The GST Council’s recommendation to bring clarity on the utility vehicles with a 22 per cent cess on top of 28 per cent rate, is not expected to have much impact to the automobile industry, said manufacturers and analysts tracking the sector.
The GST Council in its 50th meeting on Tuesday has decided that any vehicle with length exceeding 4 metres, engine above 1500 cc and ground clearance of 170 mm and above will be treated as utility vehicle, will have to pay a tax of 22 per cent compensation cess over and above the 28 per cent GST rate.
Earlier, it was 28 per cent GST and 20 per cent cess (totalling 48 per cent) and now it has just increased by 2 per cent, so there should not be much of a difference and pricing too, said the industry veterans.
‘Slabs already there’
“These slabs were already there...they have given some additional verifications. We still have to study the notification and the impact of that,” Vinod Aggarwal, President, SIAM, told businessline.
According to Shashank Srivastava, Senior Executive Director (Marketing & Sales), Maruti Suzuki India, “Maruti Suzuki has no vehicle with engine size of above 1.5 litre except the Invicto (which was recently launched). But, Invicto has only Hybrid version so the top cess should not be applicable to it. However, we have to see the detailed notification before we confirm the above.”
Also read: SUV boost gives utility vehicles lead over cars
He said from the various media reports, it appears that the peak cess of 22 per cent over the 28 per cent GST slab is now applicable for all vehicles fulfilling the three conditions of: more than 4-metre length, more than 1.5-litre engine and unladen ground clearance of more than 170 mm.
“Prima facie this removes the confusion regarding the definition of vehicles attracting the 22 per cent cess, especially the ground clearance to be taken in unladen vehicle condition,” Srivastava added.
Similarly, Tarun Garg, Chief Operating Officer, Hyundai Motor India, said the Creta and Alcazar will ‘definitely’ be impacted ‘because both are less than 1500 cc’ and the company is still studying on the impact on Tucson.
Therefore, it would impact more the bigger utility vehicles — both diesel and petrol — but not the hybrid vehicles as they have a cess rate of 15 per cent, followed by two cess slabs of 20 per cent and 22 per cent, respectively.
Bringing transparency
“Tweak in cess rate will bring more transparency as it’s now on basis of unladen weight. The definition of SUV/MPV/Sedan sometimes used to create ambiguity. Simplification is good for industry as it helps in ease of business and planning. Also, it is observed GST Council is following the same specification as during vehicle homologation. With a rush for regulation, it’s equally important to follow same standards benchmarks and protocols following by our testing agencies,” Puneet Gupta, Director, SP Global, said.