India Tax Body Clarifies Sports Utility Vehicles Definition

India’s Goods and Services Tax (GST) Council on Saturday decided to have a single definition across all states in the country for sports utility vehicles, attracting a higher tax rate.

Currently cars with engine capacity exceeding 1500 cc, length exceeding 4000 mm and having ground clearance of 170 mm attract a GST of 28% and a 22% cess, taking the effective tax rate to 50%. However, states do not have a consistent definition define a vehicle as a SUV, leading to confusion among automakers.

The council, composed of state finance ministers and chaired by the federal finance minister, decided that all the criteria including engine capacity, length and ground clearance has to met for a vehicle to be classified as a SUV.

"If cars do not meet any of these criteria, lower cess rate will be applicable," said Vivek Johri, Chairman of Central Board of Indirect Taxes and Customs.

An internal committee will also consider whether mobility utility vehicles will also have to meet these criteria to come under the higher cess threshold, Johri said.

The body did not discuss a report prepared by a ministers' panel on how online gaming companies and casinos should be taxed, an issue that affects billion-dollar companies such as Tiger Global-backed Dream11 and Sequoia Capital-backed Mobile Premier League.

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(Reporting by Nikunj Ohri in New Delhi, writing by Aftab Ahmed in New Delhi and M. Sriram in Mumbai)