GST on Bike Insurance in 2025: Rates, Impact & Savings Tips

Posted on: Jun 30, 2025 | 3 mins | Written by: HDFC ERGO Team

GST on Bike Insurance in 2025: Rates, Impact & Savings Tips

According to the Motor Vehicles Act of 1988, every two wheeler owner must purchase a third-party liability insurance. Having a third party liability insurance ensures that any third party vehicle or property damaged by your car will receive protection from the insurer. However, a comprehensive bike insurance is recommended to get coverage against damage caused due to accidents and calamities as well.

Now, as you’re buying an insurance plan for your two-wheeler, you might have questions regarding GST in mind. Let us address all your questions going forward.

Goods & Service Tax (GST)

GST or Good & Services is a multi–stage indirect tax levied on all goods and services throughout India. It was introduced in an effort to replace all the existing indirect taxes that were levied on goods and services in India, such as VAT, service tax, excise etc. The Goods and Services Tax Act was passed in the parliament on 29th March, 2017. It was brought into effect 1st July, 2017.

There are 3 types of GST collected.

1. CGST: This is the tax amount paid to the central government. It consists of VAT (Value Added Tax) and central excise.

2. SGST: This is the tax revenue collected by the state government. It is equal to the amount that goes to the central government. Some part of it is VAT and the other is service tax. Both CGST and SGST are applied only for intra-state transactions, that is, when a transaction happens within a state in India.

3. IGST: IGST is applicable for inter-state transactions, when something is sold from one state to the other. It is collected by the central government and shared based on which state the purchaser is in.

The GST rate is divided into 4 slabs: 0%, 5%, 12%, 18% or 28%. Specific goods and services fall under different slabs

GST on Two-wheeler Insurance in India

GST is going to be applicable at a rate of 18% on two wheeler insurance in India, covering both comprehensive and third party bike insurance policies. This tax structure has been employed for better streamlining of the tax process and uniformity across the insurance sector.

Effect of GST on the Bike Insurance Market

Clearly, the reform brought about by GST within itself has seen a rise in motorcycle insurance premiums, averaging an increase of about 3%. All these have resulted in increased costs for consumers but also streamlined tax processes, thus benefiting not only the insurance companies but policyholders as well.

GST Rate on Electric Bikes

Electric bikes benefit from a significantly lower GST rate of 5% compared to the 18% applicable to traditional two-wheelers. This reduced rate is part of the government's initiative to promote electric vehicles, making them more attractive to consumers and encouraging sustainable transportation options.

GST on Used/Old Bikes

The GST on used or old bikes is generally lower than that on new models, with rates varying based on the bike's age and condition. This makes purchasing second-hand bikes a more economical choice for consumers, allowing them to save on both the purchase price and insurance costs.

GST Impact on Two-wheeler Industry

The two-wheeler industry has faced challenges due to the higher GST rates on insurance and vehicles, leading to a decline in sales. Manufacturers are responding by introducing competitive pricing strategies and enhancing features to attract potential buyers, aiming to revitalize the market.

GST Applicable on Bike Insurance

Since bike insurance is a service that you purchase, GST is levied on it. The premium amount that you pay on a monthly, quarterly, half-yearly or yearly basis includes the GST as well. GST of 18% is levied on your premium amount.

GST Impact on Bike Insurance Premium

Before the introduction of GST, the tax levied on bike insurance was 15% (14% service tax + 0.5% Krishi Kalyan Cess + 0.5% Swachh Bharat Cess). After the application of GST, that amount became 18%. This 3% increase might seem like a lot. But insurers have actually done enough to provide additional coverage for the slight increase in premiums.

Here is a case to help you understand the impact of GST on bike insurance premium and how insurers have handled it. Suppose you pay Rs. 3,000 as your bike insurance premium amount. Now, with the previous tax rate of 15%, you will have to pay a premium amount of Rs. 3,450. With the implementation of 18% GST, you will have to pay Rs. 3,540. Hence, you end up paying Rs. 90 more than before. However, two-wheeler insurance providers do make up for it by giving you additional coverage. For instance, a lot of insurers now provide roadside assistance as part of the basic plan. A roadside assistance means you can get help in case you get stranded somewhere because of a flat tire or because of your fuel running out.

Is It Possible To Add Your GST Number to Your Bike Insurance?

Your GST identification number (GSTIN) is a 15-digit number assigned to every person based on their PAN card number. Each GSTIN has a starter code, your PAN number, the number of registrations done under the same PAN in a single state, the alphabet “Z” by default and a check code for detection of errors. You can apply for a GST number either through the GST online portal or by visiting a GST Seva Kendra.

As for whether your GST number can be added to your bike insurance, the answer is yes. All you need to do is contact a customer care executive and your GST number will be added to your 2-wheeler bike insurance.

Conclusion

GST was introduced in an attempt to simplify the tax system in the country. It does increase the premium you pay for your bike insurance. But you definitely get more coverage that makes it worth it. Buy a suitable bike insurance from HDFC ERGO - they have extensive coverage and can be applied for easily.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.