GST on third-party motor insurance cover may dip

New Delhi: The government will soon bring a proposal before the GST Council to reduce tax on the premium being paid by vehicle owners for buying third party (TP) insurance. Currently, the GST on third party premium is 18% and it’s mandatory for every vehicle owner to buy the TP insurance. A reduction is expected to ease the burden on consumers.

TOI has learnt that the issue of high GST on premium came up for discussion at a meeting at Prime Minister’s Office.

“The department of financial services has been directed to suggest the rate cut and expedite it so that the proposal can be placed before the next GST Council meeting. There was an unanimous view that GST rate needs to be rationalised in this case since vehicle owner has no choice than buying the policy,” said a government official.


Truckers association had sought for a complete waiver of tax on TP premium and the finance ministry has assured to look into their demand.

“Since it serves a greater social cause and has large impact, we are still hopeful that government will do away with the GST. This will bring down the premium of a big truck by Rs 5,000-7,000 on an average and will bring some relief,” said Bal Malkit Singh of All India Motor Transport Congress.

Meanwhile, the PMO has asked the road transport ministry to write to all states for greater enforcement of the mandatory TP insurance cover for all vehicles. At present, more than 50% of the registered vehicles don’t have valid insurance cover.

Insurance companies have been urging the government agencies to ensure 100% coverage of the TP insurance for vehicles. The GST Council has undertaken several rate reductions on a string of products in the past to ease the burden on consumers. The GSY Council is likely to meet later in the month.