Under the GST 2.0, the bikes with engine capacity of up to 350cc will be cheaper as they are proposed to tax at 18 percent from the current 28 percent.
Recently, PM Narendra Modi announced the restructuring of the Goods and Service Tax (GST) in order to benefit the majority of the Indian population. The GST overhaul proposed by the Union Govt aims to simplify it by dissolving the 12 and 28 percent slabs while retaining the 5 and 18 percent sections. It has been learnt that motorcycles below 350cc will be put in the 18 percent slab under GST 2.0 as compared to the present 28 percent. However, big bikes with engine capacity more than 350cc will become expensive as they are proposed to fall in the 40 percent tax category from the current 31 percent.
The Indian government introduced GST nearly eight years back in 2017 with four basic slabs in the form of 5, 12, 18 and 28 percent. However, under the GST 2.0, there will only be two categories of 5 and 18 percent reserved for essential and standard goods, respectively. There will be a special tax slab of 40 percent for premium items which includes luxurious cars and bikes.
Hence, this move of putting the bikes with engine capacity of up to 350cc will immensely benefit the buyers as the entry-level commuter motorcycles will become more affordable. The leading two-wheeler brands such as Hero, Bajaj and Royal Enfield will gain largely from this as most of their motorcycles come with engine displacement below 350cc.
Until now, the bikes with 350cc engine were taxed at 28 percent while the bikes above 350cc engine attracted 31 percent tax (28 percent GST + 3 percent cess). So, as per the new proposal, while the GST on smaller bikes will come down to 18 percent, it will be hiked for bigger models at 40 percent. Hence, the 450cc and 650cc motorcycles of Royal Enfield are likely to be more expensive while the 350cc range will be cheaper.
For the unversed, the ex-showroom price of a motorcycle is inclusive of GST and hence any modifications in the tax structure directly affects the final price of the model. So, if the smaller bikes are taxed at 18 percent from the current 28 percent, then their ex-showroom prices will certainly be lower if the brands intend to pass on this benefit directly to the consumers.
The Indian two-wheeler market is dominated by the entry-level motorcycles and scooters as they comprise the majority of the sales. Hence, this GST restructuring will definitely result in increased customer footfall and higher sales volumes. However, the sales of big bikes may be hit by this move if the two-wheeler companies don’t absorb this increase in GST and pass it directly to the buyers.
