Motorcycle GST Update 2025: 18% for ≤350cc, 40% for Above 350cc in India
India’s New GST Overhaul in 2025
The GST Council of India has made a major decision that will directly impact motorcycle enthusiasts. Starting September 22, 2025, motorcycles with engine capacities above 350cc will fall under a new 40% GST slab.
Earlier, premium motorcycles attracted 28% GST + cess (~31%), but now they move to a flat 40% GST. Meanwhile, motorcycles up to 350cc will enjoy a lower 18% GST slab.
This restructuring is part of the government’s move to simplify GST rates and differentiate between affordable commuter vehicles and luxury or aspirational goods.
What Exactly is Changing?
Two-Slab GST Structure- 18% Slab → Motorcycles under 350cc, small cars (under 4m length, ≤1200cc petrol/≤1500cc diesel), household appliances like TVs, ACs, dishwashers, etc.
- 40% Slab → Premium motorcycles above 350cc, large SUVs, luxury cars, and other “luxury & sin goods.”
- Old Rate: ~31% (28% GST + cess)
- New Rate: 40% GST
- Impact: 8–10% increase in final on-road price.
Motorcycles Under 350cc
- Old Rate: 28%
- New Rate: 18%
- Impact: 8–12% price reduction.
Impact on Buyers
🔺 Premium Segment Bikes (Above 350cc)
Motorcycles such as:
- Royal Enfield 650 Twins
- KTM Duke 390 / RC 390
- Harley Davidson X440
- BMW G310 series (technically 313cc, exempted)
- Triumph Speed 400 / Scrambler 400X (just below cutoff)
…will now become significantly costlier. For example:
- A motorcycle priced at ₹4,00,000 (ex-showroom) earlier taxed at ~31% would cost about ₹5,24,000 on-road.
- With 40% GST, the price jumps closer to ₹5,60,000–₹5,70,000 (depending on state RTO and insurance).
This makes aspirational biking harder for middle-class riders.
🔻 Entry-Level & Mid-Segment Bikes (≤350cc)
- Hero, Honda, TVS, Bajaj, Yamaha commuters
- Royal Enfield Classic 350, Bullet 350, Hunter 350
- KTM Duke 250, Pulsar 250
These bikes will now be cheaper by 8–12%. Example:
- A ₹2,00,000 motorcycle taxed at 28% earlier → ₹2,56,000.
- At 18% GST, the price falls to ~₹2,36,000.
This is a big relief for daily commuters and first-time bike buyers.
Comparative Tax Chart
Why Did the Govt Increase GST on Big Bikes?
- Luxury & Sin Goods Target – High-end bikes are seen as luxury products, similar to SUVs or imported items. Taxing them higher helps balance affordability and revenue.
- Revenue Generation – The government can earn more by taxing aspirational goods without hurting the middle-class commuter segment.
- Simplification of GST – Moving from 5%, 12%, 18%, 28% + cess → to just two slabs (18% and 40%) reduces disputes and compliance hassles.
- Encouraging Mass Mobility – Making sub-350cc bikes cheaper boosts affordability for young riders and middle-class households.
Industry & Market Reactions
- Royal Enfield & Eicher Motors: The 350cc mark is crucial. While the RE Classic 350 still stays in the 18% slab, their 650cc bikes now become pricier. Executives believe this could slow premium demand but boost 350cc sales.
- KTM & Bajaj: Mid-segment bikes like KTM 390 may see a demand dip, while Duke 250 and Pulsar 250 could become the new sweet spot.
- Consumers: Mixed reactions. Riders saving for bigger bikes are disappointed, while commuter buyers are celebrating.
What Does It Mean for the Motorcycle Market?
- Above 350cc: Premium bikes will likely see demand pressure. Buyers may delay purchases or switch to sub-350cc alternatives.
- Under 350cc: Massive boost in sales expected for commuter and budget motorcycles.
- Export Focus: Brands like Royal Enfield may push exports of 650cc+ bikes to offset domestic slowdown.
- Aftermarket & Used Bikes: Second-hand big bikes may gain popularity as new models become expensive.
Conclusion
The 40% GST on motorcycles above 350cc is a double-edged sword.
- It makes premium and enthusiast motorcycles more expensive, reducing accessibility for middle-class riders.
- At the same time, it makes commuter motorcycles more affordable, boosting the mass two-wheeler market.
- The government’s intention is clear: reward affordability, tax luxury.
For riders, the decision means carefully rethinking whether to upgrade beyond 350cc—or stick with more value-for-money options under the new 18% GST benefit.