NEW DELHI: The government on Wednesday announced that the GST rate on all mid-size and large cars — vehicles with an engine capacity above 1500 cc or length over 4000 mm — has been fixed at a flat 40%. Similarly, vehicles such as Sports Utility Vehicles (SUVs), Multi Utility Vehicles (MUVs), Multi-Purpose Vehicles (MPVs), and Cross-Over Utility Vehicles (XUVs), with engine capacity above 1500 cc, length exceeding 4000 mm, and ground clearance of 170 mm or more, will also attract 40% GST, with no additional cess.
This effectively lowers the overall tax burden on these vehicles, as the government has removed the earlier compensation cess by placing them directly under the highest GST slab of 40%.
According to a set of FAQs issued on Wednesday, mid-size and large cars currently attract 28% GST along with a compensation cess ranging from 17–22%, pushing the total tax incidence to 45–50%. Under the new structure, they will face a uniform 40% GST with no cess.
For small cars, the GST rate has been cut from 28% to 18%. For tax purposes, small cars are defined as petrol, LPG, or CNG cars with engine capacity up to 1200 cc and length up to 4000 mm, and diesel cars with engine capacity up to 1500 cc and length up to 4000 mm.
The GST rate on electric vehicles remains unchanged at 5%.
Motorcycles with engine capacity up to 350 cc will attract 18% GST, while those above 350 cc will be taxed at a flat 40% with no cess.
The revised rates, announced after the 56th GST Council meeting on Wednesday, will come into effect from September 22.