GST Council Clarifies Pan-India Definition Of An ‘SUV’; Several Models Might Get More Affordable

In its latest meeting, the Goods and Service Tax (GST) council defined what classifies as an SUV or ‘Sports Utility Vehicle’ and the tax it will attract. Going forward, the new definition will be applicable in all States of the country.

So, What’s An SUV?

The Government says, a car has to meet three factors to be called and taxed as an SUV. They are as follows:

1. Engine capacity exceeding 1,500cc

2. Length exceeding 4,000mm

3. Ground clearance of over 170mm

If your car doesn’t meet even one of these criteria, it will not be called an SUV by the State. 

Also Read: Maruti Grand Vitara Strong-hybrid Vs Maruti Alto K10: Real World Fuel Efficiency Compared

What’s The Current Tax Rate On An ‘SUV’?

For cars classified as a sports utility vehicle under the new definition, 22 per cent cess and 28 per cent GST will be applicable. This effective tax rate of 50 per cent is included in your on-road prices. Comparatively, hatchbacks have a lower GST tax rate of 18 per cent. It is yet to be specified what will be the tax rates for the models that we call SUVs, especially in the sub-four-metre category, but no longer qualify as such under the new definition.

How Will This New Announcement Affect SUVs?

While these criteria were already in place, the definition of an SUV differed for each State and even among manufacturers. Now with a standard having been set, several wrongly classified SUVs will attract a lower cess rate, from the current 22 per cent. 

Also Read: Upcoming SUVs In India

Which Cars Might Be Affected?

This rule suggests that none of the subcompact SUVs would fall under the higher tax slab. Compact SUVs like Hyundai Creta, Kia Seltos, Toyota Hyryder, MG Astor, Maruti Suzuki Grand Vitara, Skoda Kushaq and Volkswagen Taigun meet the ground clearance and length criteria, but all of them get sub-1500cc engines. Meanwhile, the Mahindra Thar meets the ground clearance and engine capacity requirements, but is a sub-four-metre car. For reference, the Scorpio Classic, Hyundai Alcazar and Tata Harrier are classified as SUVs. 

Depending on the way this new tax definition of SUVs is implemented, those that no longer qualify (like the ones stated above) might just become more affordable thanks to a lower tax rate.