CBIC gives clarification on GST on SUVs

New Delhi, Jan 15, 2023

Synopsis
The tax authority clarified that GST compensation cess at the rate of 22% is applicable on motor vehicles which satisfy all four specifications it has outlined

The Central Board of Indirect Taxes and Customs (CBIC) on Friday issued a set of instructions to senior field officers clarifying the tax and cess rates applicable on items like sports utility vehicles (SUVs) as decided by the Goods and Services Tax (GST) Council in December.

CBIC told officers in the order that representations were received seeking clarification about the specifications of motor vehicles which attract GST compensation cess at the rate of 22%.

The tax authority clarified that GST compensation cess at the rate of 22% is applicable on motor vehicles which satisfy all four specifications it has outlined--these vehicles are popularly known as SUVs, the engine capacity exceeds 1,500 cc, the length exceeds 4,000 mm and the ground clearance is 170 mm and above. This clarification is applicable only to SUVs.

The tax authority also clarified that carbonated beverages of fruit drinks or carbonated beverages with fruit juice attract GST at the rate of 28% and compensation cess at the rate of 12%. CBIC also explained that snack pellets such as ‘fryums’, which are manufactured through the process of extrusion, will attract GST at the rate of 18%.

Experts said the order brings clarity on the issue of SUV taxation. “This issue seems to have been put to rest with the four conditions being explicitly spelled out for the levy of 22% GST compensation cess. The other major clarification is around levy of 18% GST rate on raab, which has been distinguished from molasses," said Abhishek Jain, Partner, Indirect Tax at KPMG in India.

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