Home Car News What is the change In Tax On SUVs In GST Council’s Latest Meeting ?

What is the change In Tax On SUVs In GST Council’s Latest Meeting ?

by Navyatha Sandiri
GST Council

New Delhi: The GST Council resolved on Saturday to have a unified definition for sports utility vehicles across all states in the nation, attracting a higher tax rate.

A cess of 22% and a GST of 28% are currently applied to vehicles with an engine capacity greater than 1500 cc, a length greater than 4000 mm, and a ground clearance greater than 170 mm, bringing the total tax rate to 50%. Unfortunately, states do not consistently define what constitutes an SUV, which confuses automakers.

Sports Utility Vehicles (SUVs) are not well defined in India, and this has made it difficult to determine how to tax them.

Sports Utility Vehicles (SUVs) are not well defined in India, and this has made it difficult to determine how to tax them. To stop any “unintended tax evasion,” the Center is now working to close loopholes, over six years after the GST was put into effect.

The council, which consisted of state finance ministers and was presided over by the union finance minister, concluded that every condition, including those for engine size, length, and ground clearance, must be met for a vehicle to be classified as an SUV.

A lower cess rate would be in force for automobiles that do not meet any of these criteria, according to Vivek Johri, Chairman of the Central Board of Indirect Taxes and Customs.

According to Johri, a committee within the company will also determine whether mobility utility vehicles must also adhere to these requirements in order to be subject to the higher cess level.

The report of the ministerial panel on the taxation of online casinos and gambling operations, which has consequences for billion-dollar companies like Tiger Global-backed Dream11 and Sequoia Capital-backed Mobile Premier League, was not covered by the body.

Read More: Maruti Jimny Bookings Have Increased By Almost 700 Since They Began

How are automobiles taxed today?

The goods and services tax (GST), which is levied on all vehicles, is 28% but also includes a compensating cess. With a cess of 20–22%, SUVs are the most taxed. The term is ambiguous, though. A vehicle must currently meet four requirements in order to be eligible for the highest cess: it must be an SUV (sport utility vehicle), have a minimum ground clearance of 170 mm, and be at least 4 meters long. The engine needs to be filled with more gasoline than 1.2 or 1.5 liters. Due to misunderstandings caused by the first requirement, some states, like Haryana, have accused automakers of tax cheating.

What’s causing all the confusion?

As a result of not meeting all four requirements, the great majority of sports utility vehicles now on the road are not taxed as SUVs. In actuality, taxes on the new crop of small SUVs are similar to those on small cars (about 1-3%). It is not always the case. Despite not meeting two of the four requirements (length and engine size), the Mahindra Thar is still subject to a 20% cess. The Kia Carens and Maruti Ertiga, however, are examples of multi-utility vehicles (MUVs) that satisfy three of the aforementioned four requirements. The rate of cess is 17%, which was formerly reserved for large sedans, but because they are not commonly thought of as SUVs.

How are SUVs classified internationally?

The term “sport utility vehicle” (SUV) refers to a particular class of car that combines off-road and on-road driving capabilities, such as four-wheel drive and higher ground clearance.

There is no one set explanation. Yet, in the majority of developed markets, only automobiles with four-wheel drive—where all four wheels are driven, giving them all-terrain capabilities—are referred to as SUVs. The majority of automobiles, including SUVs, in India, have front-wheel drives and are therefore not considered SUVs in other countries. There are fewer than 5% of four-wheel drives on Indian roads.

Read More: What is Auto Sweep Facility and its Benefits?

What about SUVs that are electric or hybrid?

To power hybrid electric vehicles, an internal combustion engine and one or more electric motors that use energy stored in batteries work in tandem. A plug-in cannot charge the battery of a hybrid electric vehicle. Because of the added power of the electric motor, a smaller engine may be possible. Moreover, the battery can reduce engine idling while stopped and power auxiliary loads. These features combine to boost fuel efficiency while maintaining performance.

Future technologies will have a flat tax structure instead of slabs, which is simpler. India taxes all-electric vehicles (EVs) at 5%, regardless of size or ground clearance. Small hybrid cars are exempt from cess above the 28% GST rate, but large hybrid cars, like the recently released Maruti Grand Vitara, are subject to a flat 15% cess. This is one reason why manufacturers like Mahindra are eager to introduce larger EVs, as there is no financial incentive for the introduction of smaller cars and SUVs, unlike combustion engine vehicles.