New Delhi, Sept. 16 -- When the Goods and Services Tax (GST) Council unveiled GST 2.0 earlier this month, one of the headline changes was the abolition of compensation cess on automobiles. For consumers, this looks like a festive season bonanza-cars are about to get cheaper and dealers are dangling record discounts.

But behind the glitter of showroom offers lies a thorny problem: the absence of a transitional credit or refund mechanism for compensation cess has left the broader auto industry nursing a tax hit of over Rs.2,500 crore.

Simply put, dealers pay GST and compensation cess when they buy cars from manufacturers. Earlier, they recovered this by charging customers the same taxes, with input tax credits deducted from the bill.

But...