In a significant move aimed at boosting the automobile
sector, the Government of India has recently announced a reduction in Goods and
Services Tax (GST) rates across various vehicle categories. This change is
expected to make vehicles more affordable, especially in the small and medium
segments, thereby encouraging first-time buyers and expanding household
mobility.
Understanding the GST Reduction
The revised
GST rates are as follows:
Small Cars
The GST rate for small cars is reduced from 28% to
18%.
- This
makes them more accessible for first-time buyers and enhances mobility for
households. - This
GST reduction is likely to boost sales in smaller cities and towns, where
small cars are the most popular choice. - Increased
sales will create positive ripple effects for car dealerships, service
centers, drivers, and auto-finance providers. - This
reduction applies to petrol/LPG/CNG cars with engines under 1,200 cc and
up to 4 metres in length, and diesel cars under 1,500 cc and up to 4
metres in length
Large/Luxury Cars
The GST reduced to a flat 40% with no cess.
- Eliminating
the additional cess not only lowers the overall tax rate but also
simplifies and makes taxation more predictable. - Even
at 40%, the removal of the cess effectively reduces the tax burden on
larger cars, making them more attainable for aspirational buyers.
Impact on Car Insurance
With the potential reduction in vehicle prices, the
cost of car insurance premiums is also expected to decrease. Insurance premiums
are often linked to the Insured Declared Value (IDV) of the vehicle, which is
directly influenced by the vehicle’s market price. Therefore, as vehicle prices
become more affordable, the IDV decreases, leading to a reduction in insurance
premiums.
“The recent GST rate cuts present a unique
opportunity for consumers to invest in car insurance at more affordable
rates,” says Vinodh Sundareswaran, Head of Taxation, Royal
Sundaram. “We encourage potential buyers to take advantage of this window
to secure comprehensive coverage for their vehicles.”
Why Now is the Right Time
- Lower
Premiums: Reduced vehicle prices lead to lower
insurance premiums. - Enhanced
Coverage Options: With more affordable
premiums, consumers can opt for comprehensive coverage that includes
third-party liability, own damage, and personal accident cover. - Increased
Vehicle Sales: The GST reduction is expected
to boost vehicle sales, leading to a larger pool of insured vehicles and a
more competitive insurance market.
Act Now For Maximum Savings
The recent GST reduction has made vehicles more
affordable, and consequently, car insurance premiums have also decreased. This
presents an excellent opportunity for consumers to invest in comprehensive car
insurance coverage. By comparing policies and understanding the terms, you can
ensure your vehicle is adequately protected without straining your finances.
“Lower GST on insurance premiums is not just
about affordability—it is about empowerment. By reducing financial barriers,
more car owners will find it easier to secure high-quality coverage. Royal
Sundaram welcomes the move, and we are committed to helping customers make the
most of this advantageous timing,” says Vinodh Sundareswaran, Head of Taxation, Royal
Sundaram.
For more information and to explore our range of car
insurance policies, visit Royal
Sundaram’s website.
