The 50th meeting of the Goods and Services Tax (GST) council brought some unwelcome news for potential utility vehicle (UV) buyers. As per the council’s latest recommendations, all utility vehicles – regardless of their body style – will now attract a rationalised rate of compensation cess, pegged at 22 per cent. Previously, vehicles that attracted 22 per cent cess had to meet four parameters – to exceed four metres in length, 1,500 cc in engine displacement and 170 mm of ground clearance, and also be ‘popularly known as Sports Utility Vehicles (SUV)’. The council has now eliminated the last of those parameters to bring all kinds of UVs, including multi-purpose vehicles (MPVs) and crossovers under the same cess bracket.
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“It has been decided to amend the entry 52B in compensation cess notification to include all utility vehicles by whatever name called provided they meet the parameters of length exceeding 4,000 mm, engine capacity exceeding 1,500 cc and having Ground Clearance of 170 mm & above and to clarify by way of explanation that ‘ground clearance’ means ground clearance in unladen condition,” reads the official statement from the council.
Even models such as the diesel-powered MG Hector and Hector Plus are likely to witness a price hike with an increase in cess.
In a press conference following the meeting, Finance Minister Nirmala Sitharaman explained that while erasing the ‘popularly known as Sports Utility Vehicles’ requirement from the GST rate classification would also have brought sedans under the higher cess bracket, this was opposed by two states – Punjab and Tamil Nadu – after which the council decided to expressly exempt sedans from the higher cess bracket.
A variety of MPVs and crossovers, which so far attracted 20 per cent compensation cess, are now facing an impending rise in price. carandbike understands that this rationalisation will spell a price hike for some popular models, including the likes of the Toyota Innova Crysta, Innova Hycross petrol, Volkswagen Tiguan and the Hyundai Tucson. Models such as the MG Hector and Hector Plus diesel, too, are likely to be affected by this move. The increase in price is expected to be anywhere between Rs 40,000 to Rs 80,000, depending on the vehicle. Most carmakers are in the process of analysing the announcement, and are likely to increase prices in the coming weeks.
“We have taken note of the announcement made during yesterday’s GST Council meeting about amendment in compensation cess for utility vehicles. We will wait for the notification to understand the details before assessing the impact. At this point we would like to refrain from commenting further”, said Swapnesh Maru, Executive Vice President and Chief Compliance Officer at Toyota Kirloskar Motor.
