Are you confused about how the introduction of the Goods and Services Tax (GST) will impact your dream of owning a two-wheeler? Here are three factors that may help throw some light on this question.
- Simplified transactions
GST will make purchasing your two-wheeler simpler because almost 16 indirect taxes have been subsumed by it. To determine the GST rate, two-wheelers are classified under two categories; engine capacity below 350CC and those exceeding 350CC.
The first category motorcycles are expected to see a slight reduction in the prices. Before GST, these bikes were taxed at a rate of 30%, which included multiple levies like education cess, Krishi Kalyan Tax (KKT), value added tax (VAT), and others. The new rate applicable under GST will be 28%, which will lower manufacturing costs. These benefits will be passed on to the customers through price reductions.
Some of the most popular models within this category include Honda Activa, Royal Enfield Bullet 350, and Bajaj Pulsar 220. The reductionsdone by Hero Motocorp range from INR 400 to INR 1800 for some of its most popular models. Some of the high-end premium models have also witnessed price reductions of up to INR 4,000 in some locations. As a result, you will have to avail of a lower bike loan after the implementation of GST.
A 30% tax rate was previously applicable to the second category of motorcycles. However, in addition to a GST of 28%, this category of two-wheelers will see a 3% cess levy on its price. Therefore, the effective rate will be 31%, which is marginally higher than the pre-GST rate.
- Single price regime
Prior to the implementation of GST, the applicable tax rate varied from one state to another. Therefore, the ex-showroom price of the same model varied from one city to another. With ‘one country one tax’ rate, prices will be uniform across India. Furthermore, it will bring additional transparency in the system as multiple taxes are eliminated with a single applicable GST rate. Adhering to the compliances will be easier under the GST regime.
- Lower two-wheeler loan
As the prices of motorcycles that have an engine capacity of less than 350CC reduce, the amount you need to avail of towards the two-wheeler loan will reduce. This will enable you to reduce your interest cost, which makes owning a bike a more affordable option. A lower loan amount means a lesser equated monthly installment (EMI). Therefore, you may be assured of facing no financial difficulty during repayment.
Bike finance is expected to become more affordable due to price cuts. So avail of a loan today to fulfill your dream of owning a two wheeler.