely on the premise of premium. Because of GST on bike insurance, comprehensive insurance is more beneficial for riders regardless of a pricier premium. Comprehensive insurance does not only come with greater coverage but also with a host of other benefits.
The effect of GST on the two-wheeler sector does not stop at the vehicle insurance GST rate. GST rates have increased the overall rates of bikes and scooters. However, the demand for two-wheelers has not diminished. Thus, implementing GST has helped the two-wheeler market in some way or another.
Since the implementation of the GST, taxes on motorbikes and scooters are now divided based on the size of their engines. In place of the former 30% GST, a GST of 28% would be applied to bikes and scooters with engines lesser than 350 cc. Two-wheelers with engines larger than 350cc will now be subject to a 31 per cent tax, a 1% increase from earlier.
We must conclude from this that GST has now become part of our lives, and we need to accept it. We are paying GST for every good and service we use, so we must not use it as an excuse not to purchase insurance for our bikes. If you have a bike, having insurance is of paramount importance. What is even more important is finding the right insurance provider. And as we have already stated above, Tata AIG should always be your provider of choice when you think of bike insurance.