Two-Wheeler Ownership to Be Expensive Under GST


GST slaps 28% tax on spare parts of two-wheelers; tax for services goes up by 3%

India is one of the fastest growing two-wheeler markets in the world with people thriving towards owning a vehicle on two-wheels. With the Goods and Services Tax rolled out across the country on 1st July, two-wheelers with sub-350 cc engines are becoming cheaper as they see 2% decline in total tax amount, while bigger than 350 cc engine equipped models will be slightly pricier. But, there is bad news for the existing two-wheeler owners as the ownership cost is about to go up.

Under the new tax structure, spare parts for the two-wheelers have been priced at 28% slab of the GST, which means pricing will go up. On the other hand, the tax for the servicing will draw 3% extra cess. This means the two-wheeler owners have to pay bit of extra money every time they visit the service centres from now on.

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However, despite the slight increase in the service tax and 28% GST for the spare parts, it is very unlikely that the two-wheeler industry will see any negative impact of the GST. Also, the two-wheeler manufacturers believe that the marginal price increase for the premium models won’t affect the business at large. Several brands have already announced price reduction to pass on the GST benefit to the customers.

Interestingly, Indian two-wheeler market is dominated by the commuter models ranging between 100 cc – 125 cc models. Pricing of these bikes and scooters will be lowered slightly as the total tax incidence comes down by 2%. Apart from that, a good monsoon, salary hike due to the 7th pay commission are other factors expected to play in favour of the Indian two-wheeler industry.

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GST is the biggest tax reform introduced to the country since independence. It abolishes multiple state and central tax and rolls out one single universal tax system across the country that is divided in two components, state component and central component.