GST council has set clear criteria for SUV vehicles. With revised GST rates, compact SUVs like Maruti Brezza and Hyundai Venue might get cheaper.
Since its introduction, the Goods and Services Tax (GST) has been surrounded by controversies. There have also been many changes in the GST for different segments over the years. This time, it was time for the tax on SUVs. In the latest GST Council meeting, a new change has been made for SUV purchases. Currently, cars with engine capacity exceeding 1500 cc, length exceeding 4000 mm, and ground clearance of 170 mm attract up to 20-22% GST. Now, the GST Council has established a unified definition for SUVs throughout all states in the nation.
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No Consistent Definition for SUVs
The Goods and Services Tax (GST) Council meeting was held on Saturday. It was chaired by the Union Finance Minister and included state finance ministers. The point of focus was to decide on a single definition for sports utility vehicles across all states in the country. Currently, SUVs attract a higher tax rate than normal cars. There is an effective tax rate of 50% (20-22% GST, 22% cess, excise, VAT, road tax, motor vehicle tax, etc) on cars exceeding an engine capacity of 1500 cc, 4000 mm of length, and ground clearance of 170 mm. However, there has not been a consistent definition for SUV vehicles across states. This has led to confusion among automakers.
Now, the GST Council has made it clear that a vehicle has to meet all the criteria (i.e. engine size, length, and ground clearance) to be classified as an SUV. This means that if a car does not meet any of the three criteria, it would attract lower tax rates. “If cars do not meet any of these criteria, a lower cess rate will be applicable,” said Vivek Johri, Chairman, the Central Board of Indirect Taxes and Customs. Mr Johri also made it clear that the criteria for mobility utility vehicles are yet to be decided. An internal committee will also consider whether they have to meet will meet same criteria to come under the higher cess threshold.
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Buyers of Compact SUVs Like Maruti Brezza and Hyundai Venue to Benefit
Overall, the new GST Council meeting has brought a big change to the SUV segment. Under the new criteria, buyers looking for compact SUVs are bound to benefit. While automakers are still looking into the matter, further clarification may lead to price changes for some models. Many popular cars like Hyundai Venue, Kia Seltos, Mahindra XUV 300, and Maruti Suzuki Brezza might get way cheaper as they will attract a GST rate of just 5 per cent. All these cars barely miss the new SUV criteria. In a recent statement, the GST Council suggested that the GST rates will be reduced to 5 per cent or nil for several items. We might also see more and more customers opting for these compact SUVs.
The Hyundai Venue comes in both petrol and diesel engine options (1493cc diesel/ 998cc petrol/ 1197cc petrol). In terms of dimensions, it comes with a maximum length of 3995mm and a ground clearance of 190-195mm. The Kia Sonet shares the same dimensions. It comes with 1.0 and 1.2-litre petrol engine options. Even the Maruti Suzuki Brezza is 3995mm long and has a ground clearance is 200 mm. It is powered by a 1462cc petrol engine. While the Mahindra XUV 300 (1497cc diesel/ 1199cc gasoline) has a length of 3995 mm and a ground clearance of 180 mm, the Tata Nexon (1497cc diesel/ 1199cc petrol) has a length of 3,993 mm and a ground clearance of 209 mm.
