Refund of accumulated -ITC of Compensation Cess

[Prem Choudhary]

Dear Expert

Please advice for refund provision if any for following Case:-

The manufacturer are producing Cement and Clinker under HSN-2526 and Sales within in India. Cement is taxable @28% ( SGST-14% & CGST-14%) and no any GST Compensation Cess is leviable. However in production of Cement, Coal is require to running the Kilan(generating the heat) and on procurement of Coal Cess is leviable @ ₹ 400/- per tone.

As per provision of Act, Compensation Cess can be utiliase for payment of out put Cess only. Hence Compensation Cess is going to accumulation.

Further, Whether answer will be same if manufacturer is exporting as well selling Cement and Clinker within India.

[KASTURI SETHI]

Dear Querist,

Answer is not the same.

Compensation cess accumulated because final product is not subject to levy of compensation cess.

(i) If no compensation cess is leviable on final product, but compensation cess has been availed on inputs , refund of accumulated ITC can be claimed. Circular no. 45/19/2018-GST dated 30.5.18 refers.You cannot claim refund of compensation cess by making payment of IGST via export.In other words, you cannot claim refund of compensation cess in case of zero rated supply on payment of IGST.

Compensation cess accumulated because of export

(ii) Refund of compensation cess paid on goods exported is admissible. Read Section 16(3)(b) of IGST Act, 2017.

This issue has been clarified vide C.B.I. & C. Circular No. 79/53/2018-GST, dated 31-12-2018. (Point No.9 is relevant).

[Prem Choudhary]

Thank you Sethi ji for providing reference of provision and clarity,

We have gone through the Circular No.-45/19/2018-GST Point no-05 and your reply pint no-(i),

Kindly more clarify is require, In our Case Cement sale is within India and having accumulated Compensation Cess ITC. Whether we are eligible to claim refund of accumulated compensation Cess ITC ?

[KASTURI SETHI]

In view of Board's clarification, you are eligible for refund claim of Compensation Cess as your final product is cement on which cess is not leviable.

[Prem Choudhary]

Sir

As per Circular, The accumulated Credit ( including Cess) eligible for refund only in case of "inverted duty structure" o. But in Cement has no such scenario.

please advice, Whether any interpretation for refund of accumulated Compensation Cess other then Export or inverted duty structure.

[KASTURI SETHI]

I have explained as per best of my capacity.

AI Summary

Manufacturer Seeks Refund for Accumulated ITC on Compensation Cess Paid for Coal; Clarification Sought on Domestic Sales Eligibility A manufacturer producing cement and clinker, taxable at 28% GST without any compensation cess, inquires about the refund of accumulated ITC of compensation cess paid on coal used in production. The expert clarifies that if no compensation cess is levied on the final product but availed on inputs, a refund can be claimed, referencing Circular No. 45/19/2018-GST. For exports, a refund is admissible under Section 16(3)(b) of the IGST Act, 2017. The manufacturer seeks further clarification on eligibility for refunds when sales are domestic, questioning the applicability beyond exports or inverted duty structures.