Over the last few years, the Indian two-wheeler and automobile industry has grappled with challenges due to a massive supply chain crisis and nationwide lockdown. Besides the pandemic, the transition from BS4 to BS6 emission standards has also influenced GST on bikes and two wheelers. Below, we will explore the two wheeler GSTin India so our customers can make informed decisions pertaining to their future purchases.
Tax on Two Wheelers in India
To understand the concept of tax on two wheelers in India, one must first know what GST is. In simple words, GST stands for Goods and Service Tax, an indirect tax that consumers must pay while availing of goods and services. Aspiring borrowers must make a note of the following GST categories on bike purchases:
Category
GST Rate
Two-wheelers with an Engine Capacity of over 350cc
31%
Two-wheelers with Engine Capacity below 350cc
28%
Two-wheeler insurance policy
18%
Clutch Cable, Gauge Oil Level, and Brake Pads
28%
Battery Charging, Consumables, and Lubricants
18%
The former taxation system had multiple taxes between the central and state levels. The GST combined all of them under a single comprehensive umbrella, this includes bike GST rate as well. Consequently, the tax impact has reduced significantly. Additionally, the GST system has also simplified bike purchases.
GST on Two Wheeler Purchase
The engine capacity of the bike primarily affects the GST rate. In the current conditions, bikes with an engine capacity of 350cc have a GST percentage of 28%. Those with engine capacity of more than 350cc have an additional bike GST rate of 3%, amounting to a total of 31%. As evident, the GST rate on bike prices changes with the vehicle’s engine capacity, depending on how premium the two wheeler is.
The President of India implemented the GST on midnight of July 1, 2017. With this implementation, several bike manufacturers like Bajaj Auto and Royal Enfield passed on the benefits of reduced taxes to the customers. They announced discounted bike prices on several models. Besides GST on two wheelerpurchases, consumers pay 18% GST on consumables, battery charging, and lubricants. The GST on spare parts like gauge oil level and clutch plate is 28%.
The various perks of electric bikes have taken the Indian two wheeler industry by storm. Considering the soaring fuel prices, several consumers plan to purchase an e-bike for regular commutes. Contemplating the rise of electric bikes in the future, the trend has become quite popular among makers and consumers alike. To encourage the sales of electric vehicles in the Indian market, the GST on e-bikesis merely 5%. Since this is the initial phase of electric vehicles in the country, this low GST rate aims at encouraging the purchase and sale of e-vehicles.
Acknowledging the massive potential of electric bikes in India, the reduced GST on e-bikes and easy availability of two wheeler finance have paved the way for the purchase of electric vehicles significantly. Formerly, the GST on electric bikes was higher at 12%. However, with a revised GST percentage, electric two wheelers, and bikes have witnessed a drop in their overall price. Bike manufacturers have also reduced their e-bike rates to encourage customers to experience the convenience, ease, and benefits of electric vehicles.
GST on Bike Insurance
According to the current taxation rules, the bike insurance GST rateis set at 18%. In simple words, bike owners paying a bike insurance policy premium must pay an additional GST of 18%. Formerly, before the GST era, the taxation structure for bike insurance comprised VAT (Value Added Tax), CST (Central Sales Tax), excise duty, etc. All these combined together to make a tax rate of 15% on two wheeler insurance. Considering that, whether the owner purchases a comprehensive insurance cover or a third-party insurance plan, the payable premium amount on bike insurance has become higher.
The IRDAI (Insurance Regulatory and Development Authority of India) determines and caps the price of third-party two wheeler insurance. Those planning to purchase a new bike with savings or two wheeler finance must visit the authority’s website and know the latest insurance rates.
GST on Two Wheeler Loans
The implementation of GST in 2017 became a source of extensive debate among economists. The underlying idea behind its introduction was to simplify the complexity of paying several taxes on a single commodity under multiple pieces of legislation. The tax provision affects almost everything a person purchases. However, as its name suggests, it applies to goods and services only that an individual buys. That means it does not apply to two wheeler finance.
However, practically speaking, it affects loans in an indirect manner. That is because while processing and disbursing a loan, the lending institution offers the applicant various services that are taxable, including processing, bounce, and foreclosure charges. Earlier, loans involved several taxes that drove up the total amount considerably. However, with GST, the process has become smoother and more transparent than ever before.
GST Benefits for Two-Wheeler Buyers
Explore the advantages of GST benefits for two-wheeler buyers, simplifying the purchase process and offering financial relief.
Reduced Tax Rates: GST on two-wheelers is set at 28%, which is lower compared to the pre-GST era, reducing overall costs.
Input Tax Credit: Business buyers can avail of the input tax credit, decreasing their tax liability and saving on two-wheeler purchases.
Uniform Taxation: GST ensures uniform tax rates across India, making two-wheeler prices consistent and transparent nationwide.
Simplified Compliance: GST has streamlined the tax filing process, making it easier for buyers to understand and comply with tax regulations.
