Students

As a subject for exams, GST can be daunting. In our Students section, we have attempted to make the task of learning GST simple and easy by using the exam format to ask and answer plenty of questions and case studies on GST. The questions have been arranged topic wise to facilitate easy understanding.

What’s more- You can take our mock exams also. The exam papers have been prepared as per the pattern and structure of the Indirect Tax paper in the exams of ICAI.

Sample Questions

1. Mr. A supplied goods for the value of Rs. 10,000 to his customer Mr.B on 01.04.2018 on the condition that payment for the same will be made within a week. However, Mr.B made payment for the said goods on 02.05.2018 and thus paid interest amounting to Rs. 500. What is the time of supply with regard to addition in the value by way of interest in lieu of delayed payment of consideration?



As per section 12(6) of CGST Act, 2017, the time of supply with regard to an addition in value on account of interest, late fee or penalty or delayed payment of consideration shall be the date on which the supplier received such additional consideration.

Thus, time of supply in respect of interest would be the date on which the supplier has received such additional consideration, i.e. 02.05.2018. Further, Mr. A is required to make payment on or before 20th of June, 2018 (Form GSTR-3B for the month of May, 2018).
2. What would be the value of supply of goods made or received through an agent?

The value of supply of goods between the principal and his agent shall-

(a) be the open market value of the goods being supplied, or at the option of the supplier, be ninety percent of the price charged for the supply of goods of like kind and quality by the recipient to his customer not being a related person, where the goods are intended for further supply by the said recipient.

(b) where the value of a supply is not determinable under clause (a), the same shall be determined by the application of rule 30 (based on cost) or rule 31 (residual method) in that order.
3. What is a “Business vertical”? What are the factors that should be considered in determining whether goods or services are related?
“Business vertical” means a distinguishable component of an enterprise that is engaged in the supply of individual goods or services or a group of related goods or services which is subject to risks and returns that are different from those of the other business verticals.

The factors that should be considered in determining whether goods or services are related include––
(a) The nature of the goods or services;
(b) The nature of the production processes;
(c) The type or class of customers for the goods or services;
(d) The methods used to distribute the goods or supply of services;
(e) the nature of regulatory environment (wherever applicable), including banking, insurance, or public utilities.

4. A company buys raw materials worth Rs.50,40,00 locally inclusive of 12% GST. It uses these raw materials to manufacture goods. 40% is used in manufacturing exempt goods, 10% is used in manufacturing goods for zero rated supplies. The balance is used in manufacturing taxable goods.

The company also purchased machinery for Rs.22,40,000 locally inclusive of 12% GST to manufacture goods. The company claims depreciation on the GST paid.

Calculate net GST payable if the sale of goods were as below (exclusive of GST):
Sale of exempt goods : Rs.30,00,000
Zero rated sales : Rs.21,00,000
Local Taxable sales (18%) : Rs.15,00,000
Inter-state Taxable sales (18%) : Rs.35,00,000
Particulars Amount (exclusive of GST) CGST SGST IGST
Sale of exempt goods 30,00,000 - - -
Zero rated sales 21,00,000 - - -
Local taxable sales 15,00,000 1,35,000 1,35,000 -
Inter-state taxable sales 25,00,000 - - 4,50,000
Gross Tax Payable - 1,35,000 1,35,000 4,50,000
Less: Input Tax Credit
Purchase of raw material (Note-1) 45,00,000 1,62,000 1,62,000 -
Less: Input Tax Credit
Purchase of machinery (Note-2) 20,00,000 - -
Tax Payable before set-off (27,000) (27,000) 4,50,000
Set-off of excess CGST input 27,000 - (27,000)
Set-off of excess SGST input - 27,000 (27,000)
Net Tax Payable - 27,000 3,96,000

Notes: 1. As per Sec 17(2) of the CGST Act 2017, where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies and partly for effecting exempt supplies, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.

Therefore, in the given case, 60% of the total input (10% in case of zero-rated supplies and 50% in case of Taxable supplies) is considered for the calculation of eligible input tax credit.

Working:
Taxable value= Rs. 50,40,000 *100 / 112 = Rs. 45,00,000
CGST= Rs. 45,00,000 * 6% * 60% = Rs.1,62,000
SGST= Rs. 45,00,000 * 6% * 60% = Rs.1,62,000


2. As per Sec 16(3) of the CGST Act 2017, where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961, the input tax credit on the said tax component shall not be allowed. In the given case, the company claims depreciation on the tax component, and therefore is not eligible to claim input tax credit.
5. What are the cases where goods or conveyances shall be liable to confiscation u/s 130 of the CGST Act 2017?


