GST Reduction on Bikes in India 2025: How It Could Affect Your Loan Plan

Potential GST reductions in September 2025 could change bike affordability in India, in turn impacting loan plans. These possible changes could mean you benefit from lower EMIs if your dream bike is under 350cc. On the other hand, you may have to pay more tax for bikes above 350cc, leading to higher loan amounts. All these decisions will be finalised at the 56th GST Council meeting on September 3-4 in New Delhi. Here’s a breakdown of the proposed changes and how they could affect your loan plan. 

Understanding the Proposed GST Restructuring for Two-Wheelers
 

The government has expressed interest in a new, simplified tax structure with fewer tax slabs, expected to be discussed in the upcoming GST Council meeting. The proposed GST 2.0 structure omits the 12% and 28% slabs, leaving taxation at just 5% and 18% alongside a 40% tax slab for sin goods.

Currently, all two-wheelers with engines up to 350cc attract 28% GST. For bikes with engines larger than 350cc, an additional 3% cess is charged, totalling the tax to 31%. As per the new structure, the Centre has proposed a GST reduction for bikes in the commuter segment (up to 350cc), moving them to the 18% GST slab. On the other hand, premium bikes with engine sizes of more than 350cc could be subjected to a steeper tax of 40%.

Also Read: Instant Personal Loan to Buy Used Bike

The Direct Impact of Potential GST Changes on Your Loan Plan

The amount you borrow for a bike is directly linked to its on-road price, which also includes GST. Most lenders offer secured two-wheeler loans that cover 80% to 100% of the bike’s on-road price depending on certain factors. Any modification in the GST rate creates a cascading effect that substantially impacts the final cost of the bike, in turn impacting your financing plan.

Here’s what could happen if the proposed GST changes come into effect:

●    If the GST reduction for bikes under 350cc comes through, the lower on-road price will also reduce the amount that needs to be borrowed. This will lead to lower EMIs and easier repayment.
●    If the GST for bikes over 350cc is increased, the higher on-road price will mean a higher loan amount and higher EMIs.
●    Banks and NBFCs may also need to reassess and revise the terms and amounts for pre-approved loans, particularly for secured Bike Loans.

Also Read: Why Opt for a Personal Loan for Two-wheeler?

How to Strategise Your Bike Purchase and Loan

This period of uncertainty calls for thoughtful consideration. 

Buying a bike under 350cc:
If you’re planning to buy a bike under 350cc and are not in immediate need, waiting for a while could reap financial advantages. Already, reports are in of consumer behaviour reflecting a ‘wait and watch’ sentiment as consumers delay purchases in anticipation of potential savings. 

Buying a bike over 350cc:
For those looking to buy a high-capacity bike (over 350cc), it makes sense to act faster. You can protect yourself from a steep price increment by acting before any potential tax hike. By acting earlier, you stand the chance to lock the current price, which is presumably lower. Working on your financing options ahead of time allows you to prepare for either situation and gives you the liberty to decide promptly when the moment comes.

Choosing the right loan:
Personal Loan for bikes are unsecured, and the amount you get depends on your eligibility, not the price of the bike. On one hand, the terms are greatly influenced by your credit score and repayment capacity, while on the other, they have no end-use restrictions. A GST cut makes a Personal Loan for two-wheeler more attractive, as it can cover the full cost and may leave you with additional funds to buy accessories. But the interest rate and eligibility should be considered.

Bike loans, however, have much easier eligibility and lower interest rates since they’re secured. That being said, they’re not as flexible, and an increased GST may mean a much higher loan amount for you to secure your bike against.

To Conclude

In a nutshell, the new GST reforms on bikes and two-wheelers could mean a lower cost for the bikes under 350cc and a higher cost for those above 350cc. Having complete knowledge of these anticipated changes is crucial, as it helps you plan your finances in advance.

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Frequently Asked Questions

What is the current GST rate on two-wheelers in India?
Bikes up to 350cc are taxed at 28% GST. Those above 350cc are taxed at 31% (28% GST plus 3% cess). These rates are the same in every state across India.

What are the proposed GST changes for two-wheelers in 2025?  
The proposed GST changes involve increasing the GST for premium bikes above 350cc to 40% and dropping the GST for commuter bikes below 350cc to 18%. They’re the subject of continued deliberation by the GST Council as part of a larger move to simplify the GST structure.

How exactly does GST affect my bike loan EMI?
The on-road price of a bike is partially determined by GST, which impacts its final cost and, in turn, the loan you take. A lower tax rate will bring down the price, by extension lowering the loan amount and EMIs. Likewise, a higher rate will increase the overall price and result in higher loans and monthly instalments. 

Should I buy a bike now or wait for the GST changes?  
If there is a proposed tax cut, purchasers of commuter bikes under 350cc stand to gain the most. Buyers of premium bikes stand to lose the most and should purchase the bikes before an increase makes them more expensive. The right choice depends on your preferred bike segment and budget. 

What is the GST on electric bikes?
Currently, electric bicycles attract a concessionary GST of 5%. This rate is adopted to encourage the use of more eco-friendly and sustainable mobility solutions. It is well anticipated that this concessionary rate will be maintained for the foreseeable future.  

Can I get 100% financing for a bike loan? 
Typically, banks and lenders will finance 90 to 95% of the on-road price of a bike. Financing the full on-road price is rare and is usually reserved for clients that have an exemplary credit score and repayment history. Borrowers may need to make a small down payment in most cases.

What is the HSN code for two-wheelers?
The Harmonised System of Nomenclature (HSN) code for motorcycles and scooters is 8711. This code is standardised and is used across India for tax classification purposes. It aids in smooth GST compliance and filing by manufacturers and dealers.