What Is SUV? GST Council Defines Criteria For Vehicles That Would Attract Highest 22% Cess

The clarification stated 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

The GST council on Saturday spelled out a clear definition of sports utility vehicles (SUVs) that would attract the highest cess of 22 per cent, over and above the GST rates on cars, and defined parameters of multi-utility vehicles (MUVs).

Finance Minister Nirmala Sitharaman said in the case of SUVs, the clarification 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 a 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 added. The discussion on MUVs began when some states asked whether sedans should be included in the SUV category, the FM said. 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, according to the PTI report.  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.

The clarification may result in changes to the prices of certain models as companies are still looking into the change.

Meanwhile, the auto industry body Society of Indian Automobile Manufacturers (SIAM) welcomed the clarification on the definition of SUVs, saying it is on the lines of its discussions with the finance ministry.

The decision is on the lines of SIAM's recommendations and based on the earlier discussions SIAM had with the ministry of finance, it added.

In a statement, SIAM said this has brought in clarity that a higher rate of compensation cess of 22 per, over and above 28 per of GST, will be applicable only on such vehicles which meet all four conditions.

"SIAM is thankful for the ministry of finance, the government of India, and the GST Council for issuing a clarification on the definition of SUVs," it added.

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