GST on Two Wheelers in 2022

  • Author :
  • TATA AIG Team
  • Published on :
  • 03/09/2022

In the last couple of years, the Indian automobile and two-wheeler industry has been grappling with difficulties due to the nationwide lockdown and supply chain crisis. In addition to the pandemic, the transitionary change from the BS4 to BS6 emission standards has also had an influence on the GST on bikes and two-wheelers. Let us explore the GST on bikes in India for 2022 so consumers can make an informed purchase.

Tax on Bikes in India

To understand the tax on bikes in India, it is important to first know what GST is. In its simplest definition, GST, or the Goods and Service Tax, is the indirect tax that is levied on the supply of goods and services.

Following are the categories of bike GST percentage that consumers need to make a note of —

Category GST Rate
Two-wheelers with an Engine Capacity of over 350cc 31%
Two-wheelers with Engine Capacity below 350cc 28%
Two-wheeler insurance policy 18%
Clutch Cable, Gauge Oil Level, and Brake Pads 28%
Battery Charging, Consumables, and Lubricants 18%

Under the former taxation system, several taxes existed between the state and central levels. The GST combined it all under a comprehensive umbrella. Owing to this, the tax impact has been relatively lowered. Additionally, with GST, the taxation system has also been simplified for two-wheelers.

GST on Bike Purchase

The bike GST rate or the GST percentage is primarily influenced by the engine capacity. In the current scenario, bikes below the engine capacity of 350cc attract the bike GST percentage of 28%. However, with an engine capacity of more than 350cc margin, then the bike GST rate goes up by an additional 3%, amounting to 31% in total.

To elaborate with an example, GST on bikes such as a Hero Unicorn (sub 350cc bike) or a Hero Splendor (sub 350cc bike) will be 28%. On the other hand, GST on bike purchase, in the case of a Royal Enfield Classic (> 350cc), would go up by an additional 3% to accumulate to 31% in total. Evidently, the GST effect on two-wheeler prices in India changes with the engine capacity or, in other words, how premium the vehicle is.

When the government implemented the GST in 2017, several leading vehicle manufacturers, such as Royal Enfield and Bajaj Auto, passed on the benefits of the reduced GST tax on bikes in India to the customers. Vehicle manufacturers announced price discounts on several models.

Aside from the aforementioned, there is an 18% GST base rate on consumables, lubricants, and battery charging. However, the GST is calculated at the 28% margin for spare parts such as the clutch plate and the gauge oil level.

GST on Electric Bike Purchase

The many perks of electric vehicles have taken the automobile and two-wheeler industry by storm. With the soaring gas prices, several consumers are seriously considering the purchase of an electric vehicle for daily commutes. Seeing how electric vehicles are the future, the trend has caught on with consumers and makers alike. To encourage the purchase of electric vehicles, the electric bike GST rate is pegged at a mere 5%. As this is the inception phase of the electric vehicle revolution in the country, this GST base rate is meant to encourage the sale and purchase of electric vehicles.

Formerly, the electric bike GST rate was as high as 12%. With the revised percentage, there has been a considerable price drop in the overall price for electric vehicles, including bikes and two-wheelers. To prime the pump, Ather 450X lowered its price by an astonishing ₹14,000, so the customers get to experience the ease and convenience of electric vehicles – making it a prime example of a positive GST effect on two-wheeler prices in India.

Acknowledging the vast potential of electric vehicles, the GST on bikes in India in 2022 – especially for electric bikes will pave the way to encourage the purchase of electric vehicles.

GST on Insurance Policy for Bike

Basis the current taxation norms, the GST on a two-wheeler insurance policy in India is pegged at the base rate of 18%. In simpler terms, this translates to the GST of 18% that is payable by the insurance holder on the premium amount for their insurance policy for bikes. Formerly in the pre-GST era, the tax structure for the insurance policy for bikes comprised the Central Sales Tax (CST), Value Added Tax (VAT), Excise Duty, etc. A combination of all of these made up a 15% tax rate for a two-wheeler insurance policy.

Considering this, whether it is the purchase of third-party bike insurance or a more comprehensive cover, the premium amount payable will be higher.

Here to add, the price of third-party bike insurance is determined and capped by the IRDAI or the Insurance Regulatory and Development Authority of India. If you are planning to get a new bike, visit Tata AIG’s website and compare our bike insurance plans to get the best one for you.

The Impact of GST on Bikes

The reduction of GST on bikes is in talks by the government, which will subsequently benefit the customer as the vehicle manufacturers reduce their prices. As affirmed by the finance minister, this move is highly awaited by vehicle manufacturers in the country. The automobile industry has been eagerly awaiting this change, vocalising its concerns about how the increased cost of manufacturing and the high GST has had a combined effect of reduced two-wheeler purchases. The former year has already witnessed a significant decrease in the purchase of two-wheelers. The automobile industry argues that since two-wheelers are an essential element of every Indian household, having this commodity placed in the “luxury” slab is an incorrect move on the government’s part.

The GST also leads to an increase in the premium amount, which would also discourage people from investing in comprehensive 2-wheeler insurance online.

The Bottom Line

The effect of GST on bikes pervades several sections. However, once the decision to purchase a two-wheeler is made, individuals may purchase 2-wheeler insurance online or offline. With that said, purchasing 2-wheeler insurance online can help you save on the premium amount, and also you can buy it from the comfort of your home. To buy a two-wheeler insurance policy, choose Tata AIG, and shield yourself from the financial burden of unforeseen scenarios.

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Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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