A clarification from the Chief Commissioner of Meerut CBIC has spelled out bad news for automobile dealers. According to Sanjay Mangal, cess credits cannot be used or refunded under the current GST law.
Here’s a breakdown of the situation:
- What are cess credits? These are credits for the compensation cess—a tax originally meant to cover payments to states for revenue losses after GST was implemented.
- What’s the problem? Dealers have already paid this tax on their inventory, especially on high-tax vehicles like SUVs.
- Why can’t they get the money back? The credits can only be used to pay compensation cess. They can’t be used for other GST payments like CGST, SGST, or IGST, and there is no provision for a refund.
- What’s the impact? The Federation of Automobile Dealers Associations (FADA) estimates a potential ₹2,500 crore loss for dealers. They now have this money tied up in credits they can’t use.
- What happens next? FADA is calling on the government for specific relief measures to help dealers recover these losses.
In short, while the clarification resolves regulatory uncertainty, it leaves auto dealers in a tough financial spot, holding unusable credits for taxes they’ve already paid.