Prices Of SUVs, MPVs To Go Up Following GST Cess Increase

The Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, has reached a decision to refine the definition of SUVs and expand the scope of compensation cess for utility vehicles. Under the new guidelines, an SUV will be classified based on a length exceeding 4 meters, engine capacity exceeding 1,500 cc, and a ground clearance of 170 mm and above in an unladen condition. As a result of the council's decision, all large cars, regardless of their names, will now attract a 22 per cent cess on top of the existing GST rate of 28 per cent, due to which SUVs will become more expensive than before.

The revised notification now includes all utility vehicles, regardless of their nomenclature, provided they meet the parameters. However, there is ambiguity about whether a cess of 20 per cent or 22 per cent should be imposed on Multi Utility Vehicles. Previously, automobiles were subject to a 28 per cent GST, with an additional compensation cess ranging from 1 per cent to 22 per cent depending on the type of vehicle. Among all vehicle categories, SUVs attracted the highest GST rate of 28 per cent along with a 22 per cent compensation cess.

In addition, the condition popularly known as SUV has also been removed. This means that all large UVs, which were till now attracting a cess of 20 per cent, will now increase to 22 per cent, meaning there would be a price hike of about 2 per cent. The recent amendment to the compensation cess rates will have a significant impact on popular Indian SUV models such as the Hyundai Creta, Kia Seltos, Volkswagen Taigun, Skoda Kushaq, and MG Astor. These vehicles, known for their length exceeding 4-metres, will now face an increase in price due to the higher tax burden imposed by the amendment.

As a result of the revised guidelines, purchasing these SUVs is expected to become more expensive. However, there is currently a lack of clarity regarding the implementation date of the new prices. It remains uncertain whether the revised rates will apply to customers who have already booked their vehicles before the amendment was announced.

The lack of clarity regarding the applicability of the new prices to existing bookings may lead to confusion and uncertainty among both buyers and dealers. Customers eagerly awaiting the delivery of their SUVs will be keen to understand if they will be subjected to the increased tax burden or if their bookings will be honoured based on the previous rates.