Piyush Goyal, the Union Minister of Commerce and Industry, has announced his intention to address the concerns surrounding the compensation cess in the automobile sector with the Finance Ministry following the introduction of GST 2.0. Goyal clarified that resolving this issue requires a joint effort from both the government and automobile manufacturers.
Speaking at the 7th Auto Retail Conclave organized by the Federation of Automobile Dealers Associations (FADA), Goyal acknowledged the challenges dealers are facing due to the transition to the new GST slabs. A major concern is the cess balance associated with unsold inventory.
FADA President C.S. Vinnishwore highlighted that the cess should ideally be passed on to consumers, but currently, dealers are bearing the brunt of the cost. He warned that if the issue isn’t resolved quickly, dealers could face losses exceeding ₹2,500 crore during the upcoming festive season.
The Society of Indian Automobile Manufacturers (SIAM) has also appealed to Finance Minister Nirmala Sitharaman to alleviate the cess burden. SIAM President Shailesh Chandra emphasized the importance of finding a solution for the cess balance on dealers’ books and expressed optimism for a positive outcome.
FADA has also written to Prime Minister Narendra Modi, proposing the transfer of the cess balance up to September 21 to the IGST/CGST credit ledger to enable its use against regular tax liabilities.
Goyal urged dealers and auto companies to establish a strong framework or charter to ensure the long-term commitment of foreign companies in the Indian market and prevent abrupt exits that could harm dealers.
He cited the detrimental impact of sudden withdrawals by global companies like Ford and General Motors. In response, FADA is developing a model dealer agreement, based on a study of over 200 contracts from 24 countries. Honda Cars and MG Motor have already adopted this agreement, and other companies are expected to follow suit.
Goyal praised the Auto Component Manufacturers Association (ACMA) for its consistent constructive engagement and its contribution to the self-reliance, competitiveness, and export growth of India’s component industry.