The goods and services tax (GST) levied on multi utility vehicles may be increased as several members of the GST Council in the latest meeting on Saturday suggested that the category be included under the rate of 22 percent compensation cess.
Council members also suggested that there be clarity on taxation of MUVs and other related names used in trade. It was decided to let the fitment committee (the panel of central and state tax officers) assess the request to revise the GST rate on MUVs and come back to the council, Finance Minister Nirmala Sitharaman said.
The development came on the day the
Council also clarified the definition of SUVs (sports utility vehicles) that will attract 22 percent compensation cess over the 28 percent GST and decided to come out with parameters to define MUVs (multi utility vehicles).
The panel noted that for levy of higher rate of compensation cess of 22 percent, the car across any state should be called
SUV, its length should be 4,000 mm, its engine capacity should be more than 1,500 CC and it should have a ground clearance of over 170mm.
"This clarification is not new tax, it's more to say what defines that commodity which is under taxation as SUV," the Finance Minister said.
Vivek Johri, Chairman of Central Board of Indirect Taxes and Customs noted that if cars do not meet any of the mentioned criteria, lower cess rate will be applicable.
Currently cars with engine capacity exceeding 1500 cc, length exceeding 4000 mm and having ground clearance of 170 mm attract a GST of 28 percent and a 22 percent cess, taking the effective tax rate to 50 percent. However, states do not have a consistent definition defining a vehicle as a SUV, leading to confusion among automakers.
Sitharaman added that the discussion on MUVs began when some states asked whether sedans should be included in the SUV category.
The GST Council also agreed to decriminalise certain offences and doubled the threshold for launching prosecution under the tax law to Rs 2 crore, but retained the limit at Rs 1 crore for fake invoicing.
