Price Increase On 350cc Bikes? GST Hike Possible

Quick News Highlights:

• Govt proposal reportedly suggests 40% GST on bikes with engines above 350cc

• Motorcycles below 350cc could see tax cut to 18% from 28%

• GST council to discuss reforms in September meeting

The government is considering an overhaul of Goods and Services Tax (GST) rates for the automobile sector, with a focus on simplifying the structure. Under the new proposal, motorcycles with engine capacity of 350cc and above could face a higher tax rate of 40%.

Current GST Rates

At present, these vehicles attract 28% GST along with an additional 3% cess, taking the effective levy to around 31%. In contrast, smaller bikes and scooters (below 350cc) are taxed at 28% without cess. The finance ministry has suggested bringing them down to 18% in the revised structure for smaller capacity two-wheelers.

Push To Simplify Tax Slabs

New bikes below 350cc would fall under the standard 18% slab, while all vehicles above that threshold would reportedly be taxed at a special 40% rate. It’s also reported that the proposal was recently reviewed by a group of state finance ministers, and is expected to be taken up by the GST Council in its September meeting.

Effect On Buyers

If approved, the change could make larger motorcycles more expensive, depending on whether manufacturers absorb the additional tax or pass it on to buyers. That said, the price hike may not be substantial enough for buyers of this segment to think twice about their purchase. Sure, it isn’t really good news for the end consumer, but may not be really deal-breaking as such. 

On the other hand, if the GST is cut for smaller bikes and scooters, and if they end up being more affordable, it will play a big role in improving the demand as most of the sales in the two-wheeler industry come from them. We also recently analysed the proposed GST-led price cut on affordable two-wheelers.

Brands Affected

If implemented, the new structure could affect manufacturers differently depending on engine capacity. Brands such as Royal Enfield, Honda, Jawa and Yezdi are likely to remain largely unaffected, as most of their popular motorcycles fall just below the cut-off: between 334cc and 349cc. But the Royal Enfield bikes in the 450-650c range will get more expensive.

The Bajaj-KTM bikes in the 373-398cc range would also be affected by this change as they’ll fall into the higher 40% slab. The 400cc Triumph bikes manufactured in partnership with Bajaj would also be impacted.

For perspective, KTM sold 7,987 units of its 390 range, whereas the 250cc range tallied a much higher 19,410 units in FY25 (April 2024 to March 2025). So KTM will not really have to worry about impacting the overall sales as much.

On the other hand, even though Triumph clocked 36,545 units of the 400cc range in FY25, the GST-led price hike may still be manageable as it still commands the brand value. That said, Bajaj might find this situation tricky, especially for the Pulsar NS400Z. It sold 14,394 units (FY25) of the bike, and it is the most affordable 40+PS bike in India - a price hike on this bike may put a dent on the sales.

The GST hikes are still in consideration, and we will know the final verdict early next month. Until then, stay tuned.