TaxTMI 
TaxTMI 
TaxTMI 
ITC reversal on compensation cess needed ?
X X X X Extracts X X X X
X X X X Extracts X X X X
....TC reversal on compensation cess needed ?<br> Query (Issue) Started By: - BIJO SCARIA Dated:- 8-9-2025 Last Reply Date:- 14-9-2025 Goods and Services Tax - GST<br>Got 6 Replies<br>GST<br>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 be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore the change. In this case, am I required to reverse the ITC of compensation cess which I had availed and already utilised?" Reply By Shilpi Jain: The Reply: If your output now becomes cess exempt then ITC of cess is required to be paid back in your case on the capital goods, inputs including the inputs in WIP and FG as per Section 18(4) of the CGST Act (which is also applicable for cess). ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....However, if you are exporting your goods, no need to reverse/payback cess credit. Reply By Sadanand Bulbule: The Reply: Once ITC of compensation cess is validly availed under Section 16 of the CGST Act and utilised against output liability, there is no requirement to reverse the ITC merely because the Government has withdrawn compensation cess prospectively on those goods. The withdrawal of ces....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s applies from the date notified, and it does not retrospectively impact the eligibility of ITC already taken on stock purchased earlier. Reversal obligation arises only if ITC is wrongly taken, or when goods/services are used for exempt supplies or non-business purposes [Section 17 CGST Act]. Since the stock was purchased when cess was leviable, ITC was correctly availed. Therefore, in GS....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TR-3B (GST-02), he should continue as usual - no reversal entry required. Conclusion: You are not required to reverse the ITC of compensation cess already availed and utilised just because the cess has been removed later. Reply By BIJO SCARIA: The Reply: But section 18(4) says ITC reversal required when goods or service is wholly exempted. So, this case tax is not wholly exempted. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Reply By BIJO SCARIA: The Reply: But, ITC can be availed once the conditions under Section 16(2) are fulfilled, as the law does not restrict it to a prospective basis. Further, as per Section 18(4), if taxable supplies subsequently become exempt, the ITC relating to the stock is required to be reversed. Reply By KASTURI SETHI: The Reply: 2022 (3) TMI 1254 - CESTAT NEW DELHI NU VISTA ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....LTD. Versus COMMISSIONER (APPEALS), CGST, C. EX., RAIPUR Reply By K.lakshmipati rao: The Reply: Q. 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 utilized the ITC of such cess before the change. Ans. Since fully utilized the ITC of such cess bef....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ore the change, there would be no issue or reversal of cess. However, if there is any accumulated CESS in ECL, for which no REFUND is available as on date. FADA has given representation to Finance Ministry and Prime Minister, but decision is still awaited.<br> Discussion Forum - Knowledge Sharing ....