FADA seeks early GST rollout to protect festive auto sales

FADA further sought clarity on the utilisation of accumulated cess credits once cess is removed.

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Automotive dealers’ body Federation of Automobile Dealers Associations (FADA) has urged the government to advance the rollout of the new Goods and Services Tax (GST) structure, warning that the uncertainty is hurting festive season sales.

The GST Council, chaired by Finance Minister Nirmala Sitharaman, is scheduled to meet on September 3-4 to decide on moving to a two-slab taxation system. Automobiles, currently taxed at 28 per cent plus cess, could shift to a lower 18 per cent slab under the new regime, a prospect that has led customers to delay purchases.

In a letter to Commerce and Industry Minister Piyush Goyal, FADA said the announcement has created a “challenging situation” for dealers, who are building inventory ahead of Onam, Ganesh Chaturthi, Navratri and Diwali, reports PTI.

“Customers are postponing their purchases and explicitly asking dealers about the new rates. This deferment risks turning key festive sales into a whitewash period, with pent-up demand only materialising during Diwali,” FADA cautioned.

Concerning festival season

The industry body requested that the GST Council meeting be preponed so rationalisation measures could be implemented before the onset of the festival season. It also sought directions to banks and NBFCs to extend tranche periods by 30–45 days to ease stress on dealer financing. FADA further sought clarity on the utilisation of accumulated cess credits once cess is removed. While backing Prime Minister Narendra Modi’s proposed reforms, FADA emphasised the need to address short-term concerns swiftly to ensure a smooth transition and safeguard demand during the festive period.

Currently, GST is structured across four slabs — 5, 12, 18 and 28 per cent — with automobiles taxed at the highest bracket of 28 per cent, plus a compensation cess ranging from 1 to 22 per cent. Depending on engine size and vehicle length, the total tax burden on cars ranges from 29 per cent for small petrol models to 50 per cent for SUVs. Electric vehicles, in contrast, attract a 5 per cent GST rate.

FADA represents over 15,000 dealer principals operating nearly 30,000 dealerships across India.

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