The Federation of Automobile Dealers Associations (FADA) has approached the Supreme Court seeking relief over the lapse of ₹2,500 crore in accumulated compensation cess credits following the implementation of new GST rules on September 22.
A FADA representative on Friday said that the petition was filed not to oppose the GST reform but to ensure fairness and uphold trust. “The writ has been filed and it is yet to be numbered,” the member added.
The dealers’ body has been seeking to use the unutilised compensation cess held in dealers’ books as of September 21, 2025, to be used against regular GST payments or as an option for refund. Dealers typically pay GST and cess when purchasing vehicles from manufacturers and then collect the same charges from customers at the point of sale. The reform has left credits blocked in dealers’ books and they are able to offset them.
“GST 2.0 is a proud reform. But ₹2,500 crore of genuine, tax-paid compensation cess credits now risk lapsing — hurting thousands of MSME Auto Dealers. Reforms should empower, not erase what’s earned,” the member added.
Despite multiple discussions with cabinet ministers and senior government officials, dealers have yet to secure any relief. The Union government has ruled out any reduction in the compensation cess applicable to dealers.
The dealers’ association had requested the finance minister to transfer the remaining balance in the compensation cess credit ledger to the IGST/CGST credit ledger by September 21.
Previously, cars were subject to a 28% GST along with a compensation cess ranging from 1% to 22%, depending on factors such as the car’s size, engine type, and length.
Under the new GST structure, cess has been completely removed. The dealers’ body has stated that the cess loss could wipe out profits for the entire year.
