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  1. GST rate rejig: Here is what Royal Enfield's Siddhartha Lal has said on tax rates for two wheelers

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GST rate rejig: Here is what Royal Enfield's Siddhartha Lal has said on tax rates for two wheelers

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4 min read | Updated on August 31, 2025, 12:23 IST

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SUMMARY

GST rate rejig: In a post on LinkedIn, Eicher Motors Executive Chairman Siddhartha Lal said that Indian brands already dominate the small-capacity segment worldwide, and through heavy investment, the industry is now making deep inroads into mid-capacity motorcycles.

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Eicher Motors Executive Chairman Siddhartha Lal

Eicher Motors Executive Chairman Siddhartha Lal. | Image: Company website

GST rate rejig: Royal Enfield, the mid-size motorcycle maker, on Saturday, August 30, called upon the government to consider a uniform goods and services tax (GST) rate for two-wheelers, including higher-capacity bikes.

According to various reports, the revised GST structure could bring down the tax incidence on smaller bikes to 18%, while higher-capacity motorcycles could come under the ambit of higher taxation.

Presently, automobiles are taxed at 28%, which is the highest GST slab.

In a post on LinkedIn, Eicher Motors Executive Chairman Siddhartha Lal said that Indian brands already dominate the small-capacity segment worldwide, and through heavy investment, the industry is now making deep inroads into mid-capacity motorcycles.

"By delivering exceptional value, we are drawing riders worldwide to shift from larger, higher-displacement machines to Indian-made mid-size motorcycles. To sustain this momentum, a uniform GST of 18% across all two-wheelers is critical," Lal said.

Royal Enfield, a part of Eicher Motors Ltd, is a leader in mid-sized motorcycles.

"Lowering GST for less than 350cc will help broaden access, but raising GST for over 350cc would damage a segment vital to India's global edge," Lal stated.

A differential rate would dramatically shrink the domestic over-350cc segment and choke the investment needed for India to compete globally, Lal added.

Success abroad requires a wide and competitive product range, and a punitive GST on over 350 cc would relegate the industry to smaller capacity two-wheelers and undermine Indian brands' ability to build strong dealer networks and brand equity worldwide, Lal said.

Lal asserted that rivals from countries without such distortions would seize the mid-size segment internationally, then push back into the smaller-capacity market where India currently leads.

He noted that motorcycles above 350 cc make up around 1 per cent of India's two-wheeler market.

"Raising GST on them would add negligible revenue but contract the segment. For Indian riders, these motorcycles are not luxury goods; they are efficient, affordable alternatives to cars, offering lower fuel use and maintenance – benefits that also help reduce India's fuel imports," Lal said.

India already leads China, Japan, Europe, and the US in two-wheelers, Lal said.

"A uniform 18% GST will not only secure this leadership but also enable India to dominate the global electric two-wheeler market. By achieving scale in EVs, India can establish itself as the world's hub for next-generation mobility," Lal said.

This will anchor allied industries – from batteries to semiconductors and advanced electronics – creating a powerful manufacturing ecosystem that ensures India's global leadership for decades to come, Lal added.

Lal said India's two-wheeler industry is the clearest success story of the Make in India initiative and the only manufacturing sector where Indian brands lead globally.

The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation and scrap the 12% and 28% GST rates.

Currently, GST is a four-tier structure of 5%, 12%, 18% and 28%.

GST 2.0: What you need to know

In mid-August 2025, Prime Minister Narendra Modi said that the central government has circulated the draft of the next-generation GST reforms among states and sought their cooperation to enact the proposal before Diwali.

The prime minister announced the proposal to reform GST law in his Independence Day speech on August 15.

In upcoming sweeping reforms, the GST on automobiles – currently in the highest tax bracket – will be restructured to resolve classification disputes related to engine capacity and vehicle size, ultimately benefiting the common man, according to government sources.

Presently, automobiles are taxed at 28%, which is the highest GST slab. A compensation cess, ranging from 1 to 22%, is levied on top of this rate, depending on the type of vehicle.

The total tax incidence on cars, depending on engine capacity and length, ranges from 29% for small petrol cars to 50% for SUVs.

Electric vehicles (EVs) are taxed at a 5% rate.

A lower GST rate will boost demand and sales, as cars will become affordable. Thereby boosting consumption, a key idea behind the GST overhaul proposal mooted by the Centre.

Commenting on the proposal, Morgan Stanley said if the GST rate for autos is reduced, it will drive the next auto upcycle.

(With inputs from PTI)
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