Planning to buy a new car this festive season? Then you might be interested in this piece of news. Many manufacturers are offering substantial discounts or year end offers on their products. While this is a good opportunity for buyers, one must be aware of the different taxes applied on the car based on its shape, size, engine displacement as well as fuel material being used.
The Good and Services Tax Council has come out with a single definition for all Sport Utility vehicles across the country. At present, all states adopt an individual definition for classifying vehicles.
As per the definition, any vehicle with engine size greater than 1,500 cc, length longer than 4 meters and ground clearance in excess of 170 mm will be classified as an SUV. Thus such vehicles will attract a GST rate of 28 percent and a cess of 22 percent. This makes the total tax component on such vehicles at 50 percent.
The GST council had to step in because different states came up with a different definition. This caused confusion amongst carmakers. Similarly, there is also a confusion between the states on MUV or Multi Utility Vehicles.
According to Nirmala Sitharaman, Finance Minister, the higher cess rate of 22 percent is payable by all motor vehicles that meet the above four parameters. The committee will also reportedly decide if MUVs need to be taxed at a higher rate at a later date.
That said, it is not yet known if a motor vehicle fails to meet all the four parameters for 22 percent cess. Case in point is the Mahindra Thar. The Thar is a sub 4m vehicle that has engine greater than 1500cc and ground clearance more than 170mm. Will the Thar attract a lower cess amount of 17 percent?
We need to wait and see if the GST Council issues a clarification for the same.
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