GST is one of the major tax reforms in our country that has affected all sectors by bringing the different kinds of taxation under the same umbrella. The aim of GST is to simplify taxation and in turn reduce the burden of it on the common man. For the motor-insurance industry, the government has levied 18% GST on the base price of the product, this does ease the taxation mechanism but perhaps does not reduce the tax burden for two-wheeler owners.
Pre-GST, the tax levied on bike insurance premium was 15%, thus leading to a hike of 3% the burden of which will be borne by the customer. To understand the GST implication better it’s important to grasp the two different kinds of two-wheeler insurance policies available in the market -
Third-Party Bike Insurance -
This is simple insurance that covers third-party liability in case of an accident. It is mandated by the Motor Vehicles Act, 1988, and in case of default it could lead to a heavy penalty or life imprisonment. This policy primarily only covers third-party damages and does not provide an extensive cover for your asset.
Comprehensive Two-wheeler Insurance
A comprehensive policy is not compulsory according to the law but in order to protect your bike from self-damage, fire, theft, natural calamity, or any unforeseen circumstance this is the policy for you. It is advised to cover your two-wheeler under a comprehensive policy as it protects you from own and third-party damage.
The most important factors when choosing a policy are the extent of coverage and the security features, so we advise purchasing a comprehensive policy because of the extent of security and coverage it provides to the holder. Undoubtedly, a comprehensive insurance policy is slightly more expensive in terms of the premium compared to third-party-bike insurance.
Also, while paying the premium, the payable GST on an extensive policy will be greater than a third party bike insurance but this expense is not a reason that should dictate the kind of policy you choose to protect your assets.
Overall, one cannot deny that post-GST motor-insurance is more expensive especially for bike owners but due to the competition in the market, most insurance providers have reduced the price to attract potential policyholders. Also, we suggest insuring your asset when purchasing them as it safeguards you from any financial risk in case of a mishap. A slight hike of 3% tax should not be the reason to not take insurance as the security a two-wheeler insurance offers is far greater than the amount of tax paid.
When choosing a two-wheeler insurance policy, checking the extent of coverage benefits the insurer provides and tax exemptions are the prime factors that should affect your decision. Checkout the Chola two-wheeler online policy (link) that not only safeguards your financial interest but is also just one click away!