Automobile dealers could face significant financial losses as the government clarifies that compensation cess credits cannot be transitioned or refunded under the current GST law.
Speaking to CNBC-TV18, Sanjay Mangal, Chief Commissioner of Meerut CBIC, said the credits can only be used to pay compensation cess to states and cannot be applied to CGST, SGST, or IGST liabilities.
“The compensation cess was originally intended to cover payments to states for five years after GST implementation and was later extended to ensure loans and interest were cleared,” Mangal explained. “Now, after this period, it has been subsumed into GST except for certain items like pan masala and cigarettes, where it continues until liabilities are settled. As of 22nd September, any balance in the cess ledger cannot be used for other GST payments, and there is no provision for its transition or refund.”
The clarification comes after the Federation of Automobile Dealers Associations (FADA) highlighted a potential ₹2,500 crore loss for dealers. The credits represent taxes already paid on vehicles in inventory, particularly high-tax categories like SUVs. Without clear guidelines, dealers may be unable to recover these amounts.
While the CBIC clarification resolves regulatory uncertainty, it also leaves auto dealers exposed to financial losses, prompting calls for specific relief measures from the government.
Source from: https://www.cnbctv18.com/business/gst-compensation-cess-auto-dealers-seeks-relief-cbic-19665662.htm
