January 9, 2019

Refund of accumulated Input Tax Credit of Compensation Cess

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1. Refund of accumulated Input Tax Credit of Compensation Cess

Whether refund of compensation cess paid on inputs used for making zero rated supplies under LUT during the period July 2017 to May 2018 is allowed in July 2018? What is the amount of compensation cess to be refunded?

It has been clarified via circular no 45/19/2018 dated 30th may 2018 that registered person making export of goods under LUT shall be eligible for claiming the refund of compensation cess paid on inputs used for making such supplies.

A registered person, being eligible to claim refund of compensation cess paid during the period July 2017 to May 2018, shall calculate the refund amount for each month as per the formula specified in Rule 89(4):

Refund amount = (Turnover of zero rated supply of goods + Turnover of zero-rated supply of services) * Net ITC/ Adjusted Total Turnover

The sum of the eligible amount calculated above for the period July 2017 to May 2018 should be less than or equal to the amount actually claimed as refund in the month of July 2018.

2. Refund of Compensation cess where inputs is not used directly for making zero-rated supplies

In case of compensation cess paid on purchase of coal used for captive generation of electricity, in turn used for manufacture of goods exported under LUT, the CBIC has clarified that refund is allowed even if input is not directly used for making zero-rated supplies.

DISCLAIMER: The views expressed are strictly of the author and VJM & Associates LLP. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.

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