GST on car insurance in India is 18%, and it applies to third-party, comprehensive, and own-damage policies. The tax is added to your premium, so a ₹10,000 base premium becomes ₹11,800 after GST. Even after the GST 2.0 reforms introduced in September 2025, car insurance continued to attract 18% GST.
This guide explains the GST rate, HSN code, and calculation process for car insurance. It also covers ITC eligibility and the impact of recent reforms on premiums in 2026.
Key Takeaways
- GST on car insurance in India is 18%, and it applies to third-party, comprehensive, and own-damage policies, as well as add-on covers.
- The September 2025 GST reforms did not exempt car insurance from GST, unlike health and life insurance. Car insurance continues to attract an 18% GST rate.
- Car insurance falls under HSN code 997134 for general insurance services, within the broader heading 9971.
- The government splits the 18% GST into 9% CGST and 9% SGST for transactions within a state, or charges 18% IGST for transactions across states. The total tax remains 18%.
- Individual car owners cannot claim Input Tax Credit, while eligible businesses such as dealers, driving schools, and transport operators can.
- New car buyers may pay slightly lower own-damage premiums because reduced GST on cars lowers the IDV. However, the 18% GST rate on car insurance remains unchanged.
- Before GST, car insurance carried a 15% service tax, which rose to 18% under GST in July 2017 and has stayed there since.
How Much GST Do You Pay on Car Insurance?
The GST rate on car insurance is 18% and applies uniformly to all types of car insurance policies:
- Third-party insurance: The policy premium attracts 18% GST.
- Comprehensive insurance: The insurer applies 18% GST to the total premium amount.
- Standalone own-damage cover: The premium includes 18% GST on the applicable amount.
- Add-on covers: Additional covers like zero depreciation and engine protection also include 18% GST.
This means that no matter which policy or add-on you choose, the GST rate stays the same.
Note: The 18% GST applies only to the insurance premium, not the sum insured or claim amount. It applies to both new and renewed policies unless a specific exemption applies.
GST Rate and HSN Classification for Car Insurance
Every GST service has a Harmonized System of Nomenclature (HSN), similar to an HSN code, that helps classify and tax insurance premiums. Car insurance falls under HSN 9971 for financial and insurance services and is classified as a general insurance service.
The table below shows the GST rate and code for car insurance:
| Detail | Description |
| Service heading | 9971 (financial and insurance services) |
| HSN code | 997134 (general insurance services, including motor insurance) |
| GST rate | 18% |
| Rate before GST | 15% service tax |
| Change after September 2025 (GST 2.0 reforms) | No change; car insurance stays at 18% |
Note: The HSN code stays the same regardless of whether you buy a third-party or comprehensive policy, as both are general insurance services.
CGST, SGST, and IGST on Car Insurance
The 18% GST on car insurance combines different tax components depending on where you issue the policy. For most policyholders, the central and state governments each receive 9% of the GST.
Here is how the components apply:
- Central GST (CGST): The central government charges and collects 9% CGST when you issue the policy within your own state.
- State GST (SGST) or Union Territory GST (UTGST): Applies at 9% on the same within-state policy, alongside CGST, and is collected by the state or Union Territory.
- Integrated GST (IGST): Charged at 18% when the insurer and policyholder are in different states, and collected by the central government.
Note: The split into CGST, SGST, or IGST does not change the total tax you pay, which stays at 18%. The tax structure only determines how the central and state governments share the tax revenue. It does not change the amount charged on your premium.
GST on Third-Party vs Comprehensive Car Insurance
Insurers charge 18% GST on both third-party and comprehensive car insurance, so the rate does not change based on the cover type you choose. However, insurers calculate the premium differently, which affects the amount to which they apply GST. Here is how GST applies to each:
| Basis | Third-Party Insurance | Comprehensive Insurance |
| GST rate | 18% | 18% |
| What it covers | Third-party liability only | Third-party liability plus own damage |
| How the premium is set | Base premium fixed by the Insurance Regulatory and Development Authority of India (IRDAI) | Set by the insurer, based on Insured Declared Value (IDV) and other factors |
| What GST applies to | The regulated premium | The entire premium, including add-ons |
| GST amount in rupees | Lower, as the premium is lower | Higher, as the premium is higher |
Note: A limited exception applies to goods carriage vehicles, where third-party insurance attracts 5% GST with ITC from 22 September 2025. This lower rate does not apply to private cars, so a personal car policy, whether third-party or comprehensive, continues to attract 18% GST.
