350+ cc motorcycles will attract 31 percent tax post GST !

We had earlier carried an article trying to decode the impact of the unified taxation system Goods and Services Tax (GST) on the automobile industry. You can read about the same here.

While the GST seems to have a positive impact on luxury segments and electric vehicles, the motorcycle industry seems to be a bit taken back by a few decisions.As per the Goods and Services Tax (GST) guidelines, two wheelers with engine displacement more than 350cc will be subjected to 28% GST tax and an additional 3% cess which makes it a whopping 31% tax on these higher capacity motorcycles. Motorcycles and mopeds fall under the high tax bracket of GST, 28% which is applicable for luxury items.

In fact, higher capacity motorcycles are classified into the same tax bracket as private aircrafts and luxury yachts which may not be very sensible. With the new taxation norms, it is very clear that prices of bigger capacity motorcycles will never fall in the immediate future. Considering that the tax rate remains more or less similar to the existing taxation, we should only hope that manufacturers do not raise the prices further.

Further dampening the spirits of the motorcycling industry is the fact that with the proposed 28 percent rate for auto components and another proposed increase in service tax from 15% to 18%, the cost of ownership of motorcycles and scooters is likely to go up too.
Motorcycle manufacturers as of now are keeping mum and have not made any comments on the proposed GST rates. As per the industry observers, the manufacturers are still assessing the impact the new taxation system is going to have on the industry and how it might affect two wheelers demand and their sales subsequently.

Till the number of doubts around the new taxation system are cleared, manufacturers of higher capacity motorcycles may put their future plans on hold and may need to wait for clarity before taking any decision.