TaxTMI 
TaxTMI 
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?”
ITC reversal on compensation cess needed ?
08 Sep 2025 
6 Replies 
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Input tax credit reversal may be required when compensation cess removal makes supplies exempt, subject to export exception.
The dispute concerns whether reversal of input tax credit on compensation cess is required when cess is withdrawn. One position interprets the reversal mechanism for supplies becoming exempt to require payback of ITC on capital goods, inputs, WIP and finished goods held at the change, with exports excepted. The counterposition holds that ITC validly availed and already utilised against output liability when cess was leviable need not be reversed because the withdrawal is prospective. Fully utilised ITC before the change poses no reversal issue; accumulated unrefunded cess balances in the electronic credit ledger remain administratively unresolved. (AI Summary)
The dispute concerns whether reversal of input tax credit on compensation cess is required when cess is withdrawn. One position interprets the reversal mechanism for supplies becoming exempt to require payback of ITC on capital goods, inputs, WIP and finished goods held at the change, with exports excepted. The counterposition holds that ITC validly availed and already utilised against output liability when cess was leviable need not be reversed because the withdrawal is prospective. Fully utilised ITC before the change poses no reversal issue; accumulated unrefunded cess balances in the electronic credit ledger remain administratively unresolved. (AI Summary)