GST Council proposes Exemption of Tax on Third-Party Motor Premiums under MVA Fund

Finance Minister Nirmala Sitharaman chaired the 55th GST Council meeting on December 21, 2024, in Jaisalmer.

One of the primary decisions made was to waive the GST on payments made to the Motor Vehicle Accident Fund (MVA Fund) by general insurance firms from third-party motor vehicle premiums.

Under Section 164B of the Motor Vehicles Act of 1988, the MVA Fund was founded with the goal of providing compensation and cashless medical treatment to victims of road accidents and hit-and-runs. Insurance firms contribute to this fund by using a portion of the premiums they receive for third-party motor vehicle insurance.

Third-party insurance is required by law for all vehicles, and the premiums collected by insurance companies include a portion designated for the MVA fund. It helps to ensure that the fund has enough resources to help accident victims.

The GST council’s decision to waive the GST on such payments was made to ease the financial burden on insurance companies. Because the MVA Fund is dedicated to public welfare, the government does not want to charge GST on funds deposited into it. The same waiver ensures that insurance companies can increase their contributions to the fund without incurring additional taxes.

This decision supports the government’s efforts to guarantee that accident victims receive timely help, particularly in cases where the responsible party cannot be found. By waiving GST on such contributions, the government guarantees that the MVA fund remains well-funded and capable of providing significant assistance to people in need.

The meeting was attended by Union Minister of State for Finance, Shri Pankaj Chaudhary, Ajay Seth (Revenue Secretary), Chief Ministers of Goa, Haryana, Jammu and Kashmir, Meghalaya, and Odisha, as well as Deputy Chief Ministers of Arunachal Pradesh, Bihar, Madhya Pradesh, and Telangana.