Motorcycles with engine capacity of 350cc and above may come under the special Goods and Services Tax (GST) rate of 40% under the GST slabs restructuring that is under way
Currently, luxury cars and bikes with an engine capacity of 350cc or more attract a 28% GST. With 3% cess, the tax incidence on this category of bikes is 31%, while the same is up to 50% for luxury cars with higher cess being applied.
Proposed GST changes and their impact
Bikes of below 350cc attract 28% GST without cess, which will be reduced to 18% as per the Centre’s proposal.
The higher tax on the high-end bikes could mean a rise in their retail prices, if the manufacturers choose to pass it on. Royal Enfield varieties Classic, Meteor, Hunter and Honda H’ness are among the popular brands in the 350cc-and-above category.
There will be just two slabs for automobiles (other than tractors), standard 18% for small cars and bikes below 350cc, and the rest all at a special 40% rate, an official said. This is part of a report prepared by the finance ministry for GST revamp, which was broadly approved by the group of state finance ministers (GoM) concerned last week. The GST Council is scheduled to meet here on September 3-4 to decide on the contours of the reforms.
The government wants to keep it (taxation of automobiles) simple to address classification disputes in the automotive sector, another official said.
The segment below 350cc makes up for 97% of the domestic two-wheeler market. In FY25, the motorcycle segment below 350cc grew by 5% to 12,079,779, as against 11,522,954 clocked in FY24, as per the Society of Indian Automobile Manufacturers (SIAM) data.
Royal Enfield may become the biggest beneficiary if the GST on two-wheelers gets reduced to 18%. While its direct competitors like Bajaj-Triumph and Harley-Hero have motorcycles powered by engines bigger than 350cc, a majority of Royal Enfield’s bikes come fitted with engines just below the 350cc limit.
All scooters sold in India have engines below 350cc. This segment grew by 17% to 6,853,214 in FY25, as against 5,838,325 sold in FY24.
The bikes segment above 350cc has grown at a higher rate. During FY25, it grew 32% to 172,521 as compared to 130,283 in FY24.
Market and consumer reaction
Customers have been holding back their purchase from the time the new GST slab news came out. Demand has been picking up for the premium segment and this will be a big negative from that perspective for consumer sentiments,” said an executive from one of the premium bike makers.
Apart from streamlining the multiple slabs under GST into a two-pillar structure of 5% and 18%, the Centre’s proposal intends to levy a special rate of 40% on sin and luxury goods. The existing rates of 12% and 28% will be abolished.
In this context, the tax incidence on high-end bikes and some other items would also help the Centre and states contain the revenue losses due to the rate rejig.
Source from: https://www.financialexpress.com/business/industry-350cc-bikes-may-attract-40-gst-3956090/
