GST or Goods and Services Tax came to effect in India on June 1st, 2017. While so many people in the country are aware of what GST is, for many, it's still an unclear affair.
What is GST?
GST or Goods and Services Tax is a unified taxing system applicable to all states in the country and is made as a replacement for the 3-tirer taxation system in India which includes; excise, VAT and service tax. GST is implemented to make taxation simple and hassle free across the nation.
When GST came into effect, the main impact the two wheeler industry faced was the change in price for vehicles sold all across the country. Due to the certain tax changes the new taxation system introduced, prices of certain vehicles hiked and many were reduced. The new GST system made manufacturers like Bajaj and Royal Enfield to come up with an updated price list of their motorcycles even before GST came into effect and companies like Yamaha, Honda and Suzuki followed the drill.
How are the buyers affected?
As per the new GST guidelines, motorcycles with engine capacities less than 350cc will witness a price cut as the peak GST for vehicles less than 350cc will only attract 28 percent of tax as opposed to the previous 30 percent under the old tax structure.
What that actually means to a buyer is that, if you are looking to buy a new bike like a Pulsar RS200, Suzuki Gixxer SF, or a Royal Enfield Thunderbird you will see a reduction in price. These bikes come under the 350 cc and will enjoy a price reduction of 2 percent.
While the story of motorcycles with engine capacities greater than 350cc is different. These motorcycles will attract a total tax of 28 percent with an added 3 percent cess. So, bikes from companies like Triumph, Harley Davidson, Kawasaki, and Ducati will see a price hike.
"Under GST, motorcycles with more than 350 cc engine displacement attract 28% tax and another 3% cess which will mean that our total tax incidence will be more than what it is now. So prices will go up but we will have to see how much we can absorb and how much can be passed on to the customer," said Vimal Sumbly, CEO, Triumph India.
It is speculated that the ownership of two wheelers may increase as most of the customers in india prefer bikes under 350cc and it is expected that the price of superbikes and cruisers of companies like Triumph, Ducati and Kawasaki will attract the additional cess, but as of now, it's still not clear as how the on-road prices of these bikes will be affected.
Many of the two-wheeler manufacturers are trying to figure out how they will actually benefit from the price change and how the benefits of prices reduction can be passed on to customers. Experts say that the real impact of GST on the two-wheeler industry can only be understood from a long term study and it takes months to come to a conclusion on how it affects the whole industry.