GST Reshuffle: Small Two-Wheelers Get 18% Tax Bonanza, Big Bikes to Face 40% Rate from September 22

In a decisive move to boost affordable mobility, the GST Council has approved a sweeping overhaul of Goods and Services Tax (GST) slabs for the automotive sector. Effective September 22, 2025, two-wheelers with engine capacities up to 350cc will attract 18% GST, reduced from the previous 28%. This makes almost all entry-level and commuter motorcycles and scooters in India significantly cheaper just ahead of the festive season. However, motorcycles exceeding 350cc engine displacement—such as popular Royal Enfield, KTM, Triumph, and Harley-Davidson models—will now fall under a new, steeper 40% GST bracket.

This higher tax replaces the old 28% GST plus cess structure and represents a substantial increase for premium and performance motorcycles. The revised GST structure benefits buyers of commuter motorcycles such as Hero Splendor, Honda Shine, TVS Apache, Bajaj Pulsar, as well as family scooters and entry-level vehicles. With three-wheelers and small cars also moving to the 18% GST bracket, the market is expected to see a surge in demand as buyers bring forward their purchase plans to benefit from the lower tax rate. Electric vehicles retain their place at the industry-low 5% GST slab, further supporting the push for clean mobility solutions.

Ancillary benefits include a uniform 18% GST on auto parts and a 5% rate for farm equipment, aiming to improve affordability across multiple segments. Automakers expect a brief pause in early September as buyers await the price drop, but the sector is anticipating record festive season sales once the revised rates become effective. The move is set to reshape India’s auto market dynamics through enhanced affordability in the mass segment while shifting luxury purchases to a much higher tax regime.