Boost to Demand: Lower tax rates and streamlined processes under GST have made two-wheelers more affordable, boosting overall market demand.
Impact of GST on the Two-wheelers Industry in India
With the implementation of GST in 2017, the taxes on bikes and two wheelers up to 350cc have been reduced significantly. As a result, two wheelers have become cheaper and more affordable in India. However, bikes with an engine capacity above 350cc attract an additional GST of 3%. That means discounts on two wheelers after GST depending on the bike's engine capacity and the state in which the consumer is buying the vehicle.
GST has significantly affected several commodities a commoner uses in everyday life, and bikes are one of them. Die-hard fans of high-power bikes must be ready to pay a higher GST on two wheelers in India, adding to the price they must pay to get the vehicle they desire.
The impact of GST on two wheeler engulfs several sections. However, once a consumer decides to purchase a bike, they must know the GST rates they must pay for insurance, spare parts, servicing, etc. While the minimum GST for bike purchase is 28% and the higher rate is 31%, the GST rates for other associated expenses are also considerable. Besides, GST on e-bikes is lower, making them a feasible and more affordable alternative to regular bikes.
GST Impact On Top 10 Indian Bikes Prices
Here are some popular vehicles with their displacements and revised rates based on the new GST regulations.
1. Hero HF Deluxe
Before GST was implemented, Hero HF Deluxe's ex-showroom price was around INR 42,000 in Delhi. It has a displacement of 97 cc. Following a 3% reduction in the bike's GST rate to 5%, its new ex-showroom price is approximately INR 41,000.
2. Hero Splendor
The Hero Splendor is a highly sought-after bike in India due to its affordability. Its ex-showroom price in Delhi was around INR 48,000 before GST, with a displacement of 97.2 cc. Following a 3% to 5% reduction in price due to GST, the new ex-showroom price is around INR 46,000.
3. Hero Glamour
With a displacement of 124.7 cc, the Hero Glamour had an ex-showroom price of around INR 56,000 in Delhi prior to GST. After GST, the price was lowered to approximately INR 54,000.
4. Hero Passion
Prior to the introduction of GST, the ex-showroom price of this bike in the capital city of India was approximately INR 52,000, with an engine capacity of 97 cc. After the implementation of GST, the new ex-showroom price of the bike was reduced to around INR 49,000.
5. Honda Dream Yuga
The Honda Dream Yuga has a displacement of 124.7 cc, and its ex-showroom price was around INR 51,000 prior to the GST reduction. After the implementation of GST, the price of the bike dropped to approximately INR 50,000.
6. Honda CB Shine
With an engine capacity of 124.7cc, this bike's price was around INR 56,000 before the implementation of GST. Following the GST revision, the new ex-showroom price of the bike is approximately INR 53,000.
7. Bajaj Platina
This bike has a displacement of 100cc, and its ex-showroom price was approximately INR 45,000 before the implementation of GST. After a 3% to 5% reduction in price due to GST, the new ex-showroom price of the bike is approximately INR 44,000.
8. Honda CB Unicorn 150
This bike has an engine capacity of 149 cc and had an ex-showroom price of around INR 70,000 before the implementation of GST. Following the GST reduction, the new ex-showroom price of the bike is approximately INR 68,000.
9. Royal Enfield Classic 350
With a displacement of 346 cc, this bike had an ex-showroom price of approximately INR 1,35,000 before the implementation of GST. Following the GST reduction, the new ex-showroom price of the bike is around INR 1,30,000.
10. Bajaj Pulsar
The Bajaj Pulsar, with a displacement of 220 cc, had an ex-showroom price of approximately INR 92,000 before the implementation of GST. After the GST reduction, the new ex-showroom price of the bike is approximately INR 88,000.
Conclusion
Bike manufacturers and sellers are anticipating a potential reduction in the GST rate for two-wheelers, which could further decrease bike prices in the country. After selecting a two-wheeler, customers can obtain financing through a loan. Individuals can use an online two-wheeler loan EMI calculator, which is available on the lender's website, to determine their EMI payments.
Frequently Asked Questions
1. Is there a significant price difference between BS4 and BS6 vehicles?
Yes, there is a notable price difference between BS4 and BS6 vehicles due to upgraded emission standards and technology.
2. How has GST affected the pricing of two-wheelers across different states?
GST has standardized the tax rates on two-wheelers across all states, eliminating state-specific taxes and leading to uniform pricing nationwide.
3. What challenges do two-wheeler buyers face under the GST regime?
Some challenges include understanding the new tax structure and complying with the updated tax filing processes, though these are generally outweighed by the benefits.
4. Can businesses claim input tax credit on two-wheeler purchases?
Yes, businesses can claim an input tax credit on two-wheeler purchases used for business purposes, reducing their overall tax liability.
Katyaini is a finance expert with a focus on the non-banking financial sector, bringing over 8 years of experience in NBFC. She specializes in simplifying complex financial concepts for readers, helping them navigate the NBFC landscape. Outside of work, she is passionate about travelling.
