Insurers charge 18% GST on most vehicle insurance premiums in India. Since 22 September 2025, third-party insurance for goods-carrying commercial vehicles attracts 5% GST. Every vehicle owner who buys motor insurance pays GST on the insurance premium, whether the policy covers a private car, a bike, or a commercial vehicle.
Section 17(5) of the CGST Act, 2017, governs Input Tax Credit on vehicle insurance premiums. Businesses can claim ITC only when they use vehicles to transport goods, carry passengers commercially, or provide driving training. Individuals and most other businesses cannot claim ITC and must treat the GST paid as part of the insurance cost.
This guide explains the GST rate on vehicle insurance, premium calculation, ITC eligibility, commercial vehicle insurance rules, and the treatment of claim settlements. It also helps vehicle owners understand their insurance costs and meet applicable GST requirements.
Key Takeaways
- Insurers charge 18% GST on most vehicle insurance premiums in India, including private car, bike, comprehensive, own-damage, and add-on insurance covers.
- Third-party insurance for goods-carrying commercial vehicles attracts 5% GST with ITC from 22 September 2025.
- GST applies to the base premium and each add-on cover separately, including zero depreciation, engine protection, roadside assistance, and return-to-invoice cover.
- The total vehicle insurance premium includes the base premium plus applicable GST.
- Individuals cannot claim GST input on vehicle insurance premiums. They must treat GST as part of the insurance cost.
- Section 17(5) of the CGST Act blocks ITC on insurance for office cars, directors’ vehicles, employees’ vehicles, and personal-use vehicles.
- Businesses can claim GST input on vehicle insurance when vehicles transport goods, carry passengers commercially, provide driving training, or form part of vehicle stock.
- Truck operators, taxi businesses, bus operators, and goods transport companies can generally claim ITC on eligible commercial vehicle insurance premiums.
GST Rate on Vehicle Insurance in India
Insurers charge 18% GST on most types of motor insurance. This rate covers the base premium and every add-on cover you buy separately. However, third-party insurance for goods-carrying commercial vehicles attracts only 5% GST (with Input Tax Credit) since 22 September 2025.
The table below shows the insurance premium component on which GST applies for each vehicle insurance type:
| Vehicle Insurance Type | GST Applies To |
| Private car insurance (third-party and own damage) | Total premium payable |
| Two-wheeler / bike insurance | Total premium payable |
| Commercial vehicle insurance (most policies) | Total premium payable |
| Third-party insurance for goods carriage | Third-party premium |
| Third-party insurance (private vehicles) | Third-party premium |
| Comprehensive insurance | Entire comprehensive premium |
| Zero depreciation add-on cover | Add-on premium |
| Engine protection cover | Add-on premium |
| Roadside assistance cover | Add-on premium |
| Return to invoice cover | Add-on premium |
The 5% concessional GST rate on electric vehicles covers the purchase of the vehicle itself, not its insurance. Insurers charge 18% GST on electric vehicle insurance premiums, the same rate that applies to petrol and diesel vehicle policies.
Motor vehicle insurance services carry the SAC code 997134 under GST, which sits within the broader HSN/SAC classification system. This is the HSN code for motor vehicle insurance services that insurers must show on every GST invoice issued for a vehicle insurance premium. You can confirm the HSN code 997134 and its GST rate using a free HSN code finder.
How is GST Calculated on Vehicle Insurance Premiums?
Insurers calculate GST on the insurance premium before tax. They add the GST amount to the base premium to determine the final amount payable. The payable amount follows a simple formula:
GST Amount = Base Premium × 18%
Total Premium Payable = Base Premium + GST Amount
The examples below show how insurers calculate GST on vehicle insurance premiums:
| Example | Base Premium | GST at 18% | Total Premium Payable |
| Private car comprehensive insurance | Rs. 10,000 | Rs. 1,800 | Rs. 11,800 |
| Bike third-party insurance | Rs. 2,000 | Rs. 360 | Rs. 2,360 |
| Commercial truck comprehensive insurance | Rs. 25,000 | Rs. 4,500 | Rs. 29,500 |
| Zero depreciation add-on (car) | Rs. 3,000 | Rs. 540 | Rs. 3,540 |
| Comprehensive insurance with all add-ons | Rs. 15,000 | Rs. 2,700 | Rs. 17,700 |
The insurance company applies GST on the full premium it charges. When a policyholder adds extra covers to a policy, each one attracts the same 18% GST. The insurer totals the tax on the base cover and every add-on, and that combined figure appears as the GST on the invoice.
