GST council defines criteria for highest 22% cess on SUVs

NEW DELHI: The GST council meeting on Saturday came out with a clear definition of SUVs that would attract the highest cess of 22%, over and above the GST rates on cars, spelling four specific criteria that would lead to maximum tax incidence.
In a clarification after the 48th meeting of the GST council, it was announced that the higher rate of compensation cess of 22% is applicable to "motor vehicle fulfilling all four conditions, namely, it is popularly known as SUV, has engine capacity exceeding 1,500cc, length exceeding 4,000mm and a ground clearance of 170mm or above."
The clarification may result in changes to prices of certain models, though companies say that they are still looking into the matter.
The clarification came in due to confusion over the rates at which bigger SUVs need to be taxed through the application of the cess, which stands at 15% for hybrids, 20% for certain types of SUVs, and 22% for some.
MS Mani, partner at Deloitte, said that the clarification on SUVs "will need to be carefully evaluated considering the current classification by existing manufacturers for specific SUVs".
The car industry is currently taxed at a GST rate of 28%, over and above which there is a cess for various kind of vehicle categories, including the SUVs.
Industry analysts said clarification of a definition for the highest slab of SUVs came in only as there had been instances of confusion over which slab would be applicable for certain class of SUVs.
"The issue of applicable rate of compensation cess for SUVs/ MUVs has been in talks for a while. This issue seems to have been put to a rest with GST council specifying the four conditions for levy of 22% GST compensation cess levy," said Abhishek Jain, partner indirect tax at KPMG in India.