Impact of Revised GST on Bike Insurance Premiums

The recent rollout of GST 2.0 has sent ripples through many industries, and bikers who opt for the two-wheeler insurance policy are among those feeling this shift. The revised tax slabs now make smaller bikes more affordable, while premium motorcycles attract higher tax rates, altering the overall value of the vehicle. Since a bike’s insurance premium is directly linked to its market value or Insured Declared Value (IDV), these changes have a direct impact on what riders pay annually for coverage.

This article breaks down how GST 2.0 affects two-wheeler insurance premiums, what to watch out for and tips that can keep the insurance budget in check.

What changed in the revised GST rates?

Currently, no changes have been declared for the GST on the two-wheeler insurance premiums, whether you’re purchasing a new policy or renewing the existing one. This clearly means that the tax component on the bike insurance stays completely unchanged for now. However, for the sale of two-wheelers, there have been certain changes.

Under the GST 2.0 regime (effective 22nd September 2025), the GST rates on the new bikes have been revised, as outlined below:

How the revised GST affects bike insurance premiums

Your two-wheeler insurance premium has two parts: base premium and GST component. The GST on bike insurance continues to be 18%, so that portion of your premium stays the same. What can change, however, is the base premium, which depends largely on your bike’s Insured Declared Value (IDV), its current market price.

If GST 2.0 leads to a drop in bike prices, the IDV will also decrease, bringing down the premium slightly. On the other hand, if GST revisions raise the vehicle’s price, the premium will increase accordingly.

In simple terms, GST 2.0 doesn’t directly affect insurance costs, but any change in your bike’s market value under the new tax structure can influence what you pay for coverage.

Comparison: Bike insurance premiums before and after GST revision

To understand how GST 2.0 may affect insurance costs, let’s look at two examples:

Example 1: Commuter bike (150 cc)

With GST dropping from 28% to 18%, the IDV falls by roughly 8%, leading to a small decrease in the insurance premium.

Example 2: Premium motorcycle (Above 350 cc)

With GST + cess rising from 31% to 40%, the IDV and corresponding premium increase by about 7%.

Note: The numbers are for illustrative purposes only. The actual amount might vary based on the geographic zone, insurer, add-ons, rider profile, bike model and more.

Impact on new vs. renewal bike insurance policies

The pointers below show the effect on the renewal and new bike insurance policies:

1. For new policies

The effect of GST for two-wheeler insurance is seen mainly when buying a new policy. Since GST is included in the vehicle’s purchase price, a lower GST rate on smaller bikes can slightly reduce their cost and, in turn, lower the insurance premium. However, for premium bikes (above 350cc), the higher 40% GST increases the price and raises the insurance premium accordingly.

2. For renewal policies

For renewals, GST 2.0 makes no difference. The GST on your bike was already paid at the time of purchase, and the renewal premium depends on depreciation and coverage type, not new tax rates.

How to save on bike insurance premiums despite GST hike?

If you want to save on the bike insurance premiums, here’s how you can get it done:

• You should pick a base premium that is reasonable. This means it’s neither too high nor too low. That way, the GST portion stays manageable.
• Make sure to avoid unwanted add-ons if you seldom use them. Every add-on has GST applied, so when you have fewer add-ons, it leads to a lower cost.
• Maintain a proper NCB (no-claim bonus) by driving safely. Doing so might lower the base premium, which, in turn, reduces the GST amount.
• Go for the multi-year policies if provided. At times, these policies offer discounts that offset the GST effect.
• If you use the approved anti-theft device, it can lower the risks and also the premium, which also reduces the base for GST.

Role of bike insurance in financial protection

A bike insurance policy plays an important part in the financial safety net:

• Comprehensive insurance: The comprehensive two-wheeler insurance helps in covering third-party liability, your own damage and protects you from compensation costs and unexpected repairs, such as damage from man-made events, such as vandalism or natural disasters like flood.
• Third-party insurance: This cover provides essential financial and legal protection. Firstly, it helps you stay compliant with the Motor Vehicles Act, 1988, which makes third-party insurance mandatory for all riders. Secondly, it protects you from bearing heavy expenses in case your two-wheeler causes accidental damage, injury or loss of life to another person or their property.

Conclusion

Although the recent GST revisions affect the overall cost of owning a bike, the bike insurance GST percentage for the premiums remains at 18%. By choosing only essential add-ons, maintaining a claim-free record and comparing premiums before renewal, you can manage your expenses effectively. In the end, a small tax difference is a fair price for the strong financial protection that bike insurance provides.

FAQs

1. Does the GST apply to the bike insurance premium?

Yes. In India, the insurance premium for the two-wheelers has an 18% GST base premium (including the add-ons) under regular circumstances.

2. Is it possible to avoid the GST by picking only a third-party cover?

No. It’s because the third-party covers also consist of GST at the same rate as the comprehensive one under the current regulations.

3. When did the new GST rates come into effect?

The revised GST for two-wheelers and other vehicles came into effect on 22nd September 2025.

Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.