Eligibility of input tax credit of CESS on Coal

[Kaustubh Karandikar]

XYZ (Manufacturer) receiving Coal where the supplier is charging CESS in the Tax Invoice. Can XYZ take input tax credit of the CESS charged in the invoice? If no, is there any specific provision under the law to deny the credit?

AI Summary

Manufacturers can claim ITC on coal's compensation cess but only for paying compensation cess; refunds possible on exports. A manufacturer, XYZ, inquired about the eligibility to claim input tax credit (ITC) on the compensation cess charged on coal. Responses clarified that ITC for compensation cess is permissible but can only be used for paying compensation cess. Additionally, if exporting goods without duty payment, a refund of the coal cess is possible, as outlined in a specific circular. The discussion referenced legal provisions indicating that while ITC on compensation cess can be claimed, it cannot be used to pay integrated tax on zero-rated supplies, such as aluminum products, when compensation cess is not applicable to the final product.