Car Dealers Face Staggering Rs 2,500 Cr Cess Loss, Urge OEMs for Urgent Relief

A storm is brewing in India's automotive sector, threatening to dampen the spirits of car dealers right as the crucial festive season begins. A staggering Rs 2,500 crore cess loss, stemming from a recent GST Council decision, has thrown the industry into disarray, forcing car dealers to desperately appeal to Original Equipment Manufacturers (OEMs) for urgent financial intervention.

The core of the crisis lies in the GST Council’s September 11 decision to hike the cess on mid-size cars, luxury vehicles, and SUVs.

While a policy change is expected, the devastating blow comes from its retrospective application. Dealers across the country had already stocked up on inventory before this announcement, purchasing vehicles at the old cess rates. Now, they are compelled to sell these same vehicles at the new, higher rates, effectively absorbing the difference out of their own pockets.

This isn't a minor inconvenience; it's a massive financial hit that could cripple many dealerships.

Industry estimates suggest that approximately 15-20% of dealers’ total inventory is impacted by this sudden and significant increase, which ranges from 2% to 7% depending on the vehicle category. For a sector already operating on thin margins, such an unexpected and uncompensated outflow of capital is nothing short of catastrophic.

The Federation of Automobile Dealers Associations (FADA), the apex body representing vehicle retailers in India, has taken up the mantle, reaching out to OEMs with an urgent plea.

Their message is clear: without support, dealers face severe working capital challenges and potential insolvencies. The timing couldn't be worse, as the festive period traditionally accounts for a significant chunk of annual sales, and dealers rely heavily on these months to boost their bottom lines.

While OEMs traditionally refrain from compensating dealers for government policy changes, the sheer scale and suddenness of this particular loss present an unprecedented challenge.

Dealers argue that they are caught in a classic 'between a rock and a hard place' scenario, innocent bystanders suffering the brunt of a policy change implemented without a proper transition mechanism for existing stock.

The plea to OEMs is not just for a handout, but for a partnership in crisis.

Dealers are hoping for a gesture of goodwill and financial assistance, perhaps in the form of credit notes or direct compensation, to help them navigate this turbulent period. The coming weeks will be critical as both FADA and individual dealerships await responses from OEMs, hoping for a resolution that will allow them to survive this unexpected financial onslaught and salvage the festive season.