SC admits Fada plea on GST compensation cess; issues notice to Centre

The Supreme Court has admitted Fada's writ petition challenging the non-transition of accumulated GST compensation cess credits under GST 2.0, and issued notice to the Union government

The Supreme Court on Monday admitted a writ petition filed by the Federation of Automobile Dealers Associations (Fada) challenging the non-transition of accumulated goods and services tax (GST) compensation cess credits and issued notice to the Union government in this regard.

 

What is Fada seeking relief for in the Supreme Court? 

Fada approached the Supreme Court seeking relief over Rs 2,500 crore worth of compensation cess credits that was lapsing under the new GST 2.0 framework. The notice by the Supreme Court is returnable on March 25, 2026, thereby allowing the matter to proceed on merits.

 

What did the court notice mean for the case? 

“The court’s decision to issue notice is a significant procedural milestone. It ensures that the serious working-capital and constitutional issues faced by auto retail MSMEs will now be examined at the highest judicial level. Auto retail industry is hopeful of a fair, balanced and legally sound resolution,” said an industry source close to the development.

 

Why are automobile dealers concerned about cess balances under GST 2.0? 

The concern stems from the unutilised compensation cess balances held by automobile dealers in their books, which will not be carried forward under the revised GST framework.

 

What did Fada say after the GST Council meeting? 

On September 3, following the 56th GST Council meeting, Fada welcomed the introduction of GST 2.0, calling it a “watershed moment” for India’s automobile retail sector. However, it also urged the government to clarify the treatment of cess balances to avoid ambiguity during the transition.