India’s automotive retail sector is in overdrive as dealers race to liquidate stock before the new GST rates kick in on September 22. Showrooms are offering hefty discounts, particularly on high-value cars, in a bid to invoice vehicles ahead of the deadline. The move also about salvaging crores locked up in compensation cess already paid to manufacturers.
Dealers say fresh calculations show that cess paid across the industry has crossed ₹4,000 crore. Even after aggressive discounting, at least ₹2,000 crore is expected to remain stuck after September 21.
According to dealer estimates, Mahindra & Mahindra showrooms alone account for about ₹500 crore of this cess, while BMW dealerships have shelled out close to ₹100 crore. For context, a car priced at around ₹21-22 lakh carries nearly ₹2.5 lakh in cess already paid by the dealer.
Industry insiders admit that many are willing to let go of their own margins—around ₹50,000 per car—just to ensure invoices are cleared in time. OEMs are pitching in too, covering 5-7% of the post-GST rate reduction, while dealers add another 2-3% in discounts. The aim is to price the car lower than the revised GST tag and nudge customers to buy now, even if delivery happens during the festive season.
The worry goes deeper than discounts. For a dealership with ₹2-3 crore in working capital, nearly ₹50 lakh can be tied up in cess credit. That’s a quarter of available funds—an amount too large to ignore. Dealers are prioritising premium cars, where cess recovery is higher, while leaving smaller vehicles for OEMs to absorb the GST differential.
Some dealers say fresh vehicle dispatches are arriving on credit rather than being invoiced, as they cannot be billed at the old GST rate. Manufacturers are either parking stock in yards or moving it to dealerships under special arrangements.
The timing has been tricky. The ongoing Shraddh period is considered inauspicious for new purchases, forcing dealers to throw in additional 2-3% discounts and freebies such as accessories. The expectation is that customers will take delivery from September 22 onwards, coinciding with Navratri and the festive sales wave.
Mahindra & Mahindra has already said it will pass on the full GST benefits to customers from September 6. Other OEMs have also indicated they will help cushion dealers through this transition.
Both Fada and Siam have been lobbying for government intervention. At the recent Fada Auto Retail Conclave, Tata Motors passenger vehicles chief Shailesh Chandra acknowledged the issue, stressing that the problem is short-term but significant.
On September 8, Fada wrote to Prime Minister Narendra Modi, urging that compensation cess balances as of September 21 be transferred to the IGST-CGST credit ledger so that they can be set off against regular tax liabilities.
Dealers are banking on festive season demand to ease the stress. The new GST rates are expected to make cars cheaper by anywhere between a few thousand to several lakhs, depending on the model. But with discounts set to disappear after September 21, the next ten days could decide whether this transition turns into a smooth drive or a bumpy ride for auto retail.