GST Revolution: Two-Wheeler Market Shifts Gears
Significant Goods and Services Tax (GST) revisions, effective September 22, 2025, have dramatically reshaped India’s two-wheeler market. The changes, dubbed “GST Reform 2.0,” create a two-tiered tax system based on engine capacity, making entry-level bikes more affordable while increasing prices for premium models.
The recent GST cut on two-wheelers up to 350cc from 28% to 18% has sparked a significant shift in the Indian motorcycle market.
Key changes under GST 2.0
Sub-350cc Two-Wheelers: The GST rate has been cut from 28% to 18% for scooters and motorcycles with engine capacities up to 350cc.
Impact: This reduces the overall cost for the majority of the market, including popular models like the Royal Enfield Classic 350 and most scooters.
Manufacturers such as Bajaj, TVS, Honda, and Royal Enfield have already begun passing the benefits to customers through price cuts.
Above-350cc Two-Wheelers: Considered luxury items, these vehicles now face a higher GST rate of 40%.
Impact: This increases the price of premium and high-performance bikes from manufacturers like Royal Enfield (for its 650cc range) and others, potentially dampening demand in this segment.
Electric Two-Wheelers: The GST rate for electric vehicles remains unchanged at a concessional 5%.
Impact: This favorable tax treatment, coupled with the higher tax on large-capacity petrol bikes, further encourages the adoption of electric mobility.
Here’s what’s happening:
Key Developments:
Focus on 300-350cc Segment: Major manufacturers like Hero MotoCorp, Bajaj Auto, Royal Enfield, and Honda are prioritizing new launches and enhancing performance, features, and efficiency in this range.
Premiumisation of Mid-Range: The mid-range segment is getting a premium makeover with features like digital dashboards, traction control, Bluetooth connectivity, and riding modes.
350cc: The New Benchmark: Industry insiders believe that 350cc is becoming the new benchmark for aspirational biking in India, with manufacturers focusing on delivering maximum performance within this engine capacity.
Impact on Different Segments:
Bikes Above 350cc: Face a steep 40% tax, leading to reduced demand, especially outside major metros.
Sub-350cc Segment: Expected to benefit from the GST cut, with potential price drops and increased demand.
Manufacturer Strategies:
Hero MotoCorp: Plans to launch new models in the 300-350cc category by early 2026.
Bajaj Auto: To strengthen its portfolio in the sub-350cc segment and absorb GST hike on premium bikes to maintain demand.
Royal Enfield: Tuning future powertrains to stay within 350cc without compromising performance.
Honda: Doubling down on the 350cc range, with a focus on delivering premium features and performance.
Market Outlook:
The GST cut is expected to boost sales in the sub-350cc segment, while the premium segment may see a decline in demand due to the higher tax rate. However, manufacturers are optimistic about the potential for growth in the mid-range segment .
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