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GST on Car Insurance: How It’s Calculated and Why It Matters
Last Updated: 24th December 2025 - 09:59 am
In case you have renewed your motor policy and asked yourself why the ultimate premium appears to be greater than the initial amount, the reason is primarily the GST on car insurance.
Since the Goods and Services Tax was introduced, all vehicle insurance premiums, whether comprehensive or third-party, attract GST. Understanding how this tax works helps you make sense of your premium breakdown and compare policies more effectively.
The current car insurance GST rate stands at 18%, and it applies to the entire premium before government-mandated charges. Many policyholders focus only on the quoted premium, unaware that GST can significantly influence the final amount payable. When you receive a renewal notice, the base premium, add-on covers, compulsory personal accident cover, and any optional benefits are first totalled. Only then is the GST portion added.
GST on insurance premiums for commercial vehicles is one more subject where confusion can occasionally arise among the people. Nevertheless, the tax rate stays constant, though the overall premium often turns out to be higher due to risk exposure getting amplified, which in turn means GST unavoidably makes the final amount even more higher. This can have a direct impact on yearly operating costs.
Understanding these details helps you make clearer financial decisions. For example, when comparing two policies with similar features, the base premium and GST impact together determine which option is truly cost-effective. Likewise, when budgeting for your renewal, remembering that 18% GST will be added ensures you aren’t caught off guard by a higher bill.
In simple terms, knowing how GST on car insurance works puts you in better control of your money. It allows you to check premium calculations, choose suitable add-ons, and renew your policy with confidence.
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