GST cuts singe dealer profits, investor interest amid case

At the heart of investor unhappiness is compensation cess, discontinued by the government

- Ayaan Kartik

Dealers went to the Supreme Court over the compensation cess issue.

(Istockphoto)

GST rate cuts boosted sales at two-wheeler and car makers, which fuelled demand for auto stocks, as Nifty Auto raced ahead by 8% over the past three months.

However, one group in the automobile sector that is still wrestling with the authorities for back-payments and has seen feeble investor interest is car dealers.

Three of the listed largest car dealers, including Landmark Cars Ltd, Popular Vehicles and Services Ltd, and Competent Automobiles Co Ltd, saw share prices fall by 20%, 4%, and 1%, respectively, since 3 September, when the GST cuts were announced.

At the heart of investor unhappiness is compensation cess, which was discontinued by the government.

During discussions with analysts and investors, the management of Landmark and Popular Vehicles acknowledged that they had to take a temporary hit to their profit margins by clearing the stock of vehicles for which they had paid a compensation cess, which was discontinued from 22 September.