The Supreme Court on Monday admitted a writ petition filed by the Federation of Automobile Dealers Associations (Fada) challenging the non-transition of accumulated Goods and Services tax (GST) Compensation Cess credits and issued notice to the Union Government in this regard.
Fada had approached the Supreme Court seeking relief for over ₹2,500 crore worth of compensation cess credits lapsing under the new GST 2.0 framework. The notice by the Supreme Court is returnable on March 25, 2026, thereby allowing the matter to proceed on merits.
“The Court’s decision to issue notice is a significant procedural milestone. It ensures that the serious working-capital and constitutional issues faced by auto retail MSMEs will now be examined at the highest judicial level. Auto Retail Industry is hopeful of a fair, balanced, and legally sound resolution,” said an industry source close to the development.
The concern stems from the unutilised compensation cess balances held by automobile dealers in their books, which will 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.
