GST on Two-Wheelers/Motorcycles in 2025: Rates & Impact

Posted on: Mar 30, 2022 | 3 mins | Written by: HDFC ERGO Team

GST on Two-Wheelers/Motorcycles in 2025: Rates & Impact

For the past two years, the entire industrial sector was very badly affected due to the worldwide outbreak of the Covid-19 pandemic. Moreover, in the last year, there happened the vehicle transitioned from BS4 to BS6 in respect of the emission standards. These two incidents collectively impacted the automobile sector quite badly. In this particular article, we will delve deep into the matters of GST applicable on two-wheelers, motorcycles and bike insurance. Before we begin the discussion, we must note that the GST rates on bikes and two-wheelers are quite high here in India. Nevertheless, we will discuss it in detail here.

Current GST rates on two-wheelers, servicing and insurance:

• Two-wheelers with an engine capacity of <350 cc need to pay a GST of 28%
• Two-wheelers with engine capacity above 350 ccs need to pay a GST of 31%
• Consumables, lubricants, battery charging (applicable for servicing) need a GST of 18%
• Gauge oil level, brake pads, clutch cable (applicable for spare parts) need a GST percentage of 28%
• A Two-wheeler insurance policy needs a payable GST of 18%

We must note that under the previous taxation system, there existed too many taxes, varying between state-level to central level taxes. The current GST standard is one single unified tax regime that has relatively lowered the impact of so many types of taxes. Moreover, the current GST taxation standard has even simplified the taxation system on two-wheelers. In this context, we have to mention that, on two-wheeler insurance, GST is calculated @ 18% and the same on the premiums too.

Details about the GST calculated on the purchase of a bike:

The engine capacity of the concerned bike is the major determinant while calculating the GST percentage. Currently, bikes below 350 cc capacity attract the base rate of 28% tax. However, if it exceeds the 350 cc capacity margin, the GST base rate increases by 3%, amounting to 31%. For example, if you buy a Splendor or Unicorn, you need to pay 28% GST, but in the case of a https://www.hdfcergo.com/two-wheeler-insurance/royal-enfieldRoyal Enfield, it spikes up to 31%. It is evident that the high standards bikes are taxed at a higher rate of 31%. Even the relatively simpler laymen bikes’ tax rate of 28% is also quite high.

Apart from this, GST on consumables, lubricants, battery charging is charged at an 18% base rate. However, the GST on spare parts like gauge oil level, the clutch cable is calculated at 28% level. To cut the long story short, this sky-high rate of the two-wheelers along with the high GST rate will ultimately result in reduced demand for these vehicles in the automobile industry.

GST calculation on the purchase of an electric bike:

Electric vehicles are the current trend and the future of the automobile industry. This is a worldwide trend and India is no exception to it. The Indian government is trying to promote the sale of electric vehicles in the country. This is the reason that the GST calculated on electric bikes is only a mere 5%. As this is the starting phase of the electric vehicle genre, it experiences a significantly low GST base rate. Previously, this margin was 12%. Naturally, this huge reduction has considerably lowered the overall price of electric vehicles including bikes for the consumers. To popularize the trend, Ather 450X has reduced its price by almost a whopping INR 14,500. Since electric vehicles are the future of the automobile industry worldwide, these sorts of efforts will significantly play an important part in keeping the trend popular in India, thereby, increasing the demand for https://www.hdfcergo.com/two-wheeler-insurance/best-electric-bikes-in-indiaelectric scooters and bikes in the country.

Details about the GST on two-wheeler insurance in India:

As per the current taxation norms, GST on two-wheeler insurance is calculated at an 18% base rate in India. This implies that you need to pay a GST of 18% on your bike insurance premium amount. As per the previous taxation system, this limit was calculated at 15%. However, under the present GST scheme, the base percentage rate has experienced a hike for two-wheeler insurances. Be it a basic https://www.hdfcergo.com/two-wheeler-insurance/third-party-bike-insurancethird party bike insurance policy or a comprehensive plan, this will ultimately translate to paying an enhanced premium amount.

The government of India has hinted at reducing the GST percentage on bikes and other two-wheeled vehicles. Therefore, the overall prices for two-wheelers are expected to reduce in the Indian automobile market. Depending on the words of the honourable finance minister, we are expecting to witness the early implementation of this taxation scheme and see that bikes are becoming more affordable, especially for the common people. A complete revision of the Indian auto industry has been long due, because of the sky-high manufacturing costs and a comparatively reduced demand. As per the last decade’s statistics, the sale, and the demand for two-wheelers has significantly reduced. Two-wheelers being a common household necessity cannot be placed under the luxury category. Several two-wheeler companies have expressed their grievance about reducing the tax rate, as it affected the overall nature of sales.

Moreover, the high GST on two-wheeler insurances will further result in an increased premium. This ultimately results in fewer and fewer people opting for more comprehensive plans. This will sharply impact the insurance sector to a considerable extent.

ITC Availability on Bikes

One important part of GST is the Input Tax Credit (ITC). It lets people get a tax credit for GST they paid on business-related supplies or sales. After the GST changes go into effect in September 2025, this is how it applies (or doesn't apply) to motorbikes and two-wheelers in India:

Usually, you can't claim ITC for a two-wheeler that you bought for your own use. Under Section 17(5) of the CGST Act, bikes bought for personal, non-business use are not eligible for ITC.

Exceptions where ITC may be allowed:
• If the two-wheeler is used strictly for business purposes (e.g. delivery service, courier, transport of goods or passengers).
• If the bike is supplied further (resold) or used during business operations.
• If used for training or other special purposes specifically allowed under the law.

Even though the rates for bikes have changed under the new GST reform (often called GST 2.0), which starts on September 22, 2025, most of the rules for ITC have stayed the same. According to this, ITC is only possible if the bike is used for work. It means that ITC is only available when the bike is used for business/commercial purposes.

Conclusion

Since the recent GST changes, two-wheeler prices have become more organised and based on the buyer's wants. Everyday commuter bikes have become more affordable due to reduced GST. However, high-end bikes are now charged more because they are considered luxury goods.

To help India's EV goal, the GST rate on electric bikes stays low at 5%. Even though the ITC rules haven't changed much, the new structure is better for both companies and customers. It aims to boost demand in the two-wheeler business by reducing the overall costs of the two-wheelers, their spare parts, consumables, and bike insurance.

FAQs

1. What is the current GST rate applicable to bikes in India?

Motorcycle GST rates have been changed as a result of recent changes to a tiered system based on engine size:
• A bike with an engine size of up to 350cc now has a GST rate of 18% instead of 28%. This is a big cut for the mass market, including popular bikes and commuting scooters.
• Vehicles with engines bigger than 350cc are now considered "luxury" goods and are subject to a 40% GST tax rate.
• To encourage eco-friendly transportation, the GST rate on electric bikes stays at a low 5%.

2. Can GST be claimed on the purchase of a bike?

No, you can't get a GST refund on a bike you buy for your own use. Businesses that use the bike for certain business reasons are the only ones that can collect GST, which is also known as ITC. Also, the purchase statement must be GST-compliant and have the business's GSTIN on it.

3. What is the HSN code for a scooter under GST?

The Harmonised System of Nomenclature (HSN) number is 8711 for scooters, motorbikes, and mopeds. There are different sub-codes for this group based on the type and size of the engine (e.g., electric).

4. Which HSN code applies to bike spare parts under GST?

Most bike spare parts fall under HSN Code 8714, which is for "parts and accessories of cars of headings 8711 to 8713." There is now a single 18% GST rate for car parts, but different sub-codes and items may have different rates.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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