The pandemic and lockdown have affected every business over the past couple of years, driving up inflation and other costs. The two-wheeler industry is no exception. The industry has experienced a drop in sales as a result of the lockdown. Furthermore, the two-wheeler market encountered issues with the supply chain, which made things more difficult. In addition to the epidemic, the GST on two-wheelers has also been impacted by the gradual switch from the BS4 to BS6 emission regulations.

 

The two-wheeler industry has been calling for change for a very long time because, as trends changed, production costs rose and consumers were less likely to purchase bikes. The sale of two-wheelers has significantly decreased during the past few years. 

 

However, the Indian government has indicated that the country's bike GST rate will be trimmed, which would result in a fall in the cost of two-wheelers. Moreover, the finance minister later verified this information, therefore the implementation is undoubtedly anticipated. The costs of bikes may vary somewhat as a result of this drop in the GST on two-wheelers. 

 

The current bike GST rate is around 31%, which is comparable to the highest tax slabs. This is likely to drop from 31% to 18% (may vary) with the introduction of the new tax regime. After the introduction of new tax slabs, two-wheeler manufacturers may witness an increase in their stock prices, which would enable them to reap more rewards and profits. The sales will also be promoted by the reduced retail price, which frequently spurs innovation. This may be a significant development for the sector, which might be the case for both short- and long-term growth.

 

Let’s have a look at GST on two-wheelers descriptively to comprehend better. 

What is the Tax Rate for Bikes in India?

GST was introduced to make the tax system more transparent and eliminate complications. Several taxes were levied at the state and federal levels under the previous taxation system. All of it was brought together under the GST's comprehensive wing. As a result, the tax impact has been significantly lessened. The taxation procedure for two-wheelers has also been streamlined thanks to GST.

 

Here’s a closer look at the different applicable GST on 2-wheelers. 

Category 

Bike GST Rate

Two-wheelers with engine capacity of more than 350cc

31%

Two-wheelers with engine capacity of less than 350cc

28%

Gauge oil level, Clutch cable, and Brake pads

28%

Two-wheeler insurance coverage 

18%

Battery charging, Lubricants, and Consumables

18%

Electric two-wheelers 

5%

GST on Bike Purchase

The engine size has a significant impact on the bike GST rate. Bikes with an engine capacity of less than 350cc are now subject to a 28% bike GST rate. However, the bike GST rate increases by an extra 3%, to a total of 31%, when the engine capacity exceeds 350cc. Thus, the GST influence on two-wheeler costs in India varies with engine capacity or the vehicle's premium status.

 

When the GST system was implemented by the Indian government in 2017, numerous prominent vehicle manufacturers, like Bajaj Auto and Royal Enfield, carried on the advantages of the lower two-wheeler GST rate to buyers in India. In addition to this, several two-wheeler manufacturers announced price reductions on various models.

 

Besides the aforesaid, lubricants, consumables, and battery charging are subject to an 18% GST rate. On the other hand, the GST is computed at a margin of 28% for spare components such as the gauge oil level.

GST on Electric Bike Purchase

The two-wheeler business has been completely transformed by the various benefits of electric bikes. Many people are really contemplating buying an electric bike for everyday commuting due to the skyrocketing petrol/fuel prices. Given that electric vehicles are the way of the future, both customers and manufacturers are embracing the trend. Previously, the GST rate for electric bikes was 12%. With the updated percentage, the price of all electric vehicles, including bikes and two-wheelers, has significantly decreased.

 

The current electric bike GST rate is set at a modest 5% in order to promote the purchase of electric bikes. This GST base rate is intended to promote the acquisition and sale of electric two-wheelers since people are switching to these kinds of bikes due to their advantages and low maintenance costs. 

GST on Insurance Policy for Bike

The GST on a bike insurance policy in India is set at the standard rate of 18%, according to the current taxation regulations. Prior to the implementation of the GST, the Central Sales Tax (CST), Value Added Tax (VAT), Excise Duty, and other taxes were included in the tax structure for bike insurance policies. A 15% GST on bike insurance policy was derived by adding up all of these factors. 

 

However, the premium of your insurance policy is determined by the type of coverage you buy. Also, in order to lawfully ride your two-wheeler on Indian roads, you must possess bike insurance coverage. Failure to comply will result in significant penalties. Furthermore, obtaining bike insurance coverage would financially protect you in the event of a catastrophe involving your two-wheeler.

The Impact of GST on Bikes

A high rate of GST on two-wheelers has resulted in a reduction in sales, causing significant losses for the manufacturers. The sales of two-wheelers have already significantly decreased in the previous few years. The increased GST has also affected the premium bike insurance policies. Buying a two-wheeler or any other form of vehicle is one of the most important and expensive financial decisions that an individual makes in his/her life. The current GST on two-wheelers is 28% and 31%, which is restricting people from investing in any form of two-wheelers. And due to this, the industry has seen a huge fall in their sales. 

 

To make the situation better for two-wheeler manufacturers and to lessen the financial burden on people, the government is currently contemplating decreasing the GST on bikes. This will assist buyers in a significant way as there are great chances that due to a reduced GST rate, vehicle manufacturers may lower the bike prices. 

 

This will also provide manufacturers with the opportunity to profit, allowing them to invest more and expand. Another thing that will happen is that the stock values of these businesses will grow, and investments will increase. 

Conclusion

The impact of the GST on two-wheelers transcends multiple parts. However, when buying a two-wheeler, obtaining insurance coverage is the foremost thing that an individual should do. You can purchase insurance online just by sitting at your home. Buying 2-wheeler insurance will provide you with financial security as you will not be required to pay any charges for any accident involving your bike. It also covers third-party liabilities. You can acquire bike insurance coverage at the Bajaj MARKETS platform to have a hassle-free experience. The platform will reward you with various benefits like 24x7 emergency assistance, an easy application process, and so on.

FAQ For GST On Two Wheeler

  • ✔️What is the GST rate for a two-wheeler?

    The GST on 2-wheelers depends on engine capacity. Here are the different bike GST rates: 

     

    Category 

    Bike GST Rate

    Two-wheelers with engine capacity of more than 350cc

    31%

    Two-wheelers with engine capacity of less than 350cc

    28%

    Gauge oil level, Clutch cable, and Brake pads

    28%

    Two-wheeler insurance coverage 

    18%

    Battery charging, Lubricants, and Consumables

    18%

    Electric two-wheelers 

    5%

  • ✔️Is GST 12% or 18 %?

    The GST rate of 12% is not applicable on two-wheelers. The products that come into the 12% GST slab are sewing machines, mobile phones, jewellery boxes, as well as processed goods like fruit juices, frozen meats, cheese, butter, and ghee. In addition to this, business class airline tickets and cinema tickets also fall under this category.

     

    The GST rate for two-wheelers has been divided into four slabs. Here’s a table you can refer to know more.

     

    Category 

    Bike GST Rate

    Two-wheelers with engine capacity of more than 350cc

    31%

    Two-wheelers with engine capacity of less than 350cc

    28%

    Gauge oil level, Clutch cable, and Brake pads

    28%

    Two-wheeler insurance coverage 

    18%

    Battery charging, Lubricants, and Consumables

    18%

    Electric two-wheelers 

    5%

  • ✔️Do we get a GST refund on scooty?

    Yes, if you utilise your scooty for commercial purposes, you may claim ITC (Input Tax Credit).