If you have heard that GST on insurance has been cut to zero, you are only partly right, and the part that matters most to you as a vehicle owner is the part that did not change. GST on car insurance premiums and their two-wheeler equivalent remains firmly in place even after a major reform that made individual life and health insurance completely tax-free. This guide explains exactly what the GST rate on motor insurance in India applies today, how it is calculated on your actual premium, and where a handful of genuine exceptions exist.
Current GST Rate on Motor Insurance Premium
Motor insurance in India, covering both third party and comprehensive policies for cars and two-wheelers, attracts GST at a flat 18 per cent. This applies to every component of your premium: the mandatory third party portion, the own damage portion, and any add-ons like zero depreciation or roadside assistance that you choose to include. GST on bike insurance follows exactly the same structure as GST on car insurance premium, with no separate rate for two-wheelers.
This rate has not changed even after the 56th GST Council meeting in September 2025, which reduced GST on individual life and health insurance premiums to zero. General insurance, as a category that includes motor, property, fire, and marine insurance, was explicitly left out of that reduction and continues to attract the standard 18 per cent rate. This is the single most important thing to understand if you have seen headlines about insurance becoming GST-free and assumed it applied to your car or bike policy too.
Last verified: July 2026. GST rules on insurance have changed through recent GST Council decisions, so treat the rate below as current as of this date and confirm against the latest official notification before relying on it for a large purchase.
How GST Is Calculated on Your Premium
The math is straightforward once you know the rate. GST is calculated as 18 per cent of your base premium, the amount before tax, and added on top to arrive at your final payable amount. If your comprehensive car insurance premium before tax is 20,000 rupees, GST adds 3,600 rupees, bringing your total payable to 23,600 rupees.
For intra-state transactions, this 18 per cent splits into 9 per cent Central GST and 9 per cent State GST. For inter-state transactions, it is charged as a single 18 per cent Integrated GST instead. Either way, the total tax burden on your premium works out the same, and most insurers quote premiums inclusive of GST by default, so the final number you see at checkout should already reflect this calculation.
GST on Third-Party vs Own Damage vs Comprehensive Premium
There is no distinction in GST rate between these components. Third-party premium, which is fixed by IRDAI based on engine capacity or vehicle category, attracts 18 per cent GST just like the own damage portion of a comprehensive policy does. A standalone own damage policy is taxed identically as well. Add-on covers, such as engine protection, consumables cover, or roadside assistance, are generally taxed along with the base policy at the same 18 per cent rate rather than being priced or taxed separately.
One detail worth knowing: No Claim Bonus is treated as a discount on the taxable value rather than a separate transaction, following a clarification under GST Circular No. 186/18/2022. This means GST applies only to your premium after the NCB discount is deducted, not on the gross premium before that discount. For example, if your base own damage premium is 10,000 rupees and you have earned an NCB discount of 1,500 rupees, GST is calculated on the reduced 8,500 rupees, not the original 10,000 rupees, which works out to a small but real saving compared to taxing the bonus away.
Recent GST Council Notifications Affecting Motor Insurance
The most significant recent change came from the 56th GST Council meeting in September 2025, effective from 22 September 2025, which exempted individual life and health insurance premiums from GST entirely while explicitly maintaining the 18 per cent rate for general insurance, including motor insurance. This reform is often referred to informally as GST 2.0, and it also revised GST rates on vehicles themselves, not on insurance policies. Small and mid-size cars saw GST reduced, while motorcycles above 350cc actually saw their combined tax rate rise.
A narrower change did affect one specific corner of motor insurance: third-party insurance for goods carriage vehicles, a commercial category covering trucks and similar goods transport vehicles, saw its GST rationalised to a lower rate under the same reform round. This exception is specific to commercial goods vehicles and does not extend to private cars or two-wheelers, so if you are insuring a personal vehicle, this change has no direct effect on your premium.
Does GST Apply Differently to Commercial Vehicles?
Mostly no, with one specific exception. Comprehensive and own damage insurance for commercial vehicles continues to attract the standard 18 per cent GST rate, the same as private vehicles. The exception is third party insurance specifically for goods carriage vehicles, which has seen a lower GST rate applied under recent reforms, a change that reflects the goods transport sector's cost sensitivity rather than a broader shift in how commercial motor insurance is taxed.
