With less than two weeks to go for the GST 2.0 rates to take effect, the country’s apex automotive dealers’ lobby body has made a desperate appeal to Prime Minister Narendra Modi to help tide over the unaddressed issue of compensation cess.
The Federation of Automobile Dealers Association (FADA) wrote a letter to the Prime Minister’s Office (PMO) on Monday, seeking urgent transitional relief on the cess credits under the new rate regime to protect MSME auto dealerships and ensure its glitchfree implementation from September 22.
For the past several months, vehicle makers have been pumping inventory into the distribution channel in the hope of a revival in consumer demand. With retail volumes remaining stubbornly lower than wholesales, an estimated 600,000 unsold passenger vehicles (PVs) are there in the system, which is equivalent to nearly two months of retail sales. At the end of August, average inventory levels stood elevated at around 56 days, FADA said in a note.
The value of cess on these unsold units is estimated to be Rs 2,500 crore. As this inventory has no takers and since buyers are keen to wait to benefit from the new GST rates, FADA has appealed to the PMO for allowing it to transfer the cess to be used to pay the GST liability.
“Our humble request is to bring specific transitional provision to provide that the balance lying in compensation cess credit ledger as on September 21, 2025, may be allowed to be transferred to IGST/ CGST credit ledger. Such balance may then be utilised for discharge of regular GST liability,” CS Vigneshwar, president, FADA, said in the letter.
Over 95% of dealer inventory is bankfunded in India.
FADA represents more than 30,000 auto dealership outlets, employing more than 5 million professionals.
Most PVs have seen a reduction in prices ranging between 8.5% and 10% translating to Rs 40,000 to Rs 155,000 in the massmarket segment. These cuts will be implemented from September 22.
Hit by the news of an expected cut in GST rates, retail sales of PVs slowed down and ended August with a growth of 1% year on year to 323,256 units. This total was close to the wholesale total of 330,259 units clocked during the same month.
