Confused over UV definition, car companies await govt notification on cess

Some UVs which to date are paying 20% compensation cess under the old definition, will pay 22% once notification comes. But it isn't clear which UVs will be impacted

Automobile companies are confused as the central government is yet to issue a notification on the Goods and Services Tax (GST) Council's decision to change the definition of utility vehicles (UVs).

In a press release on Tuesday, the GST Council said any vehicle that has the length of four metres and above, engine capacity of 1,500 cc and more, and unladen ground clearance of 170 mm and more will be deemed a "UV". The UVs will attract the GST rate of 28 per cent along with a compensation cess at 22 per cent.

Certain UVs -- which till date are paying a compensation cess of 20 per cent under the old definition -- will be paying 22 per cent compensation cess once the aforementioned notification comes. However, it is currently not clear which UVs will be impacted by this notification.

"You have seen yesterday's announcement and we have also seen the same announcement. The notification is still not out. We have to study the implications of the notification. We will come back to you on that," Vinod Aggarwal, President, Society of Indian Automobile Manufacturers (SIAM).

The UV segment is currently the fastest growing car segment in India. In the first quarter of FY24, the UV sales jumped 17.7 per cent year-on-year (YoY) as compared to the entire passenger vehicle market that grew by 9.4 per cent YoY.

A Mahindra & Mahindra spokesperson told Business Standard that the company is evaluating details of the rate changes announced by the GST council for certain types of SUVs/MUVs.

"The change relates to a re-categorisation of the GST rate, based on unladen ground clearance, versus current laden ground clearance criterion. We await the official notification related to this change, which should also include the definition of unladen ground clearance and process to measure the same. Once received, we will approach the certification agency for potential recertification of the relevant models, based on the updated definition, if necessary. We are working through SIAM with the appropriate authorities," the spokesperson added.

In Q1 of FY24, Mahindra & Mahindra sold 100,162 UVs, making it the second largest player in the domestic UV market. Maruti Suzuki, the number one player in this market, sold 126,401 UVs domestically in the same time period.

"We have not seen the notification. Once we get it, we will study it in detail to get clarity," Shashank Srivastava, Senior Executive Officer, Marketing and Sales, Maruti Suzuki India Limited. However, he added that based on the information that is currently available publicly, none of the Maruti models are expected to be impacted by Tuesday's decision.

Swapnesh Maru, Executive Vice President and Chief Compliance Officer, Toyota Kirloskar Motor, said: “We have taken note of the announcement made during yesterday’s GST Council meeting about amendment in compensation cess for utility vehicles. We will wait for the notification to understand the details before assessing the impact. At this point we would like to refrain from commenting further.”

Executives of two other major SUV makers also said that their companies are waiting for the notification to come before commenting anything officially.