Auto industry urges govt to resolve compensation cess issue
New Delhi, Nov 19
Auto industry representatives have urged the government to address the issue of Rs 2,500 crore in compensation cess credits from the GST 2.0 regime during a pre-Budget meeting with Finance Minister Nirmala Sitharaman and senior officials.
Representatives from the auto industry, including Society of Indian Automobile Manufacturers (SIAM), voiced the concerns of dealers, primarily small and medium enterprises, regarding unutilised compensation cess balances that may get lapsed after the credits expired on September 22 when new GST norms came into effect, according to people aware of the development.
The concern is regarding the unutilised compensation cess balances held by automobile dealers in their ledgers, which may not be carried forward under the revised GST framework, they added.
The Federation of Automobile Dealers Associations had approached the Supreme Court in October, seeking relief, in a plea saying they were “not against reform, but for fairness and trust,†and cautioned that thousands of MSME auto dealers could be adversely affected as tax-paid compensation cess credits risk lapsing.
The industry body had earlier appealed to Prime Minister Narendra Modi for intervention to safeguard dealers’ interests.
Besides the compensation cess issues, industry representatives in the meeting with government officials sought relief for matters relating to ease of doing business and issues faced on GST portal with the government officials.
Meanwhile, India’s passenger vehicle (PV) industry achieved its highest-ever monthly sales in October 2025, boosted by the recent GST rate rationalisation and strong festive season demand.
PV wholesales in the domestic market rose 17.23 per cent year-on-year (YoY) to 4,70,227 units in October 2025, compared to 4,01,105 units in the same month last year. This marks the best-ever monthly performance for the Indian car market, surpassing the previous record of 4,05,522 units set in January 2025.
— IANS
Reader Comments
While I understand the dealers' concerns, the government also needs to ensure tax reforms proceed smoothly. Maybe a phased transition would have been better? 🤔 The record sales show GST rationalization is working well overall.
₹2,500 crore is a huge amount for small dealers! The government should consider allowing carry forward of these credits. Many family-run dealerships could face closure if this isn't resolved. Hope FM Sitharaman takes quick action.
Interesting to see the auto industry's growth despite these challenges. The record October sales are impressive! 🚗 Hopefully the government can find a middle path that supports both policy reforms and business interests.
As someone who recently bought a car during the festive season, I can see why sales are booming. But the government needs to be fair to dealers who paid these cess amounts in good faith. Transparency in tax policy is crucial.
The timing of this issue during festive season is unfortunate. Many dealers invested heavily in inventory. Government should provide relief - maybe extend the deadline or allow credit utilization in installments. Jai Hind! ðŸ™
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