The Goods and Services Tax (GST) Council nominated fitment committee has deferred its decision on a proposal to treat multi purpose/utility vehicles (MPVs/MUVs) at par with sports utility vehicles (SUVs) which fall under the same length and engine capacity criteria, sources told CNBC-TV18 on Monday.

The fitment committee recommended that the issue need to be decided only after a detailed study in consultation with all stakeholders and

accordingly recommended it to be deferred.

According to sources, the fitment committee examined the proposal on reservations expressed by Haryana, citing leakage of GST revenue in absence of clarity between MUVs and SUVs.

They further stated that the committee also examined the case with examples of cross-over utility vehicles, such as Toyota Innova, Kia Carnival, Isuzu V-cross and Hi-Lander among others.

This would come as a big relief for auto manufacturers like Tata Motors, Maruti Suzuki and Hyundai, who are benefiting the most in terms of volume. On the other hand, SUV-only manufacturers like Mahindra, Toyota and Kia are likely to witness otherwise.

On December 2022, the GST Council came out with a definition of SUVs that would attract the highest cess of 22 percent, over and above the GST rates on cars.

The 48th GST council meeting, in a clarification, announced that the higher rate of compensation cess of 22 percent applies to "motor vehicle fulfilling all four conditions.” The conditions are:

Popularly known as SUV

Has engine capacity exceeding 1,500cc

Length exceeding 4,000mm

Ground clearance of 170mm

The clarification came in due to confusion over the rates at which bigger SUVs need to be taxed through the application of the cess, which is 15 percent for hybrids, 20 percent for certain SUVs, and 22 percent for some.

The car industry is currently taxed at a GST rate of 28 percent, over and above which there is a cess for various kinds of vehicle categories, including SUVs.