Summary of this article
GST may simplify into two main slabs for goods.
Bikes under 350cc may become cheaper under new GST rates.
Premium motorcycles above 350cc may become costlier after revision.
The Centre may consider simplifying the GST structure by combining the existing four slabs of 5 per cent, 12 per cent, 18 per cent, and 28 per cent into a two-rate system of 5 per cent and 18 per cent, according to media reports.
At present, the GST framework for goods and services operates under four slabs: 5 per cent, 12 per cent, 18 per cent, and 28 per cent. Certain goods in the 28 per cent slab are additionally subject to an additional cess, which raises their effective tax rate. Under the proposed changes, the GST structure may be simplified into a two-rate system of 5 per cent and 18 per cent. In addition, a higher rate of 40 per cent may be introduced for luxury and sin goods.
The proposed GST changes may result in a lower tax rate for motorcycles and scooters with engine capacities up to 350 cc, potentially reducing it from the current 28 per cent (without cess) to 18 per cent. If implemented, basic commuter bikes and scooters may become more affordable, which could encourage higher demand in this segment that makes up the bulk of two-wheeler sales in India. If implemented, basic commuter bikes and scooters may become more affordable, which could encourage higher demand in this segment that makes up the bulk of two-wheeler sales in India.
In contrast, motorcycles with engine capacities of 350 cc and above, which are currently taxed at 28 per cent along with an additional 3 per cent cess, making the effective rate 31 per cent, could face a higher GST rate of around 40 per cent if the proposal is implemented. If manufacturers pass on this additional cost, premium motorcycles may become noticeably more expensive.
Brands like Honda and Royal Enfield may gain from the proposed GST adjustments, as some of their motorcycles model with engine capacity under 350 cc may fall in the 18 per cent tax bracket. In contrast, larger motorcycles from brands like Bajaj and Harley-Davidson, with engine capacities above 350 cc, may become more expensive if the proposed 40 per cent GST along with the additional cess is applied.
These changes are still under consideration and may be finalised by the GST Council in its upcoming meeting.
