GST Impact: What you need to know?

We try to clear up the confusion surrounding the new GST norms and whether you should plonk down the money now for that new two-wheeler you’ve been eyeing

Let’s get GST out of the way first.

What is GST? Is it good news for the consumer?

GST is short for Goods and Service Tax. It is an attempt by the Indian government to unify all taxes we pay on anything we buy. For example, you buy toothpaste which costs Rs 10 but then you’ve to pay service tax, VAT, education cess and other taxes, some of which are levied by the central government and some by the state government. It means, if a product is made in a certain state, its price might be higher in another state depending on the tax structure of that particular state government. GST attempts to put a cap on this by declaring a fixed combined tax on every kind of consumer product. Also, the idea is to levy the tax on the product when it is sold to the consumer, instead of different points of its manufacturing cycle, which force the manufacturer to drive up prices of a product. A single tax point should theoretically lower prices, passing on the benefits to the consumer.

It is, in a way, good for the consumer as prices for products will remain the same across state lines (barring transportation costs of course). It will also give you, the consumer, clarity on how much tax are you actually paying and for what reason.

Now, the GST rule levies a flat 28 per cent tax on motorcycles manufactured in India and having a cubic capacity below 350cc while bikes above that will attract a 31 per cent tax. Bikes currently attract a 30 per cent tax.

This means that you will be paying the least amount of tax in any given state. And with the one-time tax, the benefits will pass on to the consumer in the form of a reduced retail or ex-showroom price.

The dilemma:

A lot of bike manufacturers have already reduced prices in anticipation of the GST which will kick in on July 1st. We visited a couple of dealers and the general consensus is post-GST bike prices will go up as RTO and insurance costs (which are essentially a service commodity) will go up. While most manufacturers will pass on GST benefits to consumers in the form of a 3 to 5 percent reduction in price, it is likely that this benefit will be offset and in come cases, overshadowed by the increase in RTO and insurance.

The best deals:

Manufacturers like Bajaj and UM Motorcycles have reduced prices on their bikes by up to Rs 4,600. TVS and Royal Enfield have stated GST benefits will be passed on to the customer but that will happen once GST norms come into effect. Now is a good time to buy a Bajaj or UM motorcycle as you get post-GST price benefits while paying current taxes which are expected to go up after July 11.

The best deals right now would be for customers opting for higher capacity bikes (more than 350cc) as post-GST, these bikes will see a substantial hike in both ex-showroom and on-road prices. So if you have been eyeing that big bike for a while now, delay no further!

Post GST update:

UM Motorcycles were one of the few manufacturers that had passed on GST benefits to customers before the GST norms kicked in. The ex-showroom price for the Renegade Sports S and Renegade Commando have been cut by Rs 4,000 to Rs 5,600 depending on the model and the state they are sold in.

Bajaj too had passed on post-GST benefits to customers before the GST norms come into effect. The maximum ex-showroom price reduction on Bajaj bikes are up to Rs 4500 depending on the bike model and the state in which the bike is sold.

Honda Motorcycles meanwhile have seen a marginal effect on its ex-showroom prices post-GST. In Delhi, the ex-showroom prices for its bikes and scooters see a price cut ranging from Rs 440 to Rs 725.

Post-GST, Yamaha saw an ex-showroom price reduction for its bikes and scooters with the lowest being Rs 234 for the Ray-Z and the highest being Rs 1050 for the FZ25 (prices, ex-showroom, Delhi).

TVS has reduced its bikes and scooter prices post-GST. The ex-showroom prices have gone down by Rs 350 to Rs 1,500 for its commuter bikes and scooters. Its premium bike segment saw a reduction in ex-showroom prices of upto Rs 4,150.

Royal Enfield, on the other hand, saw more of a post-GST price hike on most of its models. In Pune, Royal Enfield bikes below 350cc saw an ex-showroom price drop of less than Rs 50. RE bikes above 350cc witnessed a substantial ex-showroom price increase ranging from Rs 2,824 to Rs 4,399.