Understanding the GST on bikes and two-wheelers in India is crucial for both consumers and businesses. With the implementation of the Goods and Services Tax, the overall pricing structure of two-wheelers has changed. This comprehensive guide will walk you through the applicable GST rates, HSN codes, input tax credit (ITC) options, and recent updates that could influence two-wheeler prices. Check your business loan eligibility to explore financing options for your vehicle needs.
Upcoming GST Reforms 2.0 may impact bike prices
The GST Council, during its recent meetings, has proposed reforms under the "GST 2.0" framework. These upcoming changes could directly impact the pricing of bikes and two-wheelers in India. Here are some key points:
- The 56th GST Council meeting introduced a hike in GST rates for bikes with engine capacity above 350cc.
- Revised tax slabs are being discussed for different segments to align with environmental and luxury classifications.
- EV incentives might be expanded under GST 2.0, potentially reducing the tax burden on electric bikes.
GST rate on two-wheelers (bikes) and HSN code
Different types of two-wheelers attract different GST rates based on engine capacity and vehicle type. Below is a table showing the applicable GST rate and HSN codes:
| Type of bike | Engine capacity | HSN code | GST rate |
|---|---|---|---|
| Motorcycles | < 350cc | 8711 | 28% |
| Motorcycles | > 350cc | 8711 | 31% |
| Electric two-wheelers | All | 8711 | 5% |
GST rates on motorbikes
Here’s a summary of current GST rates applied to motorbikes based on engine size and segment:
- Motorcycles up to 350cc: 28% GST
- Motorcycles above 350cc: 31% GST (including additional cess)
- Scooters: Generally taxed at 28%
- Luxury bikes: Attract additional cess under GST
GST rates on electric bikes
Electric bikes benefit from significant tax relief under GST:
- GST rate: 5% (as opposed to 28% on petrol bikes)
- Reason: To promote sustainable and eco-friendly transportation
- Incentives: EVs may also qualify for government subsidies and state-level rebates
GST impact on two-wheelers
The GST regime has led to several changes in the two-wheeler industry:
- Unified tax structure: Eliminated multiple state-level taxes like VAT, excise, etc.
- Higher prices: GST rate of 28% is relatively higher than pre-GST tax levels for entry-level bikes
- EV benefits: Reduced GST has increased demand for electric bikes
Check your pre-approved business loan offer to see if you qualify for instant financing to manage these price shifts.
Input tax credit (ITC) on GST on two-wheelers
The concept of input tax credit (ITC) under GST allows businesses to claim a credit for the tax paid on purchases. However, its applicability on two-wheelers is limited:
- Business use only: ITC can be claimed if the bike is used exclusively for business purposes.
- Not for personal use: Bikes purchased for personal use are not eligible for ITC.
- Documentation required: Valid tax invoice and GST registration needed for claims.
Conclusion
GST has significantly reshaped the pricing and tax structure of two-wheelers in India. While traditional bikes attract a high GST rate, electric bikes offer a more economical and eco-friendly option. Businesses can benefit from ITC if conditions are met, and with potential GST 2.0 reforms ahead, keeping track of changes is crucial. For those looking to manage bike purchases for commercial purposes, a business loan could be a smart financial tool to consider.
