🚀 GST on Two-Wheelers: The Debate Heats Up
India is the world’s largest two-wheeler market, yet affordability remains a challenge due to the high GST rate of 28% on bikes and scooters with engine capacities up to 350cc. For premium models exceeding 350cc, the total tax burden reaches 31%, including a 3% compensation cess.
Leading manufacturers like Honda, Hero, and Bajaj have now joined the call for reducing the GST rate, arguing that two-wheelers are essential for daily commuting, not luxury items. The Society of Indian Automobile Manufacturers (SIAM) has also backed this demand, emphasizing that lower GST could boost demand and economic activity.
📊 Two-Wheeler Sales: A Market Overview
Despite the high tax rates, two-wheeler sales have shown resilience. According to SIAM data:
| Fiscal Year | Total Two-Wheeler Sales | Y-o-Y Growth |
|---|---|---|
| FY23 | 1,58,62,771 units | – |
| FY24 | 1,79,74,365 units | 🔼 13.3% |
| FY25 (Apr-Dec) | 1,50,39,570 units | 🔼 11.6% |
While sales have improved, manufacturers argue that affordability remains a key barrier, especially for entry-level buyers in rural and urban areas.
🔎 Why Lower GST Makes Sense?
1️⃣ Two-Wheelers: A Necessity, Not a Luxury
Unlike premium SUVs or sedans, bikes and scooters are the backbone of transportation for millions, especially in smaller cities and villages. With limited public transport, two-wheelers are a lifeline for daily commutes, work, and small businesses.
2️⃣ Unfair Taxation Compared to EVs
Electric two-wheelers enjoy a much lower GST rate of 5%, thanks to government incentives for green mobility. While EV adoption is growing, conventional fuel two-wheelers still dominate the market. Manufacturers argue that a more balanced tax structure is necessary to ensure fair pricing for all segments.
3️⃣ Cost Inflation Due to Stringent Emission Norms
The transition from BS3 to BS6 OBD2B emission norms has significantly increased production costs. While these regulations help reduce pollution, they also raise vehicle prices, making affordability a growing concern.
4️⃣ Economic Impact of Lower GST
A reduction in GST could:
✅ Boost two-wheeler sales, helping OEMs recover lost demand.
✅ Improve affordability, especially for middle-class and rural consumers.
✅ Increase tax revenue over time, as more purchases lead to higher collections despite a lower tax rate.
⚖️ Legal & Tax Implications
📌 Case Law Reference: GST Rate Rationalization
In Union of India vs. Mohit Minerals Pvt Ltd (2022), the Supreme Court emphasized that GST rates must be aligned with the nature of goods and economic impact. Similar arguments could be made for rationalizing GST on two-wheelers, given their essential nature.
Additionally, past GST Council discussions have indicated that revising tax rates in high-impact sectors can drive long-term economic benefits.
🏍️ Hero vs. Honda: The Race for Market Leadership
In domestic sales, Honda has significantly narrowed the gap with Hero MotoCorp:
| OEM | FY25 (Apr-Dec) | FY24 (Apr-Dec) | Difference |
|---|---|---|---|
| Hero | 43,30,928 units | 40,95,084 units | 🔼 2,35,844 |
| Honda | 41,38,346 units | 33,75,566 units | 🔼 7,62,780 |
This intense competition highlights how affordability plays a major role in consumer choices, reinforcing the need for price-friendly policies like lower GST rates.
🚦 Will the Government Reduce GST?
The demand for a lower GST rate on two-wheelers is gaining momentum. While the government has prioritized electric vehicles for tax benefits, there is a strong case for making conventional two-wheelers more affordable.
🏁 What’s Next?
🔹 Upcoming GST Council Meeting – A decision on rate rationalization could be on the agenda.
🔹 Industry Lobbying – Automakers and SIAM continue to push for tax relief.
🔹 Consumer Impact – If GST is reduced, two-wheeler prices could drop, benefiting millions.
The debate is far from over, but one thing is clear: making two-wheelers more affordable through lower GST could drive economic and mobility growth for millions of Indians.