India’s motorcycle market may be on the cusp of a major shake-up if recent GST reform plans are approved. The government is considering a revamp of Goods and Services Tax slabs that could drive up costs for high-capacity bikes while bringing relief to smaller, entry-level models.
What’s on the Table?
Under the existing GST structure, motorcycles with engine displacements of 350 cc or more are taxed at 28 percent, along with a 3 percent cess—an effective rate of 31 percent. Smaller bikes under 350 cc face the same 28 percent rate but don’t carry the cess.
But the new proposal aims to simplify this by eliminating both the 12 percent and 28 percent slabs. Instead, it proposes just two standard rates: 18 percent for essential and mid‐range goods (including small two-wheelers), and a special 40 percent “sin/luxury” rate for items like premium motorcycles and larger vehicles.
If approved, motorcycles above 350 cc would move into the 40 percent slab—making them significantly more expensive. Meanwhile, smaller bikes under that threshold would enjoy a reduced GST rate of 18 percent—likely making them cheaper for consumers.Hindustan TimesBikeDekhoAngel One
Why This Matters
This reform couldn’t come at a more critical time. Bikes below 350 cc constitute about 97 percent of India’s domestic two-wheeler market. In FY25, this segment grew by 5 percent to over 12 million units, and scooters—also under 350 cc—grew even faster at 17 percent.
Meanwhile, premium bikes have seen rapid growth too—up 32 percent in FY25 over the previous year.A2Z Tax CorpThe Financial Express
Winners and Losers
Potential winners: Brands like Royal Enfield, Jawa, Honda, and Yezdi stand to gain. Many of their models are just under the 350 cc mark—thriving without getting penalized by the higher rate.Hindustan TimesBikeDekhoThe Financial Express
Likely losers: High-capacity models from Bajaj-Triumph, Hero-Harley, and other premium bikes could see prices climb sharply. Whether this deters buyers will depend on how much of the extra cost manufacturers pass to customers.
There’s already been a noticeable dip in consumer sentiment. Some potential buyers seem to be delaying their purchases until the new rates are finalized.A2Z Tax CorpBikeDekho
Wider Tax Reform Context
This isn’t just about bikes. The GST overhaul aims to simplify the tax system overall. The plan includes preserving only two standard rates—5 percent and 18 percent—and assigning a 40 percent rate to luxury and sin goods like tobacco and high-end vehicles.
For small cars, the GST may fall from 28 percent to 18 percent—making compact vehicles more affordable ahead of the festive season.Reuters+1The Times of India
What’s Next?
The new structure is slated for discussion at the upcoming GST Council meeting, likely in early September—possibly around the 3rd or 4th. The final approach could be announced before Diwali, India’s biggest shopping festival.CAclubindiaReuters+2Reuters+2
Summing It Up
- Bikes above 350 cc: Expected to move from ~31 percent effective GST to a hefty 40 percent—raising prices.
- Bikes under 350 cc: May benefit from a cut from 28 percent to 18 percent—boosting affordability.
- Market impact: Entry-level bike sales might surge, while premium segments could face hesitation.
- GST overhaul: Aims to simplify tax structure with broader changes affecting cars and insurance too.
The final verdict hinges on the GST Council’s decision next month. If passed, these changes could redefine India’s two-wheeler landscape—and your next ride’s sticker price.
