Automobile dealers have anticipated the reduction in liquidity due to the modifications in GST laws. The Federation of Automobile Dealers Association (FADA) has written a letter to the Prime Minister’s Office, Finance Ministry and GST Council, expressing the resentful effect of the addition of section 49A to CGST law on their cash flow.
FADA says that the revision in CGST law will comply automobile dealers to pay GST in cash even after having the availability of unused tax credits.
Modified rules for the adjustment of the input tax credit which have come into effect from 1st February has added further complications to the Automobile industry, already facing the challenges of decline in sales and inventory increment due to the continuous fall in the sales in recent months.
FADA said that if the scheduled date for filing GST for February will not be postponed to March 20, then the four-wheeler and two-wheeler dealers will need to invest an additional capital of Rs 50 lakh to Rs 1 crore.
FADA is awaiting the meeting with GST Council to discuss the complaints & issues of automobile dealers. Association’s Vice President Winkesh Gulati told that so far t no explanation is given on the treatment of unused tax credits.
Now, the full utilization of IGST input tax credits for all the three types of GST liabilities – IGST (integrated), CGST (Central) and SGST (State) is mandatory before using CGST and SGST credit of a firm. Just Because of this rule, firms may be left with some unused CGST input credits, which can not be used to fulfil the SGST credit. And the counter situation can also take place when firms can have SGST input credit saved, which they will not be able to use to pay the CGST liability.
Read Also: All About SGST, IGST, CGST with Input Tax Credit Adjustment
The complaints by hatchback dealer seem reasonable because they are already facing pressures of the backlog of cars and decelerated sales so the request to postpone the deadline to pay GST till march is justified to some extent.
