Impact of GST on Two-wheelers and Bikes in India

Last Modified: 5-December-2022

The government of India brought the Goods and Services Tax (GST) to unify the various indirect tax rates applicable in the country. It brings 17 central and state taxes under a single tax umbrella. Like several other sectors, the two-wheeler loan segments have also seen an impact of GST. When getting a two-wheeler loan, use an EMI calculator to calculate the EMI amount before loan application. Let’s learn how much GST has impacted the cost of two-wheeler and two-wheeler loans. 

Effects of GST on Two-wheeler and Bike Purchases 

The vehicle’s engine capacity affects the GST percentage on purchasing a bike or two-wheeler. The higher the engine capacity of a bike, the more the applicable GST is on it. In other words, the more premium bikes attract a higher level of GST than the basic versions. 

Here in this table there is all the information you need to know about the impact of GST on bikes in the country.

Tax on Two wheelers in India 

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%

Earlier, multiple taxes were levied on the central and state levels, but after the implementation of GST, all these taxes were combined into one.

GST on Two-wheelers in India 

The implementation of GST in 2017 reduced the tax burden on two-wheelers in the country. Many bike manufacturers passed on the tax benefits to the customers through price discounts on several bike models. It encouraged more and more people to purchase their two-wheelers and enjoy the freedom of safe commuting. When planning to purchase a two-wheeler with a two-wheeler loan, find out the EMI applicable on your two-wheeler using the two wheeler loan EMI calculator present online.

GST on Purchase of Electric Bikes 

Electric vehicles are the new trends in the automobile industry, and electric bikes and scooters are taking the two-wheeler segment by storm. The soaring gas and petrol prices and the increasing environmental conservation awareness motivate more and more people to opt for electric bikes. Based on this trend, bike manufacturers encourage bike enthusiasts to purchase electric bikes. To support this, the GST applicable on electrical two-wheelers is only 5%. Since electric bikes and scooters are in the inception stage in the country, the low GST on electric vehicles encourages their sale and purchase across the country.

Earlier, the GST applicable on electric vehicles was 12%. With the considerable drop in the GST on these vehicles, their price has significantly reduced, allowing more people to experience the comfort and convenience of electric bikes. Since electric vehicles have vast potential in the country, the decreased prices are expected to add more value to their sales in the coming times.

GST on Insurance Policy of Two-wheelers 

As per the prevailing taxation norms in India, the GST on two-wheeler and bike insurance policies is applicable at a base rate of 18%. It means the insurance policyholder needs to pay a GST of 18% on the insurance policy premium. Before GST, the two-wheeler insurance policies’ total taxes were up to 15%. Hence, the GST applicable on third-party and comprehensive bike insurance has effectively increased.

Conclusion

A further reduction in the GST applicable on bikes and two-wheelers is on the cards, and bike manufacturers and sellers eagerly await the move. A reduction in the GST applicable on two-wheelers will lead to a further reduction in the price of bikes in the country. Once customers decide on a two-wheeler, they can get a loan to finance the purchase. To calculate the EMI applicable on a two-wheeler loan, an individual can use an online two-wheeler loan EMI calculator available on the lender’s website.

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Muthoot Capital Services Limited is one of India's most progressive financial companies. It is the part of Muthoot Pappachan Group which carries a legacy & trust of more than 133 years.
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