FADA Intensifies Push to Recover ₹2,500 Crore Stuck in Auto Dealers' Tax Credit

The Federation of Automobile Dealers Associations (FADA) is intensifying its push to recover approximately ₹2,500 crore in stuck tax credits, a sum President CS Vigneshwar describes as a significant financial pain point for the nation’s automotive retailers.

The dispute centers on the unutilized GST compensation cess, which was stuck after the government phased it out under the GST 2.0 framework. The compensation cess, ranging from 1% to 22% depending on vehicle category, was eliminated as part of GST 2.0 reforms.

These reforms also lowered GST on small cars, motorcycles up to 350 cc, three-wheelers, and commercial vehicles from 28% to 18%. The move, aimed at boosting affordability and demand, has been widely welcomed, but it leaves dealers unable to offset the cess they had already paid on vehicles bought before the new rates took effect.

The matter is currently before the Supreme Court, who FADA had approached last year to seek relief over the ₹2,500 crore impact. While hearings have faced delays and postponements, Vigneshwar views the court's decision to admit the case as a milestone. "The court has accepted our case, which itself is a big thing because unless there is credible evidence that some law or justice has not been carried out properly, they won't accept it," Vigneshwar said, on the sidelines of the Finance Insurance Summit 2026, organized by FADA.