Union Minister of Commerce and Industry Piyush Goyal stated on Wednesday that he would raise the issue of the compensation cess in the automobile sector with the Finance Ministry following the implementation of GST 2.0. He emphasized that the responsibility for this change doesn’t solely rest with the government, but that automobile manufacturers also need to come forward and find a solution.
During his address at the 7th Auto Retail Conclave organized by the Federation of Automobile Dealers Associations (FADA), Goyal acknowledged that the implementation of the new GST slabs presented several challenges during the transition phase. The biggest problem faced by dealers is the cess balance on unsold inventory.
FADA President C.S. Vinnishwore pointed out that the burden of the cess should be borne by customers, but currently, this responsibility falls on the dealers. He warned that if a solution isn’t found quickly, dealers could suffer heavy losses during the festive season, potentially exceeding ₹2,500 crore.
The Society of Indian Automobile Manufacturers (SIAM) also wrote to Finance Minister Nirmala Sitharaman, appealing for a reduction in the cess burden. SIAM President Shailesh Chandra stated that a solution to the cess balance on dealers’ books is essential and that a positive outcome is expected soon.
Additionally, FADA has written to Prime Minister Narendra Modi, requesting that the cess balance up to September 21 be transferred to the IGST/CGST credit ledger to allow it to be adjusted against regular tax liabilities.
Goyal urged dealers and auto companies to create a robust framework or charter to ensure that any foreign company entering the Indian market maintains a long-term presence and doesn’t suddenly withdraw, putting dealers in difficulty.
He recalled that dealers had suffered significant losses when global companies like Ford and General Motors abruptly exited. Consequently, FADA is working on a model dealer agreement, having studied over 200 contracts across 24 countries. This agreement has already been adopted by Honda Cars and MG Motor, with several other companies promising to implement it soon.
Goyal commended the Auto Component Manufacturers Association (ACMA), noting that the organization never brings complaints but always engages in constructive dialogue. He attributed India’s component industry’s self-reliance, competitiveness, and export capabilities to this approach.