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New GST Impact on Bike Insurance Premium in 2025

Saumya SrivastavaSept 17, 2025

The recent GST Council Meeting brought major relief in the insurance sector. As per the latest reform, the GST on health and life insurance premiums has been reduced to zero, while no GST changes have been announced on two wheeler insurance premiums for both existing policyholders and those going for renewals.

The GST for new bikes has changed. It has reduced from 28% to 18% for bikes with an engine capacity of less than 350cc, which might affect the insurance premium as well. The new GST reform will be effective from 22nd September 2025. Let’s discuss the impact of GST reform on two-wheeler insurance and its premium in detail in the section below.

Contents

Will the New GST Affect Bike Insurance premiums?
- Factors Affecting Bike Insurance Premium
What is GST on Two-wheelers in 2025?
Summing Up

Will the New GST Affect Bike Insurance premiums?

The GST 2.0 might not have a direct impact on the bike insurance premium. The premium amount is divided into two components: GST component and base premium. The GST component of the two-wheeler insurance premium will be unchanged. While the GST on life insurance and health insurance has been completely nullified, the same is not applicable to bike insurance premiums.

On the other hand, the base premium is affected by IDV and many other factors. The IDV, which is the actual market price of the two-wheeler, directly affects the premium. So, for instance, if the bike price and its IDV are lowered due to the reduced GST, then the premium amount will also decrease. So, the answer to whether GST will affect bike insurance premiums or not depends on whether the IDV is affected.

Factors Affecting Bike Insurance Premium

In addition to the Insured Declared Value (IDV), there are other factors that also affect the premium paid towards two wheeler insurance, such as the following:

Location: The geographical location of the bike largely affects the premium of a two-wheeler insurance policy. For instance, if you reside in an accident-prone area, the premium will be higher.
Add-ons: Your bike insurance policy allows you to customise it with add-ons like Zero Depreciation Cover, No Claim Bonus Protector, Key Loss Cover, etc. Adding these add-ons increases the policy's premium.
Age of the Bike: The age of the bike also affects the bike insurance premium. The older the bike, the lower the premium.
Deductible: This is the amount that you agree to pay out of your own pocket during the claim settlement. The higher the deductible, the lower the car insurance premium.

What is GST on Two-wheelers in 2025?

The Goods and Services Tax (GST) is a tax system that is applicable to the sale of goods and services in the country. The GST is also applicable to the sale of two-wheelers in the country. With the GST 2.0, the cost of bikes has come done, depending on the engine capacity. In the table below, let’s take you through how GST has affected the price of bikes or two-wheelers:

Engine Capacity (in cc)	GST as per the new reform
More than 350cc	40%
Less than 350cc	18%
EVs	5%

Summing Up

Thus, the GST reform indirectly affects the price of a two-wheeler. With lower GST, the IDV will be lower, and so will the bike insurance premium. However, there was no direct change in the GST of the two-wheeler insurance premiums during the GST council meeting.