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MUVs To Get Pricier With The Upcoming GST Rule Change - All You Need To Know
The GST system was introduced in India in 2017, and it significantly changed how things are taxed. It replaced the earlier complex tax structure and aimed to streamline the process and create a unified tax system nationwide.
As per the recent developments, the GST Council of India will restructure the guidelines for defining MUVs according to the government's perspective, regardless of how the manufacturers define the MUVs.
There are high possibilities to see a potential hike in the prices of these Multi Utility Vehicles (MUVs). This move is to provide clarity and uniformity in the taxation process for the cars that fall into the MUV segment.
The government is set to put MUVs in a taxation category that is similar to SUVs. A 22 per cent compensation cess is expected to be levied on MUVs meeting certain criteria.
The criteria, such as a length exceeding 4,000mm, an engine capacity larger than 1,500cc, and a ground clearance exceeding 170mm, will determine the taxation category of the vehicle. If the MUV exceeds these limits, they'll have to pay the tax of SUVs.
This will eventually force manufacturers to increase the prices of their MPV models. As a result, some of the popular MPV/Crossover cars, like the Innova, Ertiga, XL6, Invicto, Kia Carens, Marazzo, etc., will become pricier.
According to the current GST, Cess Structure SUVs must pay 28 per cent GST and a compensation cess of 22 per cent. MUVs with engine capacity less than 1500cc have a similar GST of 28 per cent but a comparatively lesser compensation cess of 15 per cent.
MPVs with engine capacity exceeding 1500cc but not meeting the other parameters of SUV will have to pay GST of 28 per cent and compensation cess of 20 per cent. These parameters were set at the 48th GST meeting in December 2022.
It is to be noted that several car manufacturers have falsely claimed their SUVs as MUVs to claim lower tax benefits. The new initiative is expected to end this and give more clarity regarding different car segments.
Thoughts About GST Rule Change For MUVs
Even though the revision of the GST rule aims to bring uniformity in taxation and to provide clarity in the classification of MUVs, this could lead to price hikes which is a huge blow for customers.
The impact of this initiative on the automotive industry and the consumer remains to be seen. However, the government must bring a balance between revenue generation and maintaining affordability for consumers.
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