GST Cut on Two-Wheelers: Benefits for Buyers and the Automobile Industry

The Indian government's GST 2.0 overhaul has substantially altered two-wheeler affordability.  Motorcycles and scooters with engine sizes up to 350cc will now be subject to 18% GST from September 22, 2025.  This is a drop from the previous 28% rate. You save between ₹5,805 and ₹24,496 depending on the model you purchase. The reform impacts 98% of India's two-wheeler market directly.

Understanding the New GST Structure

The GST Council approved a comprehensive tax overhaul on 22 September 2025. The reform created three distinct categories for two-wheelers based on engine capacity.

Motorcycles and scooters up to 350cc face 18% GST, down from 28%. Premium motorcycles above 350cc now attract 40% GST, increased from approximately 31% previously. Electric two-wheelers continue enjoying a concessional 5% GST rate unchanged.

You can track changing rates and related trends through any reliable financial marketplace that compares vehicle and loan data across providers.

Direct Price Reductions Across Manufacturers

Major manufacturers passed the complete tax benefit to you through immediate price cuts. Bajaj Auto reduced prices by up to ₹20,000 on motorcycles. Honda Motorcycle & Scooter India cut prices by up to ₹18,800 across its portfolio. The Activa scooter series saw reductions ranging from ₹7,157 to ₹8,259.

TVS Motor Company announced price cuts of up to ₹24,496. Royal Enfield customers save up to ₹22,000 on 350cc motorcycles. Yamaha reduced prices by up to ₹17,581 across its range. Hero MotoCorp announced reductions ranging from ₹5,805 to ₹15,743.

Suzuki Motorcycle India implemented savings of up to ₹18,024 depending on model. The company extended GST benefits to spare parts and accessories. This reduces your long-term maintenance costs significantly.

Financing Benefits

The GST cut impacts your monthly loan repayments directly. A bike previously priced at ₹2 Lakh on-road now costs approximately ₹1.84 Lakh. Your monthly Equated Monthly Instalment (EMI) decreases by approximately ₹465 for 36-month financing. This calculation assumes a bike loan with the lowest interest rate of 12% annually. Financial marketplaces now offer access to improved loan terms reflecting lower vehicle prices.

Benefits Across Buyer Segments

Young professionals and first-time buyers gained significantly from price reductions. Entry-level motorcycles essential for commuting became more affordable. Rural and semi-urban buyers benefit considerably from improved accessibility. Two-wheelers serve as primary transportation in areas with limited public transit.

Gig economy workers, such as delivery personnel, stand to benefit significantly from lower purchase prices. You depend on two-wheelers as income-generating assets. Lower maintenance costs improve your business viability directly. Middle-class households gained improved access to personal mobility. Many turned to financial marketplaces to explore bike loans lowest interest rate options for easier financing.

Festive Season Market Response

The timing of GST implementation before India's festive season created immediate momentum. Two-wheeler registrations in October 2025 reached 1.85 million units. This represented the highest monthly tally for the year.

During Navratri period from 22-30 September 2025, sales grew 36% year-on-year. September 2025 overall saw sales increase by 9% year-on-year crossing two million dispatches. Hero MotoCorp reported a 19% jump in registrations to 323,230 units. Royal Enfield posted 43% growth with 113,000 units sold.

October retail sales showed 20-25% growth compared to the previous year's festive season. The Federation of Automobile Dealers Associations (FADA) expects high double-digit growth for the complete festive period. Buyers checking a financial marketplace during this time found better loan comparisons and several bike loans with the lowest interest rate offers.

Industry-Wide Advantages

The reform delivers substantial benefits beyond immediate consumer savings. CRISIL Ratings projects two-wheeler sales volume will grow 5-6% in fiscal 2025-26. The GST reduction provides a 200 basis point (two percentage points) uplift to demand. ICRA forecasts 6-9% market expansion for FY26 driven by GST relief.

Predictable demand growth allows manufacturers to optimise production runs effectively. You benefit from improved vehicle availability and reduced delivery waiting periods. The new structure simplified tax compliance significantly for manufacturers. Auto components now uniformly attract 18% GST regardless of classification.

Input Tax Credit (ITC) advantages strengthen manufacturer economics under the new system. The 40% flat rate on premium motorcycles allows full ITC claims. This improves working capital management, reducing cascading tax effects.

Dealers witnessed record-breaking deliveries during the Navratri period. The GST reduction extends to spare parts and accessories. This benefits your aftermarket service ecosystem, reducing overall ownership costs.

Related industries, including component manufacturers and tyre producers, benefit from expanded adoption. The auto component sector reached ₹6.73 Lakh Crore turnover in FY25. Battery suppliers, lubricant distributors, and servicing businesses experience direct positive effects.

Premium Segment Considerations

Motorcycles above 350cc face increased GST from 31% to 40%. This category represents 2% of market volume but holds strategic importance. Popular models affected include Royal Enfield Himalayan 450 and KTM 390 series.

However, several manufacturers absorbed the tax increase rather than passing costs to you. Triumph kept prices unchanged for its 400cc lineup, including the Speed 400. KTM and Aprilia similarly shielded buyers from GST hikes during the festive season.

Electric Vehicle Support

The 5% GST rate on electric two-wheelers remains unchanged. This provides policy stability for India's developing Electric Vehicle (EV) sector. You continue enjoying significant tax advantages on electric models.

Electric two-wheelers from Ola Electric, Ather, and TVS iQube maintain competitive pricing. EV registrations crossed 1 million units in the first half of FY26. The maintained tax differential between electric (5%) and conventional motorcycles (18%) supports adoption.

Market Sustainability Outlook

Industry stakeholders remain optimistic about sustained momentum beyond the festive season. Hyundai forecasts India's auto industry will grow 5.2% annually through 2030. The Society of Indian Automobile Manufacturers (SIAM) maintains an optimistic outlook, citing stable indicators.

However, traditional January price increases could dampen momentum if manufacturers raise prices. Maintaining current schemes will be critical to sustaining demand growth into 2026.

The GST 2.0 reform represents strategic intervention designed to stimulate consumption. You gain improved accessibility to basic mobility through lower prices. For the vast majority of Indian two-wheeler buyers, the reform delivers tangible benefits. You experience lower prices, reduced financing costs, and improved overall affordability supported by financial marketplace access to a bike loan with the lowest interest rate options.