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By Timsy Jaipuria Feb 14, 2023 8:54:57 PM IST (Updated)
According to sources, who did not wish to be quoted, the GST Council nominated fitment committee defers the proposal to treat MUVs at par with SUVs till the committee has a detailed discussion with industry stakeholders.
In a temporary relief for auto majors, the upcoming GST Council meeting, scheduled to take place on 18th February, is likely to defer the proposal to hike the rate of compensation cess applicable of MUVs, at par with SUVs falling under same criteria of car length, engine capacity among others.
According to sources, who did not wish to be quoted, the GST Council nominated fitment committee defers the proposal to treat MUVs at par with SUVs till the committee has a detailed discussion with industry stakeholders.
"Fitment committee examined the proposal on reservations expressed by Haryana, citing leakage of GST revenue in absence of clarity between MUVs and SUVs," sources told CNBCTV18.
It is understood from same sources that the GST Council nominated Fitment committee, examined the case with examples of cross over utility vehicles, such as Toyota Innova, Kia Carnival, Isuzu V-cross and Hi-Lander etc, to consider the request of equal treatment by Harayana.
"Fitment committee after detailed discussions decided that the issue still needs more clarity and to come to a conclusion or decision, it can be done only after detailed study in consultation with all stakeholders," sources added.
The proposal came up during 48th GST Council meeting, when industry had approached government for clarity on applicability of cess rates on SUVs and during the discussion at GST Council, states including Haryana cited that there is a clear case of tax evasion by auto players amid ambiguity between many car models not called as SUVs but fall under the same specifications, as described under the GST law for treatment of SUVs.
Post this, Union Finance Minister and Chairman of GST Council Nirmala Sitharaman, on request of states, guided the Fitment committee to examine the proposal raised by states.
The proposal considered, post this by fitment committee was to treat MUVs at par with SUVs, even when not popularly called as SUVs. Currently, a Compensation cess of 22% is levied on SUVs and all motor vehicles with length >4000mm, ground clearance of 170mm and engine capacity >1500cc.
“The deferment of the decision will certainly help both the car manufacturers and the consumers as a lot of procurements are done towards the end of the financial year and accordingly any tax rate increase at this stage would have impacted the demand,” said Abhishek A Rastogi, Founder of Rastogi Chambers.
The auto sector is already subjected to high rate of indirect taxes and hence the pragmatic approach would be essential to finalise the rates, Rastogi added.
Similarly, AMRG & Associates Senior Partner Rajat Mohan said:
"MUV is a van-shaped vehicle that can be used to ferry passengers and cargo as it offers plenty of storage and seating space. This is a prudent move. The proposal to treat MUVs at par with SUVs falling under the same car length and engine capacity criteria requires careful consideration, as it has significant implications for the automotive industry like Mahindra & Mahindra, Toyota, Isuzu Motors, Maruti Suzuki, Toyota, Datsun, TATA motors and Renault."
"While this proposal aims to bring about parity in taxation and ensure fairness, it is essential to analyse the potential impact on the consumer, manufacturer, and government revenue. Aligning tax rates for MUV’s and SUV’s will iron out the classification dispute for good, promoting ease of business in India. By taking the time to deliberate on this issue, the committee demonstrates a commitment to thoughtful decision-making and a willingness to consider all perspectives," he said.
"The postponement of the decision indicates recognition of the complexities involved in this issue and the need for a well-informed and balanced approach. With the hope that the committee will engage with stakeholders to gather inputs and concerns and weigh the pros and cons before arriving at a final decision that balances the objectives of tax reform, industry growth, and consumer protection," Mohan said.