SUV And MPV Prices To Increase by 2% After GST Cess Hike In India

|ET| Claiming a huge utility vehicle that incorporates both an SUV and an MPV (Multi-Reason Vehicle) will turn out to be more costly. However, the condition-specific to SUVs has been removed, meaning that all big SUVs/MPVs previously subject to a 20% Cess will now have a 22% Cess.

The GST Council has raised the Cess on these vehicles from 20% to 22%. Consequently, SUVs measuring more than four meters in length will witness a 2% price increase. Currently, large SUVs attract a GST rate of 28% and a cess of up to 22%. However, the condition-specific to SUVs has been removed, meaning that all big SUVs/MPVs previously subject to a 20% cess will now have a 22% cess.

Furthermore, with the proposed changes in the GST structure, the highest Cess rate of 22% will apply to larger UVs (either petrol or diesel) that fulfill the following three specifications: first, an unladen (without passenger weight) ground clearance of 170 mm, which previously considered loaded status but now applies to unloaded status; second, a length exceeding four meters; and finally, an engine capacity greater than 1500 cc.

Moreover, the condition-specific to SUVs has been removed as well. This means that all big SUVs/MPVs, which were previously subject to a 20% Cess, will now have a 22% Cess. Thus, a 2% increment in the costs of SUVs/MPVs is plausible.

It is not immediately clear which UV models will be subject to higher Cess since the company's sales brochure differs from the directive issued during the homologation process. Homologation is a government-issued certificate that allows a product to enter the market. The GST Council follows the directives shared by manufacturers during homologation.

The SUV segment has seen rapid development over the past three years. Passenger vehicle manufacturers sent a substantial number of UVs, totaling 363,563 units, to their dealers as stock accumulation during the first two months of the current financial year. Their piece of the pie in traveler vehicle dispatches expanded from 51.50% to 54.61% over a similar period last year. A total of 665,625 units of explorer vehicles were dispatched during the two months.

GST Hike Summary

The GST Council in India has increased the Cess on utility vehicles (UVs) by 2% from 20% to 22%. This will lead to a 2% price hike in UVs measuring more than four meters long. Currently, large UVs attract a GST rate of 28% and a Cess of up to 22%. However, the condition-specific to SUVs has been removed, which means that all big SUVs/MPVs previously subject to a 20% Cess will now have a 22% Cess.