As per Section 130 of the CGST Act, 2017, If any person-
(i) supplies or receives any goods in contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(ii) does not account for any goods on which he is liable to pay tax under this Act; or
(iii) supplies any goods liable to tax under this Act without having applied for registration; or
(iv) contravenes any of the provisions of this Act or the rules made thereunder with intent to evade payment of tax; or
(v) uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of this Act or the rules made thereunder unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance,

then, all such goods or conveyances shall be liable to confiscation and the person shall be liable to penalty under section 122 of the Act.
6. XY Ltd, a manufacturer of a machinery who is registered in Surat, supplied machine to ABC Furnishers from Ahmedabad. Following details are provided in relation to amounts charged:


Sl No Particulars Amount (Rs)
(i) Price of machinery, excluding taxes (before cash discount) 10,00,000
(ii) Transit Insurance 23,000
(iii) Packing charges 12,000
(iii) Extra charges for designing the machine, which was not part of the initial order, but was mutually decided subsequently 66,000
(iv) Freight 17,000


Charges mentioned in (ii) to (v) are not included in (i) above. Other information furnished is as follows:

(a) Cash Discount @ 2% on price of machinery has been allowed to the customer at the time of supply and also recorded in invoice.
(b) GST rates:
Machine – 18%
other services – 5%

Calculate value of supply of the special machine and the tax thereof.

ANS.
Computation of value of special machine
Particulars Amount (Rs)
Price of machinery, excluding taxes (before cash discount) 10,00,000
Add: Transit Insurance (Note-1) 23,000
Packing charges (Note-2) 12,000
Extra charges for designing the machine (Note-3) 66,000
Freight (Note-1) 17,000
Total 11,18,000
Less: 2% cash discount on price of machinery (Rs.10,00,000 * 2%) (Note-4) 20,000
Value of Taxable supply 10,98,000
Add: CGST @ 9% 98,820
SGST @ 9% 98,820
Total Value 12,95,640

Notes:
(1) The given supply is a composite supply involving supply of goods (special machine) and services (transit insurance and freight) where the principal supply is the supply of goods.
As per Section 8(a) of the CGST Act, 2017, a composite supply is treated as a supply of the principal supply involved therein and charged to tax accordingly. Thus, tax rate applicable to the goods (special machine) has been considered.
(2) All incidental expenses including packing charged by the supplier to the recipient of a supply are includible in the value of supply in terms of section 15(2)(c) of the CGST Act, 2017.
(3) Any amount charged for anything done by the supplier in respect of the supply of goods at the time of, or before delivery of goods is includible in the value of supply in terms of section 15(2)(c) of the CGST Act, 2017. Thus, extra designing charges are to be included in the value of supply.
(4) Cash discount was given at the time of supply and also recorded in the invoice, so the same is not to be included while computing value of supply in terms of section 15(3)(a) of the CGST Act, 2017.


7. Mr.X has been issued a show cause notice (SCN) on 31.12.2021 under section 73(1) of the CGST Act, 2017 on account of short payment of tax during the period between 01.07.2017 and 31.12.2017. He has been given an opportunity of personal hearing on 15.01.2022.
Advice Mr.X as to what should be the written submissions in the reply to the show cause notice issued to him.


The written submissions in reply to SCN issued to Rajul are as follows:

(i). The show cause notice (SCN) issued for normal period of limitation under section 73(1) of the CGST Act, 2017 is not sustainable.

(ii). The SCN under section 73(1) of the CGST Act, 2017 can be issued at least 3 months prior to the time limit specified for issuance of order under section 73(10) of the CGST Act, 2017. The adjudication order under section 73(10) of the CGST Act, 2017 has to be issued within 3 years from the due date for furnishing of annual return for the financial year to which the short-paid tax relates to.
The due date for furnishing annual return for a financial year is on or before the 31st day of December following the end of such financial year [Section 44 of the CGST Act, 2017]. Thus, SCN under section 73(1) of the CGST Act, 2017 can be issued within 2 years and 9 months from the due date for furnishing of annual return for the financial year to which the short-paid tax relates to.

(iii). The SCN has been issued for the period between 01.07.2017 to 31.12.2017 which falls in the financial year (FY) 2017-18. Due date for furnishing annual return for the FY 2017-18 is 31.12.2018 and 3 years’ period from due date of filing annual return lapses on 31.12.2021. Thus, SCN under section 73(1) ought to have been issued latest by 30.09.2021.

(iv). Since the notice has been issued after 30.09.2021, the entire proceeding is barred by limitation and deemed to be concluded under section 75(10) of the CGST Act, 2017.
8. With reference to section 54(3) of the CGST Act, 2017, mention the cases where refund of unutilised input tax credit is allowed.


As per section 54(3) of the CGST Act, 2017, a registered person may claim refund of unutilised input tax credit at the end of any tax period in the following cases:

(i) Zero rated supplies: Supply of goods/services/both to an SEZ developer/unit or export of goods or services or both. However, refund of unutilized input tax credit shall not be allowed if: • the goods exported out of India are subjected to export duty; • the supplier of goods or services or both avails of drawback in respect of CGST or claims refund of the IGST paid on such supplies.

(ii) Accumulated ITC on account of inverted duty structure: Where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as notified by the Government on the recommendations of the Council.