GST hike on SUVs unlikely to put the brakes on auto sales

financialexpress.com:

The GST hike on SUVs may have a negligible effect on overall sales. Industry observers say demand for MPVs makes up for less than 12% of auto sales and that could be the reason for the effect being very limited on the auto sector. 

The GST council in its 50th meeting decided to revise the tax structure for various industries. This included redefining the Sports Utility Vehicle (SUV) segment and levying an additional 2% cess, which now takes up the total cess to 22% from the existing 20%. The levy is in addition to the 28% GST rate for vehicles sold in India.

The GST council has included all Utility Vehicles— SUV, MUV, MPV, and so on. It defines all vehicles that measure more than 4000mm in length, have an engine displacement of more than 1.5 litres, and with a ground clearance of 170mm or more will attract a 22% compensation cess over and above 28% GST. This move once implemented will make the select SUVs, one of the highest taxed products in the country at 50% (22% cess + 28% GST).

While the contours of the revision is still being carefully studied by the industry, potentially around 10 vehicle MPVs sold in the country by 6 carmakers will see a slight increase in prices. In fact, as per data compiled by JATO Dynamics, if one looks at the sales trend in India, MPVs accounted for less around 12% of the total passenger vehicle sold in India in FY2023. For the period YTD, the share of MPVs in the overall PV sales has come down to 11.2%.

Some of the popular MPVs sold in India that could come under the new tax revision include –

Responding to the GST revision, Mahindra & Mahindra in an email said, “We are evaluating details of the changes announced by the GST council on GST rate changes, for certain types of SUVs/ MUVs. The