Temporary GST relief for automakers manufacturing MUVs, no decision yet

  • Haryana government has proposed that the MUVs be treated at par SUVs when it comes to applying compensation cess.
The proposed change in the tax structure could result in the MUVs becoming more expensive.
The proposed change in the tax structure could result in the MUVs becoming more expensive.

The auto manufacturers that build Multi Utility Vehicle (MUVs) seem to have got a temporary relief as there was no decision taken at the 49th GST Council meeting on Saturday regarding the proposal to hike the rate of compensation cess applicable to MUVs, at par with SUVs galling under the same criteria of a car length, engine capacity among others.

Speaking about the matter, central government's revenue secretary Sanjay Malhotra said that officers of the fitment committee could not arrive at any recommendation as the time was short and they still needed more discussions on the subject. However, no specific timeframe has been revealed for when the fitment committee formed by the GST Council will again discuss this matter.

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This buys a bit more time for the MUV manufacturing auto companies. It has been reported that the absence of clarity between SUVs and MUVs results in the leakage of GST revenue. Haryana proposed to bring clarity on this by hiking the compensation cess applicable to MUVs at par with the SUVs under the same criteria of the car length, engine capacity etc.

In India, in the utility vehicle segment, the Haryana government has proposed equal treatment for the models like Toyota Innova Crysta, Kia Carnival etc., at par with SUVs that come with identical lengths and engine capacities. The GST Council has formed a fitment committee to look into this matter.

The proposal by the Haryana government was to treat the MUVs at par with SUVs, even when not popularly called SUVs. Currently, the SUVs are slapped with a 22 per cent Compensation cess. This cess is applicable on all motor vehicles that are dimensionally longer than 4,000 mm and has ground clearance of 170 mm, and come with an engine capacity bigger than 1,500 cc.

First Published Date: 19 Feb 2023, 12:15 PM IST
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