In a significant move that promises to revitalize the two-wheeler market, the GST Council has announced a reduction in tax rates for motorcycles and scooters, effective September 22. This decision is expected to have far-reaching implications for both consumers and the industry at large.

Key Points of the GST Rate Cut

• Bikes with engines up to 350cc will now attract 18% GST, down from the previous 28%.
• This reduction benefits nearly 98% of the two-wheeler market.
• Motorcycles above 350cc will be taxed at 40% without cess, primarily affecting premium brands like Royal Enfield.

Impact on Pricing and EMIs

The GST rate cut translates directly into more affordable two-wheelers and reduced loan EMIs for consumers. Here's how:

• For a bike previously priced at Rs 2 lakh (on-road), the new GST rate reduces the price to approximately Rs 1.84 lakh.
• This price reduction results in a lower monthly EMI, with an estimated decrease of Rs 465 for a 36-month loan at 12% interest.

Current Two-Wheeler Loan Rates

Major banks are offering competitive interest rates on two-wheeler loans:

Beneficiaries of the GST Cut

The reduced GST rate is expected to make two-wheelers more accessible to a wider range of consumers:

• Young buyers entering the job market
• Professionals looking for affordable commute options
• Lower middle-class households
• Rural and semi-urban populations, including:
  • Farmers
  • Small traders
  • Gig workers

Industry Implications

This move by the GST Council is likely to stimulate demand in the two-wheeler sector, which has been facing challenges in recent times. The increased affordability could lead to higher sales volumes, particularly in the sub-350cc segment that dominates the Indian market.

For premium motorcycle manufacturers with models above 350cc, the impact may be mixed. While they face a higher tax rate of 40%, the removal of cess could potentially offset some of the increase.

As the new tax rates take effect, industry observers will be keenly watching for shifts in consumer preferences and any potential boost to the overall automotive sector. The coming months will reveal the full extent of this policy change on both the industry landscape and consumer behavior in the two-wheeler market.

In a significant move that's set to shake up the Indian two-wheeler market, major manufacturers have announced substantial price reductions following a recent Goods and Services Tax (GST) rate cut. The GST Council's decision to lower the tax rate on two-wheelers with engine capacity below 350cc to 18% has prompted industry leaders to pass on the benefits to consumers, making motorcycles and scooters more affordable across the board.

Royal Enfield Leads the Charge

Royal Enfield, the iconic brand known for its classic designs and powerful engines, has taken a bold step by announcing price cuts of up to Rs 22,000 across its entire 350cc motorcycle range. This move will apply not only to motorcycles but also to service, apparel, and accessories.

B Govindarajan, Managing Director of Eicher Motors Ltd. and Chief Executive Officer of Royal Enfield, expressed enthusiasm about the development: "The Government of India's latest GST reform will not only make motorcycles under 350cc more accessible but will also excite the first-time buyers. Royal Enfield is delighted to announce that we are passing the full GST benefit of the price revision directly to our consumers, opening the world of Royal Enfield to an even larger community of riders."

Industry-Wide Price Reductions

The ripple effect of the GST rate reduction is being felt across the two-wheeler sector:

• TVS Motor Company: Implementing price cuts of up to Rs 22,000 across its internal combustion engine portfolio. Notable reductions include:

  • TVS Jupiter 125: From Rs 77,000 to Rs 70,667
  • NTORQ 125: From Rs 85,000 to Rs 77,778

• Honda: The popular Honda Dio 125 will see a price decrease of Rs 6,222, bringing its new price to Rs 65,778.

• Suzuki: The Suzuki Burgman Street 125 will experience a reduction of Rs 6,444, with its new price set at Rs 75,556.

Impact on the Market

This widespread price reduction is expected to stimulate demand in the two-wheeler segment, particularly in the sub-350cc category. The move comes at a crucial time when the industry is looking to boost sales and cater to the evolving needs of Indian consumers.

The price cuts are particularly significant for entry-level and mid-range models, making them more accessible to a broader range of customers. This could potentially lead to increased sales volumes and market penetration for manufacturers.

Looking Ahead

As the new pricing structure takes effect, industry observers will be keenly watching its impact on sales figures and market dynamics. The reduced prices could potentially accelerate the shift towards personal mobility solutions, especially in urban and semi-urban areas where two-wheelers are a popular mode of transportation.

The move also aligns with the government's efforts to boost the automotive sector and provide relief to consumers. As manufacturers adjust to the new tax structure, it remains to be seen how this will influence their product strategies and market positioning in the coming months.

For consumers, this presents an opportune moment to consider purchasing a new two-wheeler, with a wide range of models now available at more attractive price points across various brands.