Is Car Insurance Premium Is Getting Cheaper After GST Rate Cut? Here's The Truth

India's automobile market is set for a festive boost as the revamped Goods and Services Tax (GST) structure promises significant price cuts across various vehicle segments starting September 22, 2025.

What's Getting Cheaper?

Entry-level & mid-segment cars (up to ₹14 lakh)
Expect up to a 13% drop in prices thanks to reduced GST and the elimination of cess.

Small cars (petrol, LPG, CNG GST slashed from 28% to 18%, and the 1-3% cess is gone.
Popular models like Maruti Swift, Hyundai i20, and Tata Altroz will benefit.

High-end cars (>1200cc engines)

Despite a new 40% GST rate, removal of cess (previously up to 22%) means prices could still fall by 5-10%.

EVs Stay Steady

Electric vehicles
Continue to enjoy the lowest GST rate of 5%, reinforcing the government's push for clean mobility.
Not All Good News: Premium Bikes Hit Hard

Motorcycles above 350cc
GST jumps to 40%, up from the earlier 31% (28% GST + 3% cess).
This affects models like Royal Enfield 650cc, Harley-Davidson, and KTM Duke 390.

However, another question that has been widely discussed is whether car and vehicle insurance are also getting cheaper.

No, car or vehicle insurance will not drop to 0% GST under the new GST revamp-instead, the changes apply only to health and life insurance premiums, and even then, the impact on consumers may be limited. Here's a detailed breakdown:

What's Changing

Health & Life Insurance-Now GST-Free

The GST Council has exempted individual health and life insurance policies (including term plans, ULIPs, endowment policies, family floaters, senior citizen covers) from GST. This means these policies will now have a 0% GST, effective from September 22, 2025.

Additional coverage like reinsurance linked to these policies is also exempt.

However, group insurance policies and other insurance products such as motor or vehicle insurance remain taxable unless explicitly exempted.

Motor Vehicle Insurance-Still Taxed

A targeted exemption has been introduced, but it applies only to contributions made by general insurance companies to the Motor Vehicle Accident Fund for third-party accident compensation-not to the policy premiums themselves. Comprehensive and own-damage motor insurance continues to attract GST.