Will the Auto Industry's Call to the Government on Compensation Cess be Addressed?
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Synopsis
In a significant pre-Budget meeting, auto industry representatives have urged the government to resolve the Rs 2,500 crore compensation cess issue that threatens the viability of small and medium dealers. As the new GST norms risk lapsing these credits, the industry is seeking urgent action to prevent potential adverse impacts.
Key Takeaways
- Auto industry representatives seek government action on Rs 2,500 crore compensation cess.
- Concerns over unutilised cess credits potentially expiring.
- Small and medium enterprises could face significant financial challenges.
- Supreme Court intervention sought for fairness in GST implementation.
- Record passenger vehicle sales reported in October 2025.
New Delhi, Nov 19 (NationPress) Representatives from the auto sector have called upon the government to tackle the matter of Rs 2,500 crore in compensation cess credits stemming from the GST 2.0 framework, during a pre-Budget discussion with Finance Minister Nirmala Sitharaman and other high-ranking officials.
Industry representatives, including the Society of Indian Automobile Manufacturers (SIAM), expressed the concerns of dealers, particularly those operating as small and medium enterprises, regarding the unutilised compensation cess credits that are at risk of expiring after the deadline of September 22, when the new GST regulations were implemented, according to sources familiar with the situation.
The primary worry revolves around the unutilised compensation cess credits that automobile dealers have recorded, which may not be transferable under the modified GST guidelines, they further noted.
Additionally, the Federation of Automobile Dealers Associations approached the Supreme Court in October, seeking intervention, stating they were “not against reform, but for fairness and trust,” warning that thousands of MSME auto dealers might face negative repercussions as tax-paid compensation cess credits risk becoming void.
The industry body had previously reached out to Prime Minister Narendra Modi for assistance in protecting the interests of dealers.
In addition to discussing compensation cess issues, industry representatives raised concerns regarding the facilitation of business operations and challenges encountered on the GST portal during their meeting with government officials.
In a related note, India’s passenger vehicle (PV) market recorded its highest-ever monthly sales in October 2025, spurred by the recent adjustments to GST rates and robust demand during the festive season.
Domestic PV wholesales surged by 17.23 percent year-on-year (YoY) to 470,227 units in October 2025, compared to 401,105 units in the same month of the previous year. This achievement marks a record-breaking monthly performance for the Indian automobile sector, eclipsing the prior record of 405,522 units set in January 2025.
Point of View
It is clear that the auto industry's plea for government intervention regarding the compensation cess is a testament to the ongoing challenges faced by small and medium enterprises in India. The government's response to this issue will be crucial in maintaining trust and fairness within the sector, especially during these transformative times.
NationPress
19/11/2025
Frequently Asked Questions
What is the compensation cess issue about?
The compensation cess issue concerns Rs 2,500 crore in GST credits that may lapse under new regulations, affecting auto dealers' financial stability.
Why are small and medium enterprises concerned?
Small and medium enterprises are primarily affected as they hold unutilised compensation cess credits that could expire, impacting their operations.
What actions have been taken by the industry?
The Federation of Automobile Dealers Associations has approached the Supreme Court for relief and has called for the government's intervention.
How did the passenger vehicle market perform recently?
India's passenger vehicle market achieved record sales in October 2025, with wholesales rising by 17.23% YoY, reaching 470,227 units.
What has been the government's response so far?
The content does not specify the government's response, but industry representatives are actively seeking discussions with officials.
