Union Minister Piyush Goyal has confirmed that he will present the automobile sector’s concerns regarding the compensation cess under GST 2.0 to the Finance Ministry. He stressed that resolving this issue requires collaboration, not just from the government, but also from auto manufacturers.
Addressing the 7th Auto Retail Conclave hosted by the Federation of Automobile Dealers Associations (FADA), Goyal acknowledged the transitional challenges posed by the new GST slabs, specifically concerning the cess on unsold inventory faced by dealers.
C.S. Vinnishwore, President of FADA, emphasized that the cess burden should ideally be absorbed by consumers, but currently falls on dealers. He warned of potential losses exceeding ₹2,500 crore for dealers during the festive season if a resolution isn’t found promptly.
SIAM, the Society of Indian Automobile Manufacturers, has also appealed to Finance Minister Nirmala Sitharaman to address the cess burden, with President Shailesh Chandra emphasizing the need for a solution for the cess balance on dealer books and expressing optimism for a positive outcome.
FADA has further requested Prime Minister Narendra Modi to allow the transfer of the cess balance until September 21 to the IGST/CGST credit ledger for adjustment against regular tax liabilities.
To mitigate risks, Goyal urged dealers and auto companies to establish a robust framework, or charter, to ensure foreign companies commit to long-term presence in the Indian market and avoid sudden exits that could negatively affect dealers.
He cited the negative impact from the sudden departures of global companies like Ford and General Motors. FADA has responded by developing a model dealer agreement, based on a review of over 200 contracts from 24 countries, which has already been adopted by Honda Cars and MG Motor, with other companies poised to implement it.
Furthermore, Goyal praised the Auto Component Manufacturers Association (ACMA), citing their constructive approach as a key factor in the Indian component industry’s self-reliance, competitiveness, and export expansion.