22% cess for all vehicles which meet these criteria: GST Council

If you’re considering purchasing a popular midsize sedan, SUV, or MUV, be prepared to spend more money. The Union Finance Minister, Nirmala Sitharaman, has announced an increase in the compensation cess over the GST applied to new vehicles. Under the new rule introduced by the 50th Goods and Services Tax (GST) Council, all types of utility vehicles, including SUVs, MUVs, and crossovers, will now be subject to an additional 22 percent compensation cess on top of the existing 28 percent GST applied to new vehicles.

Furthermore, the Finance Ministry has provided a clarification on the definition of SUVs in the Indian market. According to Nirmala Sitharaman’s statement, all passenger vehicles measuring four meters or more, with an engine capacity of at least 1,500cc and a ground clearance of at least 170mm, will be classified as SUVs, regardless of their seating configurations. However, sedans with higher ground clearance exceeding 170mm are excluded from this classification and are not considered SUVs.

While two states raised concerns about including sedans in the category attracting higher cess, all states have unanimously agreed on a uniform increase of compensation cess to 22 percent for all types of utility vehicles falling under this category, as per Nirmala Sitharaman.

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Previously, MUVs with seating configurations for six or more people bypassed the higher cess classification, resulting in a lower cess despite meeting other criteria. This loophole was addressed in the 48th Goods and Services Tax (GST) Council, which aimed to clarify the definition of SUVs.

Sub-4m sedans and SUVs with 1200cc engine

Currently, sub-four-meter sedans and SUVs with engines below 1,200cc attract a lower compensation cess, as do midsize SUVs and MPVs with engine capacities below 1,500cc. However, new-generation SUVs and MUVs like the Mahindra XUV700, Tata Safari, Tata Harrier, and Toyota Innova Hycross will now attract a higher 22 percent cess instead of the previous 15 percent.

This announcement is expected to impact the auto industry, as popular and high-selling midsize SUVs and MPVs will become more expensive. Vehicles such as the Hyundai Creta, Kia Seltos and Carens, Maruti Suzuki Grand Vitara and Invicto, Toyota Urban Cruiser Hyryder and Innova Hycross, Mahindra XUV700, Tata Safari, and Harrier are set to experience increased prices.

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