GST Rate Cut To Lower EMIs On Bikes: Check Interest Rates Offered By Top Banks On Two-Wheelers Loans
The recent GST rate cut on two-wheelers under 350cc will reduce on-road prices, making loans and monthly EMIs more affordable.
The Goods and Services Tax (GST) Council’s recent decision to rationalise tax slabs is set to make two-wheelers more affordable, both in terms of upfront costs and equated monthly instalments (EMIs) for loans. The new GST rates will come into effect from Sept. 22.
Under the revised slabs, two-wheelers with engines up to 350cc will now attract a GST rate of 18%, down from 28% earlier. This move is expected to benefit nearly all manufacturers in this segment, which, as per industry reports, accounts for around 98% of the market.
Similarly, bikes with engine capacities above 350cc will now be taxed at 40% without cess. This change is likely to impact brands such as Royal Enfield, which sells a significant number of bikes in the 450cc and 650cc segments.
Current Two-Wheeler Loan Rates
Interest rates for two-wheeler loans vary across banks depending on the lender and the borrower’s credit profile. HDFC Bank offers two-wheeler loans at interest rates starting from 14.5% per annum, ICICI Bank from 10.25% and Axis Bank from 10.5%. State Bank of India offers two-wheeler loans at interest rates ranging from 13.1% to 14.6% per annum.
GST Rate Cut Impact On Two-Wheeler Loans
The GST revision will have a direct impact on two-wheeler loan plans. Loan amounts are usually based on the on-road price of the bike, which includes GST. Most banks offer loans covering up to 80% to 100% of the bike’s on-road price. Any change in GST, therefore, alters the final cost, influencing the borrowing amount and EMI.
Let us understand this through an example:
Bike under 350cc
Previous on-road price at 28% GST: Rs 2 lakh
Present on-road price after 18% GST: Around Rs 1.84 lakh
Loan amount (assuming 90% financed):
Before GST cut: Rs 2 lakh × 90% = Rs 1.80 lakh
After GST cut: Rs 1.84 lakh × 90% = Around 1.66 lakh
EMI calculation (for 36 months at 12% interest):
EMI before GST cut: Rs 5,979 per month
EMI after GST cut: Rs 5,514 per month
This indicates a drop of around Rs 465 per month in EMI, making the loan more affordable for potential borrowers. Similarly, the higher GST on bikes above 350cc will increase on-road prices, leading to higher loan amounts and monthly EMIs for those seeking financing options.
The reduction in GST for smaller bikes will make them more accessible to young buyers, professionals and lower middle-class households. Given that motorcycles remain the primary mode of transport in rural and semi-urban India, cheaper two-wheelers will directly benefit farmers, small traders, daily wage earners and gig workers.