Passenger-carrying commercial vehicles, such as taxis and buses, do not benefit from this same reduction and continue to be taxed at the standard 18 per cent rate across both their third party and own damage components.
Can Businesses Claim GST Input Tax Credit on Motor Insurance
This depends heavily on vehicle type and use. Under Section 17(5) of the Central Goods and Services Tax Act, input tax credit on motor vehicle insurance is blocked for passenger vehicles with a seating capacity of up to 13 persons used for personal purposes, which covers the vast majority of private cars. An individual buying insurance for a personal car cannot claim this credit under any circumstances, regardless of how the vehicle is occasionally used.
Businesses can claim input tax credit in specific, defined situations: when the vehicle is used for further supply of vehicles, such as a dealership, for transportation of passengers for a fare, for imparting driving training, or for the transportation of goods. Simply using a car for business errands does not automatically qualify, since the exceptions under Section 17(5) are narrowly defined rather than a general business-use exemption. Commercial vehicle fleet operators, taxi businesses, driving schools, and goods transporters are the categories that most commonly and legitimately claim this credit, provided their invoices carry a valid GSTIN.
Impact of GST on Your Overall Premium Cost
For most vehicle owners, GST adds a consistent, predictable 18 per cent on top of whatever base premium your insurer quotes. This has remained stable since the last direct change to motor insurance GST rates, so unlike the wider GST 2.0 reform's effect on other products, you should not expect your motor insurance tax burden to shift dramatically year to year.
Where GST does interact indirectly with your premium is through the wider vehicle GST changes introduced in September 2025. A lower GST rate on small and mid-size cars reduces their ex-showroom price, which in turn reduces the Insured Declared Value used to calculate the own-damage premium for new buyers. This means new car buyers in certain segments may see a marginally lower base premium simply because their car itself became cheaper, even though the 18 per cent GST rate charged on the insurance premium itself has not moved at all.
How to Verify the GST Component on Your Policy Document
Every motor insurance policy document and premium receipt should itemise the base premium and the GST charged on it separately, rather than showing only a single combined figure. Look for a breakdown showing your base premium, the GST amount, typically split into CGST and SGST for an intra-state purchase or shown as a single IGST line for an inter-state one, and the final total payable.
If your policy document does not clearly separate these amounts, or if a quoted price seems inconsistent with an 18 per cent calculation on the stated base premium, it is worth asking your insurer directly for a breakdown before completing payment. This is particularly useful if you are a business trying to claim input tax credit, since your invoice needs to clearly display the GST component along with a valid GSTIN to support that claim.
A Common Point of Confusion
Because the September 2025 reform was covered so widely in the news, a lot of vehicle owners now assume the GST rate on motor insurance in India has dropped, simply by association with the health and life insurance changes that happened at the same GST Council meeting. This is understandable but incorrect, and it is worth double-checking your own renewal notice rather than assuming a lower number will show up automatically.
If your renewal premium looks different from last year, the change is far more likely to come from a shift in your vehicle's IDV, a change in your No Claim Bonus, or an insurer-specific rate adjustment on the own damage portion, rather than any change to GST on car insurance premium itself. The 18 per cent rate has remained a fixed, unmoving part of the calculation throughout these changes, and treating it as such when you review any quote will save you from being caught off guard.
Note: This article has been vetted by Siddarth Khandelwal, an Insurance expert at Insure24.
FAQs
Q. How much GST on car insurance 2026 applies to a standard comprehensive policy?
18 per cent, applied to the base premium after any No Claim Bonus discount is deducted, the same rate that has applied to motor insurance since the last direct rate change.
Q. Is GST charged on third party premium the same way as on own damage premium?
Yes. Both the mandatory third party portion and the own damage portion of a comprehensive policy attract 18 per cent GST, with no distinction in rate between the two components.
Q. Can I claim GST input credit on car insurance if I use my car partly for work?
Generally no. Input tax credit on personal vehicle insurance is blocked under Section 17(5) of the CGST Act unless the vehicle falls into a specific exempted business-use category, such as passenger transport for a fare or goods transport.
Q. Does GST on comprehensive vs third party insurance differ for bikes specifically?
No. Two-wheeler insurance follows the same 18 per cent GST rate across third party, own damage, and comprehensive components, identical to how car insurance is taxed.
