Cess refund under inverted duty structure
We are in the process of establishing a steel plant and refinery, requiring coal to be used in equal ratio with iron ore. The coal consumed attracts a GST compensation cess of Rs. 400/- per ton, while our final product, steel, is not subject to any cess. Under the inverted duty structure, we seek clarification on whether the GST compensation cess paid on coal is eligible for a refund under Section 54 of the CGST Act, 2017, or if it will be an additional cost to our operations?
As per Section 11(1) and 11(2) of GST (Compensation to states) Act 2017, the provisions relating ITC of CGST Act 2017 and IGST Act 2017 shall mutatis mutandis apply in relation to the to the levy and collection of cess
As stated above, the provisions of Section 17(2) of CGST Act 2017 and Rule 42 and Rule 43 of The CGST rules 2017 read with Section 20 Of IGST Act 2017 shall mutatis mutandis apply for the reversal of the Cess ITC.
Since your outward supply does not attract any cess, it is treated as exempt supply in terms of cess. Hence, you are required to reverse the entire cess credit.
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