The Federation of Automobile Dealers Associations (FADA) has moved the Supreme Court seeking relief over Rs 2,500 crore worth of compensation cess credits that risk lapsing under the new GST 2.0 framework.
While the industry body has reiterated its support for the reform, it said the move was aimed at ensuring fairness for thousands of MSME auto dealers impacted by the transition.
“GST 2.0 is a proud reform. But Rs 2,500 crore of genuine, tax-paid compensation cess credits now risk lapsing — hurting thousands of MSME auto dealers. FADA has moved the Supreme Court not against reform, but for fairness and trust. Reforms should empower, not erase what’s earned,” the association said in a statement on Friday.
The concern stems from the unutilised compensation cess balances held by automobile dealers in their books, which may not be carried forward under the revised GST framework.
On September 3, following the 56th GST Council meeting, FADA had welcomed the introduction of GST 2.0, calling it a “watershed moment” for India’s automobile retail sector. However, it had also urged the government to clarify the treatment of cess balances to avoid ambiguity during the transition.
At the time, FADA President C S Vigneshwar had said the reforms would simplify the tax structure, lower rates for mass mobility, and enhance affordability, but cautioned that “clarity on levy and treatment of cess balances” was essential to ensure a smooth rollout.
Industry estimates suggest that the total cess credit locked in dealer books amounts to around Rs 2,500 crore. FADA has maintained that these credits were paid in full under the previous regime and should not be written off in the transition to GST 2.0.
The matter is now expected to be taken up by the Supreme Court, even as the government prepares for the phased rollout of GST 2.0 ahead of the festive season.