Q. Has GST on motor insurance been reduced along with health insurance?
No. The September 2025 reform that brought individual life and health insurance to zero GST explicitly excluded general insurance, including motor insurance, which remains at 18 per cent.
Q. Does GST apply to the No Claim Bonus discount I receive at renewal?
No. NCB is treated as a discount on the taxable value rather than a separate charge, so GST is calculated only on your premium after the NCB deduction has been applied.
Q. Is there any GST exemption for electric vehicle insurance specifically?
No direct GST exemption applies to EV insurance premiums themselves. Any savings for EV owners come from IRDAI's separate third party premium discount for electric vehicles, not from a different GST treatment.
Q. Do add-on covers like zero depreciation attract a different GST rate?
No. Add-ons are generally taxed at the same 18 per cent rate as the base policy, since they form part of the same overall insurance service rather than being taxed as a separate product.
Q. Can a business claim GST input tax credit on commercial fleet insurance?
Yes, provided the vehicles fall into a category permitted under Section 17(5), such as goods transport or passenger transport for a fare, and the insurer's invoice carries a valid GSTIN.
Q. Why did GST on third party insurance for goods carriage vehicles change but not for cars?
This targeted change reflects a specific policy decision to ease costs in the goods transport sector. It does not extend to private passenger vehicles, whose motor insurance continues to be taxed at the standard 18 per cent rate.
Two riders with what looks like the same bike can end up with noticeably different insurance quotes, and it is rarely a mistake on either side. Bike insurance premium calculation follows a defined set of rules, but those rules respond to more individual factors than most riders realise, from your city to your claim history to how you set your bike's declared value. This guide breaks down the factors affecting two wheeler insurance premium one by one, covering every major bike insurance cost factor, so a quote stops feeling arbitrary and starts feeling explainable.
Key Factors That Determine Bike Insurance Premium
Every comprehensive bike insurance premium is built from two separate pieces added together, and understanding this split is the foundation of any accurate bike insurance premium calculation. The first is third party premium, a flat rate fixed by IRDAI based purely on your bike's engine capacity, identical no matter which insurer you buy from. The second is own damage premium, which is where most of the variation between riders, and between insurers, actually shows up.
Own damage premium responds to your bike's Insured Declared Value, its age, your registration city, your claim history and accumulated No Claim Bonus, and any add-ons you choose to include. Two wheeler insurance premium in India can differ meaningfully between two riders with the same bike model simply because one lives in a higher theft city, has a longer claim-free streak, or has chosen a different set of add-ons.
How Engine CC Affects Your Premium
Engine capacity is the single factor that determines your fixed third party premium, and IRDAI groups two-wheelers into bands rather than pricing each cc individually. A 100cc commuter and a 145cc commuter typically land in the same third party band, while a 350cc or larger motorcycle moves into a meaningfully higher bracket. This portion of your premium cannot be reduced through negotiation or by switching insurers, since it is a fixed regulatory rate.
Engine capacity also has an indirect effect on own damage premium, since larger, more powerful bikes tend to have higher ex-showroom prices, which pushes up their Insured Declared Value and, with it, the own damage portion of your total premium. A bigger engine rarely changes your premium through cc alone beyond the fixed third party band, but it very often changes your premium through the higher IDV that tends to come attached to it.
How IDV Affects Your Premium
Insured Declared Value is the maximum amount your insurer pays if your bike is stolen or damaged beyond repair, and it directly drives your own damage premium. A higher IDV means a higher potential payout for the insurer, which translates into a higher premium. A lower IDV reduces your premium but also caps what you can actually claim.
This creates a genuine temptation to under-declare IDV to save a modest amount on premium, which is one of the more common and costly mistakes riders make. If your bike is later stolen or totalled, you are locked into whatever IDV you agreed to at the start of the policy period, so an artificially low figure directly reduces your payout exactly when you need it most. Setting IDV close to your bike's genuine current market value, rather than the lowest figure your insurer will accept, is almost always the better long-term choice.
How Bike Age and City Affect Premium
Your bike's age drives IDV down through a standard depreciation schedule, which in turn reduces own damage premium year after year, even before any No Claim Bonus is factored in. A five-year-old bike will generally carry a noticeably lower own damage premium than the same model when it was new, simply because its IDV has depreciated substantially over that period.
