Goods and Services Tax (GST) on bikes in India is determined by the vehicle type and engine capacity, with all motorised two-wheelers classified under Harmonised System of Nomenclature (HSN) Code 8711.
These rates directly affect the purchase cost of bikes, dealers' pricing decisions, and businesses' GST compliance. Recent changes introduced through Notification No. 9/2025-Central Tax (Rate) have revised the tax structure for the two-wheeler segment. As a result, buyers and businesses need to understand the applicable GST rate and input tax credit (ITC) rules.
How are bikes classified under HSN for GST purposes?
Bikes in India are classified under HSN 8711 for GST purposes. This section covers motorcycles, scooters, mopeds, and electric two-wheelers, with further tariff sub-classifications based on factors such as engine capacity, propulsion type, and vehicle category.
The applicable GST rate is determined primarily by the vehicle category and the engine capacity threshold prescribed in the relevant GST notifications. Under the revised GST structure, 350 cc is the key threshold for petrol and diesel two-wheelers.
GST rates on bikes by category and engine capacity
The following table outlines the GST rates for different categories of two-wheelers under HSN Code 8711:
|
Bike Category |
GST rate |
Notes |
|
Petrol/Diesel motorcycle or scooter (Engine capacity up to 350 cc) |
18% |
Reduced from 28% |
|
Petrol/Diesel motorcycle or scooter (Engine capacity above 350 cc) |
40% |
Increased from ~31% (earlier 28% GST + 3% compensation cess). Now, no cess applicable. |
|
Electric two-wheeler |
5% |
Concessional rate to promote electric mobility. |
Sources: http://gstcouncil.gov.in
How is GST calculated on a bike purchase?
GST on a new bike is calculated by applying the applicable GST rate to the taxable value of the vehicle, that is, its base price before tax. This GST forms part of the ex-showroom price, while road tax, insurance, and registration charges are added separately to arrive at the on-road price.
For example, a 160 cc commuter motorcycle with a taxable value of ₹1,20,000 attracts GST at 18%, resulting in GST of ₹21,600.
Road tax, registration fees, and insurance charges are not included in the GST calculation, as these are levied separately.
Similarly, a motorcycle above 350 cc with a taxable value of ₹3,50,000 attracts GST at 40%, amounting to ₹1,40,000.
How does GST apply to used and second-hand bikes?
GST may apply to the sale of used and second-hand bikes when the seller is a GST-registered dealer. Under the margin scheme prescribed in Rule 32(5) of the CGST Rules, 2017, GST is generally payable only on the dealer's margin, rather than on the full transaction value.
The margin is usually calculated as the difference between the selling price and the purchase price. If the margin is negative, meaning the dealer sells the bike at a loss, GST is generally not payable on that transaction.
A dealer opting for the margin scheme cannot claim ITC on the purchase of the used bike.
Where depreciation has been claimed on the vehicle under Section 32 of the Income-tax Act, the margin is the difference between the sale consideration and the depreciated (written-down) value on the date of supply, as prescribed under Notification No. 08/2018-Central Tax (Rate).
For transactions between private individuals who are not registered under GST, GST generally does not apply because the transaction does not involve a taxable supply by a registered person.
Input tax credit on bikes: What is blocked and what is not?
ITC on bikes is generally blocked under Section 17(5)(a) of the CGST Act, with limited exceptions. Motorcycles and scooters are motor vehicles used for transporting persons. As a result, businesses cannot usually claim ITC on GST paid for bikes bought for internal use, such as staff commuting or business operations.
ITC on bikes is available only in the following circumstances:
- The bike is used for further supply, such as by a dealer.
- The bike is used for passenger transportation, such as two-wheeler taxi services.
- The bike is used for imparting riding or driving training, such as by a driving school.
Outside these exceptions, ITC cannot be claimed and the GST paid on the purchase of the bike is included in the buyer's asset cost.
Key takeaways on GST for bikes
Understanding a bike's GST rate requires more than knowing whether it runs on petrol, diesel or electricity. Correct classification, engine-capacity thresholds and ITC restrictions all affect the final tax outcome and compliance obligations. For dealers and businesses, getting these details right helps avoid tax mismatches, incorrect invoicing and compliance issues.
As transaction volumes grow, solutions like TallyPrime can simplify GST compliance by providing accurate HSN classification, GST-ready invoicing, ITC tracking and return preparation, enabling businesses to manage two-wheeler taxation with greater confidence.