How to Calculate GST on Your Car Insurance Premium?
Calculating GST on a car insurance premium is simple because insurers add a flat 18% GST to the base premium. You can simply multiply the base premium by 18% and add it to the base amount to get the total payable. The formula is:
GST amount = Base premium × 18%
Total premium payable = Base premium + GST amount
For example, on a car insurance policy with a base premium of ₹10,000:
- GST amount: ₹10,000 × 18% = ₹1,800
- Total premium payable: ₹10,000 + ₹1,800 = ₹11,800
If you add covers like zero depreciation or engine protection, insurers first add their cost to the base premium. They then calculate 18% GST on the total premium amount.
Example:
- Base premium: ₹10,000
- Add-on covers: ₹2,000
- Total taxable premium: ₹12,000
- GST at 18%: ₹2,160
- Total payable premium: ₹14,160
A higher premium, whether due to a larger sum insured or additional covers, results in a higher GST amount in rupees.
Note: GST applies to the final premium amount after discounts, not the original premium. You can use a GST calculator to quickly find the tax amount instead of calculating it manually.
How Does Lower GST on Cars Affect Your Insurance Premium?
The 18% GST on car insurance remains unchanged. However, the September 2025 reforms reduced GST on cars, which may indirectly affect insurance premiums because a car’s value influences the premium amount. The impact depends on whether you buy a new car or already own one. Here is how it works:
- Lower GST on cars reduces the price: Small cars (under 4 metres with petrol engines up to 1200cc or diesel engines up to 1500cc) saw GST reduced from 28% to 18%. Larger cars and SUVs moved to 40% GST, while EVs remained at 5% with the compensation cess removed. These changes can reduce the ex-showroom price of eligible cars.
- A lower price lowers the IDV: The Insured Declared Value (IDV) is based on the car’s market value, so a lower ex-showroom price means a lower IDV.
- A lower IDV reduces the own-damage premium: Insurers calculate the own-damage part of a comprehensive policy based on the IDV. A lower IDV results in a slightly lower own-damage premium.
- Third-party premiums stay the same: The IRDAI sets third-party premiums based on engine capacity, so changes in car prices do not affect them.
The impact mainly benefits new car buyers, as lower car prices can reduce IDVs and slightly lower own-damage premiums. Existing car owners see no change, as their renewal premium continues to attract 18% GST on the same basis as before.
Can You Claim ITC on Car Insurance Premium?
Input Tax Credit (ITC) lets a GST-registered business claim back the GST it pays on eligible business expenses. Car insurance restricts ITC, and your vehicle’s usage determines whether you can claim it. Here is how ITC applies:
- Personal car owners cannot claim ITC: ITC on cars and their insurance is blocked under Section 17(5) of the CGST Act for personal use. This means that an individual cannot claim the 18% GST paid on a personal car policy.
- Eligible businesses can claim ITC: Businesses can claim ITC for vehicles used in transport, driving schools, car dealerships, or vehicles with more than 13 seats.
- Conditions must be met: To claim ITC, a business must register under GST, use the vehicle for business purposes, and ensure that the insurance invoice includes the business GSTIN.
Evolution of Car Insurance Tax in India: Before and After GST
The tax on car insurance has changed with India’s move to GST, though the current rate has held steady since then. Here is how the tax on car insurance has moved:
| Period | Tax on Car Insurance |
| Before July 2017 | 15% service tax |
| July 2017 onwards | 18% GST |
| After September 2025 | 18% GST (unchanged) |
Confused about how GST applies to your insurance or business expenses? Knowing where you can and cannot claim ITC can save you a significant amount each year. RegisterKaro offers expert GST registration and advisory support to keep your business compliant. Contact us today to simplify your GST and make the most of every eligible claim!
