Your Dream Ride Just Got Cheaper: Tax Relief & Accessible Two-Wheeler Loans

India’s Goods and Services Tax (GST) regime has just undergone one of its most impactful revisions, popularly dubbed GST 2.0, and it’s set to take effect on September 22, 2025. This GST reform bill simplifies the structure into two primary slabs—5% for essentials and 18% for standard goods—with a new 40% “demerit” rate reserved for luxury and sin products. 

For India’s two-wheeler industry, the changes are dramatic: motorcycles and scooters up to 350cc will now attract only 18% GST instead of 28%, while premium models above 350cc move to the highest 40% slab. Electric two-wheelers retain their 5% GST to continue promoting sustainable mobility.

To understand the gravity of this change, we must first look at why two-wheelers form the backbone of India’s mobility landscape.

Two-Wheelers: India’s Mobility Backbone

For decades, two-wheelers have been part of economic lifelines among many Indian households. Whether it’s a delivery agent navigating city lanes, a farmer transporting goods to the mandi, or a student commuting to college, motorcycles and scooters remain indispensable.

In FY 2024–25, India sold approximately 19.6 million two-wheelers, while exports were about 4.2 million units. Motorcycles dominate with nearly 65% market share, while scooters account for around 35%, especially popular among women and urban commuters. Mopeds and niche vehicles make up the rest. 

Against this backdrop, GST 2.0’s tax cuts on commuter bikes are market movers. Let’s move on to, what exactly has changed?

Understanding the GST Tax Changes

The new GST bill alters the tax landscape for two-wheelers as follows:

• ≤(Less than) 350cc motorcycles & scooters: GST rate cut from 28% to 18%, covering almost 98% of India’s two-wheeler market. This includes all popular commuter models in the Indian automobile market.
• >(above) 350cc motorcycles: Shifted from 28% to 40%, targeting high-end models.
• Electric two-wheelers: Continue at 5% GST, ensuring policy continuity to accelerate EV adoption.
• Implementation date: September 22, 2025, aligning with the nationwide GST 2.0 rollout.

This restructuring reflects a deliberate strategy: Prices for commuter bikes and scooters will fall, making them more affordable for millions of families. Meanwhile, luxury motorcycles will get pricier, signaling the government’s intent to differentiate between essentials and indulgences.

Industry Response: Manufacturers & Dealers

For India’s major OEMs, GST 2.0 could not have come at a better time. All the big brands that dominate the sub-350cc category, will gain the most as their flagship commuter models now fall under the lower GST rate. 

Dealers, who faced sluggish sales in anticipation of tax cuts, are bracing for a festive season boom. Many customers have delayed purchases, waiting for GST 2.0 to kick in. With implementation lined up just before Diwali, a surge in bookings and deliveries is expected. Analysts forecast that pent-up demand could lead to one of the strongest quarters for the two-wheeler industry in recent years. 

Wider Economic & Policy Impact

The GST cut has the potential to create a multiplier effect across sectors:

• Consumer Savings: Families saving ₹7,000–₹12,000 on purchases can redirect funds to fuel, maintenance, or household essentials. This boosts consumption
• Rural Empowerment: Affordable two-wheelers expand access to schools, hospitals, and jobs. Farmers can transport produce more easily, while gig workers in delivery and ride-hailing gain entry at lower costs. With over 3 million Indians employed in the gig economy (as of 2025), this cost reduction can improve incomes.
• Credit Formalization: More buyers will be choosing a bank for two wheeler loans, increasing participation in formal finance. This aligns with government efforts to broaden financial inclusion.
• EV Push: By retaining the 5% GST rate on electric two-wheelers, the government reinforces its climate targets under the FAME-II scheme. Lower petrol bike costs and EV subsidies together create a balanced ecosystem.
• Luxury Demarcation: Premium bikes above 350cc, now taxed at 40%, serve as a clear policy signal: mass mobility is supported, but discretionary luxury will remain a revenue contributor.