Piyush Goyal, the Union Minister of Commerce and Industry, announced he would raise the automobile sector’s concerns regarding the compensation cess post the implementation of GST 2.0 with the Finance Ministry. He highlighted that addressing this matter requires cooperation from both the government and automobile manufacturers.
During the 7th Auto Retail Conclave organized by the Federation of Automobile Dealers Associations (FADA), Goyal acknowledged the hurdles dealers face due to the transition to new GST slabs, particularly the issue of the cess balance on unsold inventory.
FADA President C.S. Vinnishwore stated that ideally, consumers should bear the cess burden, but it currently falls on dealers. He cautioned that dealers could incur significant losses, potentially exceeding ₹2,500 crore, during the upcoming festive season if a solution isn’t found.
The Society of Indian Automobile Manufacturers (SIAM) has also appealed to Finance Minister Nirmala Sitharaman, seeking a reduction in the cess burden. SIAM President Shailesh Chandra emphasized the urgency of finding a solution for the cess balance present on dealer books and expressed hope for a favorable resolution.
FADA has also written to Prime Minister Narendra Modi, suggesting the transfer of the cess balance accumulated until September 21 to the IGST/CGST credit ledger to allow for its use against regular tax liabilities.
In an effort to prevent future issues, Goyal encouraged dealers and auto companies to establish a solid framework or charter. This is intended to ensure that foreign companies entering the Indian market maintain a long-term presence and do not suddenly withdraw, thereby avoiding problems for dealers.
He cited the problems that arose when companies like Ford and General Motors unexpectedly exited the market. As a response, FADA is working on a model dealer agreement, after studying more than 200 contracts across 24 countries. Honda Cars and MG Motor have already adopted this agreement, and several other companies are expected to implement it soon.
Goyal lauded the Auto Component Manufacturers Association (ACMA) for its consistent constructive approach, highlighting its role in fostering self-reliance, competitiveness, and export growth within India’s component industry.