Automakers applaud GST reform, but ₹2,500 crore compensation cess worries dealers

Automotive dealers have raised concerns over the burden of compensation cess even as the government’s GST reform is expected to boost sales across the country.Speaking to CNBC-TV18, CS Vigneshwar, President of FADA, said the issue is “very important, and we probably need to look into it. We are writing to the government as we speak, and we are seeking clarity there, because compensation cess at the end of the day was supposed to be paid by the end user, and we are in the middle of the channel. We can’t bear the brunt.” Dealers have already paid GST and applicable state-level cesses on inventory, and without reimbursement, the cess could prove “catastrophic for dealers.”

Gaurav Gupta, President of Two Wheelers at TVS Motor Company, said that while OEMs and dealers would need to study the implications, he was optimistic that “the affected parties and stakeholders will come together to resolve this.”

At the same time, industry leaders welcomed the government’s reduction of GST on two-wheelers from 28% to 18%. Gupta called the move “really encouraging,” saying it would empower higher buying power among middle-class customers and accelerate the journey towards Viksit Bharat, the Prime Minister’s vision for 2047. The new rates will come into effect from September 22.Gupta also highlighted the launch of the new NTORQ 150 scooter by TVS, which he described as a “perfect hyper scooter.” The vehicle brings high performance, advanced technology, and styling inspired by stealth aircraft, including traction control, ABS, and a cluster with over 50 connected features. He added, “This special Diwali gift by the government will really accelerate growth and, more importantly, make two-wheelers more accessible while also helping people upgrade their choices.”

Industry participants expect a festive-season uptick in two-wheeler sales, particularly in the entry-level commuter segment, supported by favourable macro fundamentals, good monsoon, and low repo rates. The overall sentiment is that the combination of tax rationalisation and new product launches will simplify the market, encourage growth, and boost demand across the country.

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