The 50th GST Council meeting has announced a 2% price increase for larger utility vehicles (UVs) comprising SUVs and MPVs (multi-purpose vehicles). The council has raised the cess from 20% to 22%, equivalent to a surge of 200 basis points.
UVs will now be subjected to a 28% GST rate along with a cess of up to 22% under the revised GST regime. Hybrid UVs will have a lower cess rate of 15%, resulting in two cess slabs of 20% and 22%, respectively.
UVs exceeding 4 meters in length will attract the highest 22% cess rate if they meet any of the following specifications: unladen ground clearance of 170mm (previously based on laden basis), length exceeding 4 meters, and engine capacity over 1500cc.
Moreover, the term “SUV” has been removed, implying that larger SUVs/MPVs previously subjected to a 20% cess rate will now face the higher 22% cess rate, leading to a 2% surge in costs.
The variance between specifications in the company’s selling brochure and those during vehicle homologation makes it unclear which UV models will be affected by the higher cess. Homologation refers to a government-issued certificate that allows a product to enter the market. The GST Council follows the manufacturer’s specifications shared during homologation.
The increased cess of UVs coincides with the significant growth witnessed by UVs over the past three years. In the initial two months of the current fiscal year, passenger car manufacturers dispatched 363,563 UV units, resulting in their proportion of overall passenger vehicle dispatches increasing from 51.50% to 54.61% compared to the same period last year. A total of 665,625 passenger car units were dispatched during this two-month period.