🏍️ Big Update on GST for Motorcycles

By Taxaj | Updated on: September 3, 2025

The Indian two-wheeler market is facing one of the biggest tax reforms since the introduction of the Goods and Services Tax (GST) in 2017. The GST Council, in its upcoming 56th meeting, has approved a new slab of 40% GST for motorcycles above 350cc, up from the earlier 31% (28% GST + 3% cess).

On the other hand, motorcycles below 350cc will now attract only 18% GST, down from the existing 28%. This marks a clear divide between affordable commuter bikes and premium leisure motorcycles.

The change is not just about tax rates—it will reshape pricing, demand, and consumer behaviour in India’s booming two-wheeler industry.

📊 Current vs New GST Structure

To understand the significance, let’s look at how things are changing:

This restructuring is part of a larger GST reform, where the government is scrapping the 12% and 28% slabs to move towards a two-tier system (5% and 18%), with 40% reserved for sin and luxury goods.

🏁 Why Did the GST Council Do This?

The government’s decision is rooted in three major objectives:

1️⃣ Simplification of Tax Slabs

Earlier, multiple slabs (12%, 18%, 28% + cess) caused confusion and frequent disputes. Moving to a simpler 5%, 18%, and 40% model makes compliance easier.

2️⃣ Balance Between Affordability & Luxury

• Commuter segment: Majority of Indian buyers (97% of the market) use sub-350cc bikes and scooters for daily transport. Lower GST at 18% directly benefits them.

• Luxury segment: Big bikes above 350cc are treated as aspirational, hence taxed higher at 40%.

3️⃣ Government Revenue

By reducing standard GST rates, the Centre and states risk revenue loss. The 40% slab on luxury motorcycles (and other sin goods) helps compensate.

👉 In short, the Council is rewarding mass mobility while taxing premium aspiration.

💰 Impact on Motorcycle Prices

The change will directly increase ex-showroom prices of bikes above 350cc.

🔹 Example Price Hikes

• Royal Enfield Interceptor 650

  • Old Price: ₹3.03 lakh

  • New Price: ₹3.23 lakh

  • 📈 Hike ~₹20,000

• KTM Duke 390

  • Old Price: ₹3.11 lakh

  • New Price: ₹3.35 lakh

  • 📈 Hike ~₹24,000

• Triumph Speed 400

  • Old Price: ₹2.33 lakh

  • New Price: ₹2.50 lakh

  • 📈 Hike ~₹17,000

📌 While the hike may seem modest in percentage terms, it places premium motorcycles firmly in the luxury bracket—affecting affordability for middle-class enthusiasts.

🏆 Winners and Losers in the Market

This reform will reshape competition in India’s two-wheeler market.

🟢 Winners (Benefit from Lower GST – 18%)

• Royal Enfield → Classic 350, Meteor, Hunter (core portfolio sits below 350cc).

• Mass Market Brands → Hero, Bajaj, Honda, TVS (scooters & commuters).

• Scooters → Already seeing strong growth, now even more attractive.

🔴 Losers (Hit by Higher GST – 40%)

• Royal Enfield 650cc range → Interceptor, Continental GT.

• KTM 390 Series → Duke & RC 390.

• Triumph & Harley-Davidson → Speed 400, X440, premium cruisers.

• Japanese Premium Brands → Kawasaki, Honda BigWing, Yamaha R3, Suzuki V-Strom.

👉 The 350cc mark becomes a tax boundary line—brands sitting just above it are at a disadvantage.

📈 Market Trends and Consumer Behaviour

The shift in GST is likely to change consumer buying patterns in FY26 and beyond.

• 🚲 Sub-350cc bikes dominate → Already 97% of domestic two-wheeler sales, expected to grow further.

• 🛵 Scooters surge → 17% growth in FY25, demand will strengthen at lower tax.

• 🏍️ Premium motorcycle growth slows → Segment saw 32% YoY growth in FY25, now faces demand pressure.

• 💸 Buyers delay purchases → Reports suggest many enthusiasts are postponing big bike purchases till after festive season.

👉 Expect a demand shift from premium to mid-range motorcycles.

🌍 Global Perspective: How Does India Compare?

👉 India now ranks among the highest globally for premium motorcycles, potentially discouraging global brands from aggressive launches.

🗣️ Industry Reactions

The move has triggered mixed reactions across the auto sector:

• SIAM (Society of Indian Automobile Manufacturers):
  “Simplification is welcome, but a 40% slab could discourage premium buyers.”

• Royal Enfield Dealers:
  “Customers are shifting towards 350cc models; interest in 650cc is slowing down.”

• Bajaj Auto Executive:
  “It benefits commuters but may hurt aspirations of premium segment buyers.”

• Premium Bike Makers:
  Express concern that sudden hikes could impact India’s position as a growing big-bike market.

🔮 The Road Ahead

The GST overhaul will redraw the Indian motorcycle map:

• Sub-350cc models → will dominate sales and attract newer buyers.

• Premium bikes → will get repositioned as luxury lifestyle products.

• Manufacturers → may tweak strategies, introducing more 349cc variants to escape the 40% slab.

• Electric bikes → continue to enjoy tax benefits at just 5%, making them future-ready.

🏁 Conclusion

The decision to impose 40% GST on motorcycles above 350cc is more than just a tax change—it’s a structural reform that reshapes affordability, aspiration, and competition in India’s motorcycle market.

• 🚲 Affordable two-wheelers get cheaper, encouraging mobility for the masses.

• 🏍️ Premium motorcycles become costlier, cementing their status as luxury goods.

• ⚖️ The market gets a clear divide: mobility vs lifestyle.

As India moves towards a simplified GST regime, the 350cc line becomes a turning point for the two-wheeler industry. For consumers, it’s both an opportunity and a challenge—affordable rides on one side, pricier dreams on the other.