What Happens When Auto Dealers Face GST Changes Without Cess Credits Transfer

What Happens When Auto Dealers Face GST Changes Without Cess Credits Transfer

Last Updated Sep - 19 - 2025, 01:17 PM | Source : Fela News

New GST rules abolish cess but block credit transfer, causing financial strain for auto dealers.

A wave of concern has strike auto dealers all across India after recent GST changes. The compensation cess has been abolished, but many dealers still can’t adjust for cess already paid. Under the new GST regime, which was announced earlier this month and effective from September 22, 2025, several GST slabs are rationalised. Dealers who holding inventory bought under earlier higher tax system are now stuck about Rs2,500 crore in cess is locked in their electronic ledgers but cannot be used under new rules.

The Federation of Automobile Dealers Associations (FADA) has raise voice strongly. They asking urgent government intervention so that the cess balances can be transfer into usable GST credits. If that doesn’t happen, dealers warn, working capital will be squeeze just as festival season is approaching, when inventories are high and expense are already mounting. OEMs also reducing booking discounts on popular models like Pulsar and Baleno as a cost-cutting step. So the benefit from lower GST rates may be partly offset for customers.

One dealership said that a Pulsar bike which earlier had Rs4,000 discount will now give less discount, starting Monday after GST changes. Dealers complain that almost all their inventory is bank-funded, and blocking credit from cess reduces their drawing power. It’s not just margin compression it is also a serious cash-flow tightening risk.

Still, the GST reform is bring relief for consumers. Small cars, SUVs and two-wheelers are all cheaper now because of rationalised slabs. But for dealers, it has created a paradox joy for buyer, distress for seller. The coming weeks will test whether government step in to fix transition issues or if dealers have no choice but to absorb losses.

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