ITC reversal on compensation cess needed ?

[BIJO SCARIA]

When the government removes compensation cess on certain goods, I have stock lying as on the date of the rate change on which I had already paid compensation cess. I had also fully utilised the ITC of such cess before the change.

In this case, am I required to reverse the ITC of compensation cess which I had availed and already utilised?”

AI Summary

Previously paid compensation cess with fully used input tax credit generally need not be reversed unless law changes mandate adjustment If compensation cess was validly paid and input tax credit of that cess was lawfully availed and fully utilized before the cess was abolished, there is ordinarily no obligation to reverse that already-utilized ITC. However, the result depends on the precise statutory amendment and any transitional or notification provisions issued by the tax authority; if the tax treatment of the goods changed to exempt or composition in a way that triggers ITC reversal under the general GST reversal rules, adjustment may be required. Verify the governing amendment and official guidance to determine any mandatory reversals.