Compensation cess and your UV buying plans

livemint.com:

SUV (sport utility vehicle) or MUV (multi-utility vehicle) the GST Council’s decision to change the definition of UVs that attract a compensation cess of 22% may have implications. Mint explains the changes and the impact on buyers. All motor vehicles, barring electric vehicles, are taxed in the highest GST slab of 28%.

Electric vehicles, no matter what their physical or mechanical attributes are, attract a GST of 5%. Apart from the 28% GST on the basic price of a passenger vehicle, the government also levies a compensation cess in the range of 1% to 22%, which is also calculated on the basic price of the vehicle, depending upon the vehicle’s ground clearance, length, engine capacity and fuel type. The effective tax rate on SUVs can therefore range from 29%, all the way up to 50%.

The ex-showroom price of a vehicle is inclusive of GST. The Society of Indian Automobile Manufacturers (Siam) requested clarification from the government regarding Section 52B of a finance ministry notification on compensation cess. It prescribed a 22% cess rate for SUVs—vehicles with engine capacity over 1,500 cc with a length exceeding 4,000 mm and ground clearance of 170 mm or above.

However, the words “popularly known as SUVs" led to confusion as some MUV manufacturers such as Toyota Innova were taxed at a lower 20% rate. States questioned why MUVs were taxed less and sought clarification from original equipment manufacturers (OEMs). The GST Council has removed the reference to SUVs, to now simply state that all utility vehicles, irrespective of how they’re marketed, will attract a cess of 2% if they’re more than 4,000 mm in length, have an engine capacity of 1,500 cc or above, and have unladen ground clearance of 170 mm or more.