Bajaj Auto Managing Director has welcomed the government’s proposal to reduce Goods and Services Tax (GST) on two-wheelers from 28% to 18% for models under 350 CC (cubic capacity), calling it a “fabulous and fantastic” step. However, he urged policymakers to further rationalise rates and extend the benefit across all segments of the industry.
In an interaction with CNBTV-18, he said the two-wheeler industry has been struggling to recover to pre-COVID levels, with inflation outpacing income growth over the past five years. “The common man has been hit very hard by inflation, while the job market and wage situation have been very difficult. That context is very important,” he noted.
The reforms, pitched as part of the government’s “GST 2.0” initiative, aim to reduce complexity, lower disputes, and drive consumption by rationalising rates. At the same time, challenges around revenue neutrality, inverted duty structures, and exemptions are drawing attention.
However, he pointed out that India’s proposed 18% rate remains significantly higher than global norms. “In countries like Brazil, Thailand, Indonesia, Malaysia, and Vietnam, tax rates on two-wheelers range between 8% and 14%, with the global median around 12%. Even after the cut, Indian consumers will still pay about 50% more,” he said.
In addition, he Auto MD also raised concerns about the government’s decision to limit the reduction to vehicles under 350 CC. “Over 97–98% of all two-wheelers sold in India are under 350 CC. Why not keep it simple and make 18% applicable to everything? By excluding the top 1–2% by volume, we create distortions,” he argued.
According to him, such classifications force manufacturers to unnecessarily realign product portfolios and engine designs, leading to inefficiencies. He also warned that restrictive tax structures could “dumb down” the Indian motorcycle market. “If a customer wants to buy a higher CC bike, let him do so affordably. This will strengthen Make in India, improve the domestic supply chain, and enhance global competitiveness,” he added.
Finally, on the question of impact on demand ahead of the new GST rates, he said, “The slowdown has already started… but it is only a deferment,” he said. “If the new policy comes into effect from October 1, demand will bounce back strongly during the festive season. Consumers are not cancelling purchases; they are simply waiting for lower prices.”
There are signs of slowdown already across the automobile industry ahead of the upcoming festival season. According to Nuvama Institutional Equities’ latest dealer channel checks, customer enquiries remain healthy, but fresh automobile bookings have slowed sharply over the past week as buyers adopt a wait-and-watch approach.
The industry is awaiting official notification of the revised rates, which are expected to provide a boost to sales amid a slow recovery in consumer demand.
