The Goods and Services Tax (GST) Council on Wednesday approved an increase in levies on high-capacity motorcycles, raising the tax rate on two-wheelers above 350cc engine capacity to 40% from 28%. The new rates will come into force on September 22.
“Mid-size and large cars, motorcycles of engine capacity exceeding 350cc, aircraft, airplanes for personal use… are all under 40%,” Finance Minister and GST Council Chairperson Nirmala Sitharaman said after the 56th Council meeting.
The move is significant for India’s premium motorcycle segment, which, though relatively niche in volume terms, has been expanding steadily with the rise of aspirational buyers. This category is dominated by Royal Enfield, Triumph, KTM, Harley-Davidson and others.
Until now, motorcycles above 350cc attracted 28% GST plus a 3% cess. With the new tax structure, the effective levy rises sharply, likely increasing on road prices and dampening affordability.
Analysts see the development as a mild headwind for Royal Enfield, India’s market leader in mid-size bikes, which has built a strong following for its 650cc line up comprising Interceptor, Continental GT, Super Meteor and 450cc engine based Himalayan. While most of its sales come from the 350cc range, the company still derives around 9% of domestic volumes from motorcycles above 350cc.
Last week, Siddhartha Lal, Executive Chairman of Eicher Motors, issued a strong appeal to policymakers for a uniform 18% Goods and Services Tax (GST) across all two-wheelers, warning that a split tax regime could weaken India’s global leadership in the sector, stall investment, and create an opening for foreign competitors.
Lal had pointed out that motorcycles above 350cc account for just 1% of India’s two-wheeler market, and raising GST on them would generate negligible revenue while contracting the segment. A uniform GST of 18% across all two-wheelers is critical. While lowering GST for motorcycles under 350cc will help broaden access, raising GST for those above 350cc would damage a vital segment and undermine India’s global leadership, Lal said.
The premium motorcycle space in India, though small compared with the commuter segment, has been growing faster than the overall two-wheeler market. According to industry data, sales of >350cc motorcycles have surged in recent years, driven by urban professionals and younger consumers upgrading from entry-level bikes. Royal Enfield alone sold over 1.4 lakh units of motorcycles above 350cc in FY25, registering a growth of 40% on year. On the other hand Bajaj Auto sold 1.55 lakh units, marking a 22% on year growth.
The GST hike could cool this momentum, especially as the segment is price-sensitive despite its aspirational appeal. However, some analysts believe the impact may be limited in the long term, as buyers of premium motorcycles tend to be less deterred by incremental costs compared with mass-market customers.