Tip: Policyholders may determine the GST applicable to any premium using an Online GST Calculator.
Can You Claim Input Tax Credit (ITC) on Vehicle Insurance?
The CGST Act, 2017, regulates Input Tax Credit on vehicle insurance premiums.
The table below shows when businesses can claim GST input on vehicle insurance premiums:
| Vehicle Usage | ITC on Insurance Available? | Reason Under the CGST Act |
| Trucks and goods carriers used to transport goods | Yes | Section 17(5)(a) does not restrict goods vehicles |
| Taxis, cabs, and licensed passenger transport vehicles | Yes | Used to provide taxable passenger transport services |
| Driving school vehicles | Yes | Used to provide driving training services |
| Vehicle dealers and manufacturers using demo or test vehicles | Yes | Used for the further supply of motor vehicles |
| Fleet operators using goods vehicles for commercial delivery | Yes | Goods vehicles fall outside Section 17(5)(a) restrictions |
| Office cars used by staff and directors | No | Section 17(5)(a) restricts ITC on eligible passenger vehicles |
| Cars given to employees as a benefit | No | The business does not use them for an eligible taxable activity |
| Private vehicles owned by individuals | No | Individuals cannot claim ITC without GST registration and an eligible business use |
The proviso to Section 17(5)(ab) also grants ITC to two specific categories of registered persons, even for passenger vehicles that the seating-capacity rule otherwise restricts. A manufacturer of such motor vehicles can claim ITC on the general insurance, servicing, and repair relating to those vehicles.
GST on Commercial Vehicle Insurance
Insurers charge 18% GST on comprehensive and own-damage insurance premiums for commercial vehicles. This rate is the same as the rate for private vehicle insurance.
Eligible commercial vehicle operators can claim ITC on their insurance premiums. This includes:
- Truck fleet owners
- Taxi operators
- Bus operators
- Goods transport companies
For example, a transport company insures 10 trucks under comprehensive policies. It pays Rs. 45,000 as GST on the total insurance premiums. The company can claim this amount as ITC and reduce the GST payable on its business sales. As a result, the company bears only the base insurance premium.
The following points explain the ITC treatment:
- The business must use the vehicles for an eligible activity.
- The business adjusts the ITC against GST payable on its sales.
- After claiming ITC, the business does not bear the GST paid on the insurance premium.
Note: The Rs. 45,000 figure assumes the 18% rate, so the example uses comprehensive policies. If the same trucks carried third-party only cover, the rate would be 5%, and the amounts would differ.
Businesses that remit GST after the prescribed due date may compute the interest payable using a free GST Interest Calculator Online.
Is GST Applicable on Vehicle Insurance Claim Settlement?
GST does not apply to vehicle insurance claim settlements. When an insurance company pays a vehicle insurance claim, it is settling the insurance contract rather than supplying goods or services. Therefore, the claim amount received by the policyholder is not subject to GST.
GST on Cashless Claims
In a cashless claim, the insurance company pays the repair garage directly for the vehicle repairs. The garage issues a GST invoice for the repair work, and GST applies at the applicable rate (18% for most vehicle repair services).
The policyholder does not pay GST on the insurance claim amount. They only pay the deductible or any amount not covered under the policy, if applicable.
GST on Reimbursement Claims
In a reimbursement claim, the policyholder first pays the repair garage and then submits the repair bill to the insurance company for reimbursement. The insurance company reimburses the total eligible amount, including the GST paid on repairs. The reimbursement itself does not attract GST.
GST on Total Loss and Salvage
When a vehicle is declared a total loss (write-off), the insurance company pays the insured value. The treatment of the damaged vehicle (salvage) depends on how the claim is settled. The Central Board of Indirect Taxes and Customs (CBIC) clarified these GST rules through Circular 215/9/2024-GST:
- If the insurance company deducts the salvage value from the claim amount, the policyholder keeps ownership of the damaged vehicle. In this case, the insurance company does not pay GST on the salvage value.
- If the insurance company pays the full Insured Declared Value (IDV) without deducting the salvage value, ownership of the damaged vehicle passes to the insurance company. If the insurer later sells the salvage, it must pay GST on that sale.
In both cases, the policyholder does not face any GST liability on the insurance payout received.
Need help understanding GST on vehicle insurance or claiming eligible ITC? RegisterKaro can help you assess GST applicability, check ITC eligibility, and maintain accurate GST compliance for your vehicle-related business expenses. Contact our experts for timely and reliable assistance!
