GST rule change to make popular MPVs costlier: Here's how
What's the story
The Goods and Services Tax (GST) Council, led by Union Finance Minister Nirmala Sitharaman has decided to add a 22% cess on MPVs, on top of the existing 28% GST. This decision will impact the pricing of popular models such as the Toyota Innova Crysta and Kia Carens. Until now, only vehicles categorized as SUVs attracted the highest GST rate of 28%.
Context
Why does this story matter?
SUVs and MPVs have been gaining popularity over the past few years. Indian car buyers favored rugged offroaders and people-movers over other body types in 2022. However, with an addition of 22% cess over the existing 28% GST, their ex-showroom prices are soon set to rise. This move will impact the sales of many popular vehicles on our shores.
Current
All Utility Vehicles will fall under the same tax bracket
As decided by the GST Council, all large Utility Vehicles will now fall under the same tax bracket. Till now, only mid- and full-size SUVs attracted the highest GST of 28%. Other vehicles attracted cess ranging from 1% to 22% depending on their body type. This move by the council is done to simplify the categorization of SUVs and MPVs.
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Which cars will fall under the new bracket?
All vehicles, irrespective of what they are called by the carmakers, would attract the revised cess if they are longer than four meters, have an unladed ground clearance of 170mm, and feature an engine with a 1,500cc capacity.
Reaction
Maruti Suzuki will not be impacted, says Shashank Srivastava
Shashank Srivastava, Maruti Suzuki's Senior Executive Officer for marketing and sales, says that the homegrown carmaker would not be impacted by the additional cess. The automaker only has the Invicto falling under the new bracket. However, with its hybrid powertrain, it is likely to escape the burden of the extra 22% cess. Other manufacturers have not provided any official statement as of now.
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How will it impact the customers?
With the implementation of the new rule, all carmakers in India will pass on the burden of the additional tax to their potential customers by increasing the ex-showroom prices of their offerings. This will dent the popularity of SUVs and MPVs on our shores.