Chapter 87 - GST on Bikes: Rates, HSN Codes, and Input Tax Credit Guide

• Goods and services tax applies to new and used bikes, including electric and conventional motorcycles, with specific transactions exempt from GST.
• E-way bills are required for transporting bikes valued over ₹50,000.
• GST rates and HSN codes vary by engine capacity and bike type: 28% for up to 350cc, 31% for over 350cc, and 5% for electric bikes, all under HSN code 8711.
• Bikes are generally not eligible for input tax credit (ITC) unless they are used for passenger transport, further supply, or driving training.
• The goods and services tax promotes transparency and uniform pricing across states, reducing price discrepancies and benefiting electric vehicle adoption with lower tax rates.

The implementation of GST has streamlined the tax landscape across various sectors, including the automotive industry. This guide is about the specifics of GST on bikes, including different engine capacities and types, such as electric bikes.

Applicability of GST on Bikes in India

GST is levied on new and used bikes, covering electric and conventional motorcycles. Certain conditions exempt specific transactions from GST, enhancing the understanding of its comprehensive application in the two-wheeler sector.An e-way bill must be generated for transporting bikes worth over ₹50,000, even if the consumer is not registered under GST. The destination of the goods determines the place of supply for motorcycles, and registered sellers must issue a tax invoice for bike sales.

GST Rate and HSN Code for Bikes

The GST rates and HSN codes for bikes vary based on the engine capacity and type of bike:

ITC Availability on Bikes According to section 17(5)(a), the input tax credit (ITC) is generally not claimed on bikes. However, exceptions allow for ITC claims under specific conditions:

• Bikes are used for transporting passengers or as public transport.
• Bikes that are further supplied.
• Bikes that are used in training for driving.

Sales Decline: High GST rates make two-wheelers, particularly premium bikes, more costly. This obstacle for budget-conscious consumers leads to a dip in overall sales volumes. Increased Insurance Costs: The two-wheeler insurance attracts a GST of 18%, increasing the total cost of ownership. Combined with the high GST on the bike, this imposes a significant financial burden on purchasers. Industry Losses: The combination of declining sales and decreased affordability may cause the two-wheeler industry to stagnate. Manufacturers might experience inventory accumulation, slowdowns in production, and diminished profitability. Benefits from Potential GST Reduction on Bikes

• Lower Prices: Reducing GST rates would directly lower the cost of two-wheelers, enhancing affordability for the average consumer.
• Boosted Sales: More accessible pricing will likely entice buyers, especially in the budget and mid-range segments, potentially boosting demand.
• Industry Growth: Increasing sales volume would enable manufacturers to expand operations, introduce new models, and invest in emerging technologies.
• Increased Investments: A flourishing two-wheeler industry with rising demand might attract more investments, both domestic and international, reinforcing India’s stature as a major global player in two-wheeler manufacturing.

Input tax credit (ITC) on bikes is generally restricted under Section 17(5)(a) of the CGST Act, with exceptions in specific scenarios:

• Passenger Transportation: ITC is permissible if bikes are utilised for bike taxi or rental services.
• Further Supply: Entities selling or supplying bikes can claim ITC on their purchases.
• Training Services: Driving schools that employ bikes for instructional purposes can claim ITC.

Increased Transparency: GST has streamlined the pricing structure of two-wheelers by replacing multiple taxes with a singular, unified tax. This transparency allows buyers to fully understand the actual cost of their purchases without any hidden fees. Reduced Price Differences: Before GST, varied tax rates across states created notable price discrepancies for two-wheelers. The implementation of GST has standardised these rates, ensuring uniformity in pricing nationwide. This uniformity promotes fairness and aids consumers in making well-informed decisions, free from concerns about regional price variations. Benefits for Electric Vehicles: The GST framework supports the adoption of electric vehicles by applying lower tax rates and providing various incentives. This initiative makes electric two-wheelers more economical and promotes environmental sustainability. Buyers benefit from lower prices while contributing to a greener future.

India's GST structure for bikes is pivotal in shaping buyer behaviour and industry dynamics. While high GST rates have posed challenges by increasing prices and insurance costs, leading to a potential sales slowdown, the strategic tax rate adjustments also open doors to numerous benefits. Lowering the GST could make bikes more accessible, stimulate market demand, and encourage industry expansion. For buyers and businesses looking to assess tax implications, using a GST calculator can provide clarity on costs and potential savings. As the sector evolves, staying informed and adaptive to these changes will be crucial for consumers and manufacturers alike. This will capitalise on potential opportunities and drive ahead in a more sustainable and profitable direction.