Registration city affects premium independently of age or engine size, since insurers price in local accident frequency and theft rates. Riders in dense metro areas with higher traffic volumes and higher reported theft generally see higher own damage premiums than riders with an identical bike registered in a smaller town with lighter traffic and a lower theft profile.
Third-Party Premium: IRDAI Fixed Rates by CC Slab
The table below reflects the general structure of IRDAI's notified third party rates for two-wheelers, current as of recent notifications. Since IRDAI reviews these periodically, confirm the exact current figures before relying on them for a purchase decision.
| Engine Capacity | Approximate Annual Third Party Premium |
|---|---|
| Up to 75cc | Rs 538 |
| 75cc to 150cc | Rs 714 |
| 150cc to 350cc | Rs 1,366 |
| Above 350cc | Rs 2,804 |
Since this portion of your premium is identical across every insurer, it is not worth spending time comparing on this component specifically. Where genuine comparison shopping pays off is entirely on the own damage side.
How Own Damage Premium Is Calculated
Own damage premium is generally calculated as a percentage of your bike's IDV, adjusted by insurer-specific rate factors tied to your bike model, city, and risk profile, then reduced by any No Claim Bonus you have accumulated. Different insurers apply somewhat different base rates to the same IDV, which is exactly why two comprehensive quotes for the same bike can differ even when the IDV figure itself is identical across both.
Add-ons are calculated separately and added on top of this base own damage premium, each priced according to the specific risk it covers. Zero depreciation cover, for instance, is priced higher than a smaller add-on like roadside assistance, since it increases the insurer's potential payout on every claim rather than covering a narrower, less frequent risk.
Sample Premium Table by Engine CC
To make this concrete, here is an illustrative first-year premium range across different engine capacity bands, using typical IDV assumptions for popular models in each band. These are indicative figures meant to show the general pattern, not exact live quotes, since actual premium depends on your specific bike, city, and add-ons.
| Engine Band | Example Bike Type | Indicative Total Comprehensive Premium (Year 1) |
|---|---|---|
| Up to 75cc | Basic scooter or moped | Rs 2,200 to 2,800 |
| 75cc to 125cc | Standard commuter bike or scooter | Rs 2,700 to 3,400 |
| 125cc to 150cc | Sporty commuter or entry naked bike | Rs 3,200 to 4,200 |
| 150cc to 350cc | Mid-size cruiser or tourer | Rs 5,500 to 7,500 |
| Above 350cc | Premium or high-capacity motorcycle | Rs 9,000 and above |
Notice how the jump between bands is driven far more by IDV than by the modest step-up in fixed third party premium, reinforcing that own damage cost is where the real variation in your total bill comes from.
Role of NCB in Reducing Premium
No Claim Bonus is one of the most significant levers you have over your own premium, applying only to the own damage portion and rising with each consecutive claim-free year. The standard progression runs from 20 per cent after one claim-free year to a maximum of 50 per cent after five consecutive years without a claim.
This is why riders wondering why is my bike insurance premium so high across renewal years sometimes overlook the simplest explanation: a single claim, even a small one, resets this discount entirely back to zero at the next renewal. Weighing whether a minor repair costs less than the NCB you would lose by claiming for it is worth doing every time, rather than filing every small claim reflexively.
How Add-ons Affect Total Premium
Add-ons increase your premium incrementally, and understanding roughly how much each one adds helps you choose deliberately rather than accepting a bundled package by default. Zero depreciation cover tends to be the costliest individual add-on, since it removes depreciation deductions on every claim. Engine protection, useful for riders in flood-prone cities, typically adds a moderate amount. Roadside assistance and NCB protection are usually the least expensive additions available.
Rather than accepting a pre-selected bundle, most insurers let you toggle add-ons individually, which is worth doing so you can see exactly how much each one costs relative to the protection it offers for how you actually ride.
Why Insurers Treat Cities Differently
City-based pricing often surprises riders more than any other factor on this list, since it feels less within your control than choices like IDV or add-ons. Insurers build their own damage rate factors partly from claims data specific to each city, tracking how often bikes registered there are stolen, how frequently accidents get reported, and how expensive repairs tend to run locally due to labour and parts costs.
This is why identical bikes with identical IDV can carry a genuinely different own damage premium purely based on the RTO code on the registration. If you are relocating and re-registering your bike, or simply curious why your renewal quote looks different from a friend's in another city, this city-level risk pricing is very often the answer, separate from anything about your personal riding history.
