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Business News/ Economy / What is SUV? GST Council sets criteria to define it
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What is SUV? GST Council sets criteria to define it

Finance Minister Nirmala Sitharaman said in case of SUVs, the clarification that has been given is that the higher rate of compensation cess of 22 per cent is applicable to a motor vehicle fulfilling all four conditions

Currently cars with engine capacity exceeding 1500 cc, length exceeding 4000 mm and having ground clearance of 170 mm attract a GST of 28% and a 22% cess, taking the effective tax rate to 50% (Bloomberg)Premium
Currently cars with engine capacity exceeding 1500 cc, length exceeding 4000 mm and having ground clearance of 170 mm attract a GST of 28% and a 22% cess, taking the effective tax rate to 50% (Bloomberg)

The GST Council on Saturday clarified on the definition of SUVs (sports utility vehicles) for levy of 22% compensation cess and decided to come out with parameters to define MUVs (multi utility vehicles).

Currently cars with engine capacity exceeding 1500 cc, length exceeding 4000 mm and having ground clearance of 170 mm attract a GST of 28% and a 22% cess, taking the effective tax rate to 50%. However, states do not have a consistent definition define a vehicle as a SUV, leading to confusion among automakers.

Finance Minister Nirmala Sitharaman said in case of SUVs, the clarification that has been given is that the higher rate of compensation cess of 22 per cent is applicable to a motor vehicle fulfilling all four conditions -- it is popularly known as SUV; has engine capacity exceeding 1,500cc; length exceeding 4,000 mm; has ground clearance of 170 mm and above.

"So this clarification is not new tax, it's more to say what defines that commodity which is under taxation as SUV," the minister said.

Finance Minister Nirmala Sitharaman said the discussion on MUVs began when some states asked whether sedans should be included in the SUV category. The states also suggested bringing in a definition for MUVs.

"If cars do not meet any of these criteria, lower cess rate will be applicable," said Vivek Johri, Chairman of Central Board of Indirect Taxes and Customs.

An internal committee will also consider whether mobility utility vehicles will also have to meet these criteria to come under the higher cess threshold, Johri said.

The minister said the Council decided that if any other motor vehicle categories need to be added to the 22 per cent cess, the panel of central and state tax officers (or the Fitment Committee) will look into it.

Meanwhile, briefing reporters after the 48th GST Council meeting, Finance Minister Nirmala Sitharaman said the Council could decide on only 8 out of the 15 agenda items due to paucity of time, but added that no new taxes have been brought in.

Offenses such as deliberate tampering of material evidence, failure to supply information and preventing any officer in his or her discharge of duties have been decriminalized, Revenue Secretary Sanjay Malhotra said Saturday.

*With inputs from agencies

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Published: 17 Dec 2022, 06:18 PM IST
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