Royal Enfield Advocates for Uniform 18% GST Rate on All Two-Wheelers to Boost Market Access

Royal Enfield, a prominent mid-size motorcycle manufacturer, has urged the government to implement a standard GST rate for all two-wheelers, including those with higher engine capacities. Reports suggest that a revised GST framework might reduce taxes on smaller bikes to 18%, while larger motorcycles could face higher taxes. Currently, vehicles are taxed at 28%, the highest GST bracket, with an additional compensation cess ranging from 1% to 22% based on vehicle type.

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Impact of GST on Two-Wheeler Market

Eicher Motors Executive Chairman Siddhartha Lal highlighted that Indian brands already lead globally in the small-capacity segment. With substantial investments, the industry is now making significant progress in 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 per cent across all two-wheelers is critical," Lal stated.

Royal Enfield, part of Eicher Motors Ltd, is a leader in mid-sized motorcycles. Lal argued that reducing GST for bikes under 350cc would increase accessibility. However, increasing GST for those over 350cc could harm a crucial segment for India's global competitiveness. He warned that a differential rate could significantly reduce the domestic market for over 350cc bikes and hinder necessary investments for global competition.

Global Competitiveness and Market Dynamics

Lal emphasized that success abroad requires a diverse and competitive product range. A high GST on over 350cc bikes could limit the industry to smaller capacity models, weakening Indian brands' ability to build strong dealer networks and brand equity worldwide. He noted that competitors from countries without such tax distortions could dominate the mid-size segment internationally and then challenge India in the smaller-capacity market.

Motorcycles above 350cc constitute about 1% of India's two-wheeler market. Raising GST on them would generate minimal revenue but shrink the segment. For Indian riders, these bikes are not luxury items; they offer efficient and affordable alternatives to cars with lower fuel consumption and maintenance costs, which also help reduce India's fuel imports.

Future Prospects and Industry Growth

India already surpasses China, Japan, Europe, and the US in two-wheeler production. Lal believes a uniform 18% GST will not only maintain 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. This development will support allied industries like batteries, semiconductors, and advanced electronics, creating a robust manufacturing ecosystem that ensures India's global leadership for decades.

Lal remarked that 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 transitioning to a two-slab taxation system and eliminating the 12% and 28% GST rates. Currently, GST follows a four-tier structure: 5%, 12%, 18%, and 28%.

With inputs from PTI