Understanding GST and Its Impact on Bike Prices in India

Since its implementation on July 1, 2017, the Goods and Services Tax, or GST, has been a significant reform in India, creating a more unified tax structure. The amendment has affected various sectors, including the two-wheeler market. In this article, we will explore the effects of GST on bike prices, its implications, and how it compares to the previous tax system.

The GST Structure and Its Impact on Bikes

On July 1, 2017, the GST Council decided that bikes with an engine capacity over 350cc would be subjected to an additional 3% cess, on top of the 28% GST. This means that bikes with an engine size exceeding 350cc will fall into the 31% tax bracket. However, for bikes with an engine capacity under 350cc, the tax rate remains at 28%.

For example, if a bike with a 351cc engine was costing Rs. 50,000 before the GST, the new price after including the GST and additional cess would be Rs. 63,500. Conversely, a bike with an engine capacity under 350cc, if it was priced at Rs. 45,000, the new price would remain around Rs. 45,500, reflecting a slight 1% increase.

Benefits and Drawbacks Post-GST Implementation

After the implementation of GST, buying a bike, such as a Honda Scooty, might be more beneficial. The total tax after GST (28% plus an additional 3% cess) is generally lower than the pre-GST tax rates, which ranged between 31% and 35%. As a result, buying a bike after GST could be a more economical choice in the long run.

However, certain bikes above 350cc with engine sizes like the KTM's RC390 and Duke 390, which have 373cc engines, will face a price hike due to the additional 3% cess. At the same time, bikes from Royal Enfield have an engine size of 346cc, which is below 350cc, thus avoiding this additional cess.

Electric Bikes and the GST Impact

An interesting aspect of the GST impact on bikes is its effect on electric bikes. Due to the new tax structure, electric bikes will fall into the 12% tax bracket instead of enjoying the previous tax cuts. This could result in a significant price increase for electric bikes, making them more expensive for consumers. This change could have a significant impact on the baking industry, specifically on manufacturers who were planning substantial investments in introducing electric two-wheelers.

Impact on Maintenance Costs

It's not just the purchase price that has seen changes; maintenance of bikes will also become more expensive post-GST. The new tax structure imposes a 28% GST on spares, and there is an increase of 3% on services such as labor charges. These changes could result in higher costs for bike maintenance and repairs, which might not be favorable for bike owners in the long run.

Conclusion

The implementation of GST has brought about a variety of changes in the bike industry, primarily affecting the tax structure and potentially impacting the price and cost of bike maintenance. While the overall impact on bike prices may be minimal, the changes in the tax structure for bikes above 350cc and the increased costs for electric bikes and maintenance could have a significant effect on the market. Prospective buyers should consider these factors when deciding whether to make a purchase or wait for the new tax regime to settle.

FAQs

Q: Will the prices of bikes increase or decrease after GST?

A: The prices of bikes with engine capacities over 350cc will likely increase, while bikes with engine capacities under 350cc will experience minimal or no change. Electric bikes will also face a higher price due to the new 12% tax bracket.

Q: Will GST make bike maintenance more expensive?

A: Yes, the introduction of GST will increase maintenance costs for bikes. Spares will attract a 28% GST, and there will be a 3% increase in labor charges, resulting in higher overall costs for maintenance and repairs.

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