GST Council Proposes 40% Tax on Motorcycles Above 350cc, Slashes Rate to 18% for below 350cc

The 56th meeting of the Goods and Services Tax (GST) Council was held at Sushma Swaraj Bhavan in New Delhi on September 03, 2025, chaired by Union Finance Minister Nirmala Sitharaman, has proposed huge changes in the Goods and Services Tax (GST) rates on automobiles, including motorcycles.

One of the biggest announcements was the steep hike in GST on high-capacity motorcycles. The tax rate on motorcycles with engine capacity exceeding 350cc will go up to 40%, while smaller motorcycles of up to 350cc will see their GST rate reduced from 28% to 18%.

Explaining the decision at the press briefing, Finance Minister Sitharaman said:

“Midsize and large cars, motorcycles of engine capacity exceeding 350cc, aircraft, for example, helicopters and aeroplanes for personal use, distinctly for personal use, yacht and other vessels for pleasure or sports are all under 40%.”

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The move clearly differentiates between luxury and everyday use vehicles. By lowering the tax burden on motorcycles below 350cc, which make up the majority of commuter bikes in India, the Council aims to provide relief to middle-class and daily users. At the same time, placing a 40% GST rate on bigger bikes, cars, private aircraft and yachts puts them in the “luxury goods” category.

The new rates may come into effect from September 22, 2025, as part of the phased rollout of GST changes announced by the Council.

This decision is expected to benefit millions of two-wheeler owners across India, as most motorcycles sold fall below the 350cc engine capacity. On the other hand, buyers of high-end superbikes and luxury cars will face a much higher tax burden.

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