A GST rate cut can lower your bike loan EMI, but only for two-wheelers with engines under 350cc
This is because the GST is applied to the on-road price of the bike, which directly affects the principal amount you need to finance.
Effective September 22, 2025, the GST rates for two-wheelers in India were revised, creating two different scenarios:
1. For bikes and scooters under 350cc
For this mass-market segment, the GST was reduced from 28% to 18%.
- Lower on-road price: The 10% tax reduction immediately lowers the final purchase price of the bike.
- Lower loan amount: Since you need to borrow less to buy the bike, the principal amount of your loan decreases.
- Lower EMI: With a smaller loan principal, your equated monthly installment (EMI) will be lower, reducing your monthly financial burden.
2. For bikes over 350cc
Bikes in this premium, high-performance segment will now be taxed at a higher 40% GST rate.
- Higher on-road price: The increased GST will raise the final cost of the bike significantly.
- Higher loan amount: You will need to borrow a larger amount to finance the purchase.
- Higher EMI: The larger loan principal will result in a higher monthly EMI.
Other factors affecting your EMI
While a GST rate cut directly impacts the purchase price, other factors also determine your final EMI:
- Interest rate: The rate charged by your lender is a primary factor in EMI calculation.
- Loan tenure: A longer repayment period will decrease your monthly EMI but increase the total interest you pay over the life of the loan.
- Lender-specific charges: GST does not apply to the loan interest itself, but it does apply to charges such as processing and prepayment fees.
Apart from these aspects of purchase, you may want to look at how much you are paying for mandatory insurance of your two-wheeler. Refer our related article for the same.
Write to us by email to GET@Budvice.com to get quotations best suited for your needs.
