Proposed GST Alert! Buy Your Dream Bike Before 40% GST Hike on KTM, RE, Bajaj & Other Luxury Bikes Over 350cc

The proposed changes to the Goods and Services Tax (GST) may make big, premium motorcycles much costlier, while offering some price relief for buyers of smaller bikes and scooters. Under the new GST structure being considered, motorcycles with engine capacities above 350 cc may be taxed at a steep 40%, up from the current effective rate of 31% (28% GST plus 3% cess). In contrast, smaller bikes and scooters with engines up to 350 cc could benefit from a reduced GST rate of 18%, down from the current 28%.

September GST Council Meeting: New GST Structure to Introduce 40% Tax on Luxury Goods

This major tax restructuring is expected to be discussed in the upcoming GST Council meeting scheduled for September. As part of the broader GST 2.0 reform plan, the government is looking to simplify the current four-slab system by removing the 12% and 28% slabs and shifting to three main categories; 5% for essential items, 18% for standard goods and services and 40% for luxury or "sin" goods such as high-end motorcycles and premium vehicles.

How Will GST 2.0 Affect Two-Wheeler Buyers?

Currently, all two-wheelers are taxed at 28%, but those above 350 cc attract an additional 3% cess, bringing the effective tax rate to 31%. If the new GST regime is approved, small bikes and scooters will be taxed at just 18%, potentially reducing their ex-showroom prices and making them more affordable for budget-conscious buyers.

On the other hand, motorcycles above 350 cc will move into the luxury category, subject to the proposed 40% GST rate. This could sharply raise their on-road prices, particularly if manufacturers pass the added cost to customers.

For instance, the Husqvarna Vitpilen 250, which currently retails at Rs 2.19 lakh (ex-showroom), could drop to approximately Rs 2.01 lakh under the new 18% GST slab. Conversely, the Svartpilen 401, powered by a 373 cc engine, could see its price jump from Rs 2.92 lakh to around Rs 3.20 lakh under the proposed 40% rate.

40% GST on High-CC Bikes May Dent Sales for Premium Brands Like Triumph, Harley, KTM

Brands whose product lines mostly fall under the 350 cc threshold are expected to benefit significantly from the GST revision. Manufacturers like Royal Enfield, Honda, and Jawa-Yezdi (Classic Legends) offer several models in the 334-349 cc range, which would remain below the cutoff, making them more attractive to buyers under the 18% tax slab.

However, Royal Enfield's premium lineup, including models between 450 cc and 650 cc, such as the Himalayan 450 and Interceptor 650, may see price hikes if the 40% GST rate is applied. Despite this, the brand may still have an edge over competitors such as Harley-Davidson, Triumph, and Bajaj-KTM, which predominantly sell motorcycles with larger engines.

Bajaj Auto, which manufactures high-performance models like the Pulsar NS400Z (373 cc) and partners with KTM and Husqvarna, could face challenges as many of its offerings fall above the 350 cc mark. Still, KTM's volume sales in India are driven by sub-350 cc models, potentially softening the blow.

KTM, Royal Enfield, Bajaj to Face Major Price Hike? GST Overhaul Raises Concerns

"With the government proposing a steep 40% GST on motorcycles above 350 cc and lowering the rate to 18% for sub-350 cc models, this could significantly distort the market dynamics. Now is arguably the best moment for buyers considering a high-capacity bike to act before the changes take effect. However, the government should also reconsider this proposal, as the 350 cc+ segment accounts for barely 0.8% of total monthly two-wheeler sales - roughly 13,000 units out of 1.6 million sold every month," said Gaurav Yadav, Editor at Gaadiwaadi.com.

"Brands like Royal Enfield, KTM, Bajaj, Triumph, and Kawasaki are likely to face challenges if this segment is taxed disproportionately, which may also discourage premium buyers and impact India's aspiration to move up the value chain in motorcycling," Mr Yadav added further.

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