Ways to Reduce Your Bike Insurance Premium
A handful of practical choices can meaningfully lower your total premium without cutting essential coverage. Protecting your No Claim Bonus by avoiding claims for very minor damage is the single most effective lever available to most riders over time. Choosing a voluntary deductible, an amount you agree to pay out of pocket before your insurer contributes to a claim, reduces own damage premium in exchange for accepting more risk yourself.
Comparing quotes across two or three insurers before renewing matters more than people expect, since own damage rate factors genuinely differ between companies even for an identical bike and IDV. Fitting an approved anti-theft device can also unlock a modest discount from several insurers, and setting an accurate rather than inflated IDV keeps your premium proportionate to your bike's real value instead of paying for coverage you do not actually need.
FAQs
Q. How is bike insurance premium calculated in India exactly?
It combines a fixed third party rate set by IRDAI based on engine capacity with a variable own damage premium based on your bike's IDV, age, city, claim history, and chosen add-ons.
Q. Why is my bike insurance premium so high compared to last year?
Common reasons include a claim that reset your No Claim Bonus, a change in your bike's IDV, an insurer-wide rate revision, or newly added covers that were not part of your previous policy.
Q. What does bike insurance premium by engine cc 2026 look like for a 150cc bike?
Third party premium for a 150cc bike falls in the mid engine band, while total comprehensive premium including own damage typically runs into the low thousands of rupees annually, depending on IDV and add-ons.
Q. Does a higher IDV always mean better value?
Not necessarily. A higher IDV increases your maximum payout but also raises your premium, so the ideal figure closely reflects your bike's actual current market value rather than being pushed artificially high.
Q. Can I reduce my bike insurance premium without dropping coverage?
Yes, primarily by protecting your NCB, comparing quotes across insurers, considering a voluntary deductible, and fitting an approved anti-theft device where a discount is available.
Q. Do all insurers charge the same third party premium for the same bike?
Yes. The third party premium is fixed by IRDAI based on engine capacity and is identical across every insurer, so comparison shopping only affects the own damage portion of your premium.
Q. How much does No Claim Bonus actually save on renewal?
It can reduce your own damage premium by up to 50 per cent after five consecutive claim-free years, making it one of the largest single savings levers available to any rider.
Q. Does my bike's age reduce my premium automatically?
Yes, since IDV depreciates on a standard schedule as your bike ages, which reduces own damage premium correspondingly, separate from any NCB discount you may have also earned.
Q. Why do two riders with the same bike model pay different premiums?
Differences usually come from IDV, registration city, claim history, NCB status, and the specific add-ons each rider has chosen, rather than the bike model itself.
Q. Is it worth adding zero depreciation cover to a bike insurance premium calculation?
For newer or higher-value bikes, it is generally worth the added cost, since it meaningfully improves your payout on replaced parts during a claim, which matters most while your bike is newest and most expensive to repair.
Licenced by
COMPANY
PRODUCTS
RESOURCES
LEGAL
Cars24 Financial Services Private Limited
(Wholly owned subsidiary of Cars24 Services Private Limited)
Corporate Office - 6th Floor, SAS Tower-C, Ch Baktawar Singh Road, Medicity Sector 38, Shivaji Nagar,
Gurgaon - 122001, Haryana
IRDAI Corporate Agency Registration No: CA0710 | Registration Validity: Perpetual |
CIN: U65990HR2018PTC075713
Disclaimer : The information contained in this website is presented purely for information purposes only provided as service to the internet community at large. It does not constitute insurance advice and we do not guarantee the accuracy, adequacy or the completeness of the information contained here.
Licenced by
COMPANY
PRODUCTS
RESOURCES
LEGAL
Cars24 Financial Services Private Limited
(Wholly owned subsidiary of Cars24 Services Private Limited)
Corporate Office - 6th Floor, SAS Tower-C, Ch Baktawar Singh Road, Medicity Sector 38, Shivaji Nagar,
Gurgaon - 122001, Haryana
IRDAI Corporate Agency Registration No: CA0710
Registration Validity: Perpetual
CIN: U65990HR2018PTC075713
Disclaimer : The information contained in this website is presented purely for information purposes only provided as service to the internet community at large. It does not constitute insurance advice and we do not guarantee the accuracy, adequacy or the completeness of the information contained here.