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To understand the concept of tax on two wheelers in India, one must first know what GST is. In simple words, GST stands for Goods and Service Tax, an indirect tax that consumers must pay while availing of goods and services. Aspiring borrowers must make a note of the following GST categories on bike purchases:
Category | GST Rate |
---|---|
Two-wheelers with an Engine Capacity of over 350cc | 31% |
Two-wheelers with Engine Capacity below 350cc | 28% |
Two-wheeler insurance policy | 18% |
Clutch Cable, Gauge Oil Level, and Brake Pads | 28% |
Battery Charging, Consumables, and Lubricants | 18% |
The former taxation system had multiple taxes between the central and state levels. The GST combined all of them under a single comprehensive umbrella, this includes bike GST rate as well. Consequently, the tax impact has reduced significantly. Additionally, the GST system has also simplified bike purchases.
The engine capacity of the bike primarily affects the GST rate. In the current conditions, bikes with an engine capacity of 350cc have a GST percentage of 28%. Those with engine capacity of more than 350cc have an additional bike GST rate of 3%, amounting to a total of 31%. As evident, the GST rate on bike prices changes with the vehicle’s engine capacity, depending on how premium the two wheeler is.
The President of India implemented the GST on midnight of July 1, 2017. With this implementation, several bike manufacturers like Bajaj Auto and Royal Enfield passed on the benefits of reduced taxes to the customers. They announced discounted bike prices on several models. Besides GST on two wheeler purchases, consumers pay 18% GST on consumables, battery charging, and lubricants. The GST on spare parts like gauge oil level and clutch plate is 28%.
The various perks of electric bikes have taken the Indian two wheeler industry by storm. Considering the soaring fuel prices, several consumers plan to purchase an e-bike for regular commutes. Contemplating the rise of electric bikes in the future, the trend has become quite popular among makers and consumers alike. To encourage the sales of electric vehicles in the Indian market, the GST on e-bikes is merely 5%. Since this is the initial phase of electric vehicles in the country, this low GST rate aims at encouraging the purchase and sale of e-vehicles.
Acknowledging the massive potential of electric bikes in India, the reduced GST on e-bikes and easy availability of two wheeler finance have paved the way for the purchase of electric vehicles significantly. Formerly, the GST on electric bikes was higher at 12%. However, with a revised GST percentage, electric two wheelers, and bikes have witnessed a drop in their overall price. Bike manufacturers have also reduced their e-bike rates to encourage customers to experience the convenience, ease, and benefits of electric vehicles.
According to the current taxation rules, the bike insurance GST rate is set at 18%. In simple words, bike owners paying a bike insurance policy premium must pay an additional GST of 18%. Formerly, before the GST era, the taxation structure for bike insurance comprised VAT (Value Added Tax), CST (Central Sales Tax), excise duty, etc. All these combined together to make a tax rate of 15% on two wheeler insurance. Considering that, whether the owner purchases a comprehensive insurance cover or a third-party insurance plan, the payable premium amount on bike insurance has become higher.
The IRDAI (Insurance Regulatory and Development Authority of India) determines and caps the price of third-party two wheeler insurance. Those planning to purchase a new bike with savings or two wheeler finance must visit the authority’s website and know the latest insurance rates.
The implementation of GST in 2017 became a source of extensive debate among economists. The underlying idea behind its introduction was to simplify the complexity of paying several taxes on a single commodity under multiple pieces of legislation. The tax provision affects almost everything a person purchases. However, as its name suggests, it applies to goods and services only that an individual buys. That means it does not apply to two wheeler finance.
However, practically speaking, it affects loans in an indirect manner. That is because while processing and disbursing a loan, the lending institution offers the applicant various services that are taxable, including processing, bounce, and foreclosure charges. Earlier, loans involved several taxes that drove up the total amount considerably. However, with GST, the process has become smoother and more transparent than ever before.
Explore the advantages of GST benefits for two-wheeler buyers, simplifying the purchase process and offering financial relief.
With the implementation of GST in 2017, the taxes on bikes and two wheelers up to 350cc have been reduced significantly. As a result, two wheelers have become cheaper and more affordable in India. However, bikes with an engine capacity above 350cc attract an additional GST of 3%. That means discounts on two wheelers after GST depending on the bike's engine capacity and the state in which the consumer is buying the vehicle.
GST has significantly affected several commodities a commoner uses in everyday life, and bikes are one of them. Die-hard fans of high-power bikes must be ready to pay a higher GST on two wheelers in India, adding to the price they must pay to get the vehicle they desire.
The impact of GST on two wheeler engulfs several sections. However, once a consumer decides to purchase a bike, they must know the GST rates they must pay for insurance, spare parts, servicing, etc. While the minimum GST for bike purchase is 28% and the higher rate is 31%, the GST rates for other associated expenses are also considerable. Besides, GST on e-bikes is lower, making them a feasible and more affordable alternative to regular bikes.
The Honda Dream Yuga has a displacement of 124.7 cc, and its ex-showroom price was around INR 51,000 prior to the GST reduction. After the implementation of GST, the price of the bike dropped to approximately INR 50,000.
With an engine capacity of 124.7cc, this bike's price was around INR 56,000 before the implementation of GST. Following the GST revision, the new ex-showroom price of the bike is approximately INR 53,000.
This bike has a displacement of 100cc, and its ex-showroom price was approximately INR 45,000 before the implementation of GST. After a 3% to 5% reduction in price due to GST, the new ex-showroom price of the bike is approximately INR 44,000.
This bike has an engine capacity of 149 cc and had an ex-showroom price of around INR 70,000 before the implementation of GST. Following the GST reduction, the new ex-showroom price of the bike is approximately INR 68,000.
With a displacement of 346 cc, this bike had an ex-showroom price of approximately INR 1,35,000 before the implementation of GST. Following the GST reduction, the new ex-showroom price of the bike is around INR 1,30,000.
The Bajaj Pulsar, with a displacement of 220 cc, had an ex-showroom price of approximately INR 92,000 before the implementation of GST. After the GST reduction, the new ex-showroom price of the bike is approximately INR 88,000.
Bike manufacturers and sellers are anticipating a potential reduction in the GST rate for two-wheelers, which could further decrease bike prices in the country. After selecting a two-wheeler, customers can obtain financing through a loan. Individuals can use an online two-wheeler loan EMI calculator, which is available on the lender's website, to determine their EMI payments.
1. Is there a significant price difference between BS4 and BS6 vehicles?
Yes, there is a notable price difference between BS4 and BS6 vehicles due to upgraded emission standards and technology.
2. How has GST affected the pricing of two-wheelers across different states?
GST has standardized the tax rates on two-wheelers across all states, eliminating state-specific taxes and leading to uniform pricing nationwide.
3. What challenges do two-wheeler buyers face under the GST regime?
Some challenges include understanding the new tax structure and complying with the updated tax filing processes, though these are generally outweighed by the benefits.
4. Can businesses claim input tax credit on two-wheeler purchases?
Yes, businesses can claim an input tax credit on two-wheeler purchases used for business purposes, reducing their overall tax liability.
The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.
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