Auto dealers warn of festive season washout if GST rejig delayed

FADA has urged the government to prepone the GST Council meeting so that the new rates can kick in before the season begins in full swing.

India’s auto dealers are staring at a paradox this season. Showrooms are full of vehicles, but customers are hesitant to book. The reason? The buzz around the proposed Goods and Services Tax (GST) rationalisation, which could slash vehicle prices once implemented.

The Federation of Automobile Dealers Associations (FADA), which represents more than 15,000 dealer principals across the country, has warned that this uncertainty is threatening to turn the most lucrative sales window of the year into a “whitewash period.”

Why the festive period matters

Festivals like Onam, Ganesh Chaturthi, Navratri, and Diwali account for a big chunk of annual car and two-wheeler sales in India. Dealers have already built up inventory to meet demand. But with the GST Council set to meet only on September 3-4, buyers are postponing purchases, hoping for a price cut under the new system.

“Customers are explicitly asking dealers about new GST rates and delaying decisions. Unless the reforms are implemented quickly, the entire festive calendar risks being compressed into Diwali alone,” FADA said in a letter to Commerce Minister Piyush Goyal, as cited by PTI.

What FADA wants

FADA has urged the government to prepone the GST Council meeting so that the new rates can kick in before the season begins in full swing.

Its other demands include:

Directing banks and NBFCs to extend repayment cycles for dealers by 30-45 days.
Clarifying how accumulated cess credits will be adjusted once cess is phased out.
The industry body argues that these short-term fixes will protect dealers from financial stress and keep the supply chain—from manufacturers to financiers—resilient.

The GST plan on the table

The Centre has proposed a simplified two-slab structure:

5 percent for ‘merit’ goods and services.
18 percent for ‘standard’ goods and services.
A special 40 percent rate will apply to ultra-luxury cars and sin goods.

Currently, automobiles sit in the top GST bracket of 28 percent, with an additional cess of 1-22 percent depending on the vehicle type. This means the total tax burden ranges from 29 percent for small cars to nearly 50 percent for SUVs. Electric vehicles, however, already enjoy a 5 percent GST rate.

The bigger picture

FADA insists it fully supports the reform push, calling it “a far-reaching step that will rejuvenate the auto sector and accelerate India’s growth trajectory.” But it warns that unless timing issues are fixed, the transition could hit dealers the hardest, just when demand is supposed to peak.

“Protecting festive sentiment will not only benefit consumers but also keep the entire auto ecosystem, dealers, OEMs, component makers, and financiers on steady ground,” the body said.

(With inputs from PTI)