ICAI INTERMEDIATE EXAMINATION - JAN, 2021

PAPER – 4 : TAXATION

SECTION B: INDIRECT TAXES

(i) Question No. 5 is compulsory.

(ii) Candidates are also required to answer any two questions from the remaining three questions.

(iii) All questions should be answered on the basis of position of position of GST law as amended by significant notifications/circulars issued upto 30^TH Apr, 2020.

(iv) Working notes should form part of the answer.

(v) Wherever necessary, suitable assumptions may be made by the candidates and disclosed by way of note.

Quesiton-5 [M-8]

Star Ltd., a registered supplier in Karnataka has provided the following details for supply of one machine.

Star Ltd. received Rs.5,000 as subsidy from a NGO on sale of each such machine, The Price of Rs.80,000 of the machine is after considering such subsidy.

During the month of February, 2020, Star Ltd. supplied three machines to Intra-State customers and one machine to Inter-State customer.

Star Ltd. purchased inputs (intra-State) for Rs.1,20,000 exclusive of GST for supplying the above four machines during the month.

The Balance of ITC at the beginning of February, 2020 was

Note:

(i) Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively for both inward and outward supplies.

(ii) All the amounts given above are exclusive of GST.

(iii) All the conditions necessary for availing the ITC have been fulfilled.

Compute the minimum net GST payable in cash by Star Ltd. for the month of February, 2020.

Answer              

WN-1 Taxable value of Machine as per GST Laws

Notes:

1. Section 15(2) - value of supply shall include

(a)any taxes, duties, cesses, fees and charges levied under any law for the time being in force other than GST charges under GST laws, if charged separately by the supplier.

(c) incidental expenses, commission, packing and any amount charged by the supplier to the recipient of a supply in respect of the supply at the time of, or before delivery of goods or supply of services. Hence packing exp shall be included.

(e) subsidies directly linked to the price excluding subsidies provided by the Central and State Governments. Since subsidy is not provided by government, hence it shall be included.

2. Section 15(3)(a) - The value of the supply shall not include any discount which is given before or at the time of the supply  if such discount has been duly recorded in the invoice issued in respect of such supply;

WN-2 Calculation of Input Tax for Feb, 20              

WN-3 Calculation of Output tax

3. Net payment of Tax

WN-3 Payment of Net GST in Feb, 20

WN-4. Order of Utilisation of ITC [S-49B rw R-88A]

Question-6(a) [M-6]

Green Agro Services, a registered person provides the following information relating to its activities during the month of February, 2020:

All the above receipts are exclusive of GST.

Compute the value of taxable supplies under GST laws for the month of February, 2020.

Answer

Computation of value of taxable supplies

Quesiton-6(b) [M-4]

Satya Sai Residents Welfare Association, a registered person under GST has 30 members each paying Rs.8,000 as maintenance charges per month for sourcing of goods and services from third persons for common use of its members.

The Association purchased a water pump for Rs.59,000 (inclusive of GST of Rs.9,000) and availed input services for Rs.23,600 (inclusive of GST of Rs.3,600) for common use of its members during February 2020.

Compute the total GST payable, if any, by Satya Sai Residents Welfare Association, for February 2020.

GST rate is 18%. All transactions are intra-State.

There is no opening ITC and all conditions for ITC are fulfilled.

Answer              

Computation of total GST payable by Satya Sai Residents Welfare Association

Question-7(a) [M-4]

ABC Cinemas, a registered person engaged in making supply of services by way of admission to exhibition of cinematograph films in multiplex screens was issuing consolidated tax invoice for supplies at the close of each day in terms of section 31(3)(b) of CGST Act, 2017 read with fourth proviso to rule 46 of CGST Rules, 2017.

During the month of October, 2019, the Department raised objection for this practice and asked to issue separate tax invoices for each ticket. Advise ABC Cinemas for the procedure to be followed in the light of recent notification.

Answer

Rule 54(4A)

The procedure to be followed by ABC Cinemas, a registered person engaged in making supply of services by way of admission to exhibition of cinematograph films in multiplex screens, is as under:-

The option to issue consolidated tax invoice is not available to a supplier engaged in making supply of services by way of admission to exhibition of cinematograph films in multiplex screens. Thus, ABC Cinemas cannot issue consolidated tax invoice for supplies made by it at the close of each day. ABC Cinemas is required to issue an electronic ticket.

The said electronic ticket shall be deemed to be a tax invoice, even if such ticket does not contain the details of the recipient of service but contains the other information as prescribed to be mentioned.

Question-7(b) [M-3]

Agni Ltd. a registered supplier wishes to transport cargo by road between two cities situated at a distance of 368 kilometres. Calculate the validity period of e-way bill under rule 138(10) of CGST Rules, 2017 for transport of the said cargo, if it is over dimensional cargo or otherwise.

Answer

The validity period of e-way bill under rule 138(10) of the CGST Rules, 2017 for transport of cargo by road between two cities situated at a distance of 368 km is as under:

(i) If it is over dimensional cargo: the validity period of the e-way bill is one day from relevant date upto 20 km and one additional day for every 20 km or part thereof thereafter.

Thus, validity period in given case:

= 1 day + 18 days = 19 days

(ii) If it is a cargo other than over dimensional cargo: the validity period of the e-way bill is one day from relevant date upto [1][200 km.] and one additional day for every [2][200 km.] or part thereof thereafter.

Thus, validity period in given case:

= 1 day + 1 days = 2 days

Question-7(c) [M-3]

The aggregate turnover of Mr. Prithvi, a registered person for the FY 2017-18 and 2018-19 were Rs.140 lakh and Rs.170 lakh respectively. He has not filed the annual return (GSTR-9) under section 44(1) of CGST Act, 2017 before the due date.

Discuss the penal provisions, if any, for not filing the returns before the due date.

Answer

The penal provisions for not filing the annual return (GSTR-9) u/s 44(1) of the CGST Act, 2017 before the due date are as under:-

(a) Rs.100 for every day during which such failure continues, or

(b) 0.25% of the turnover of the registered person in the State/Union Territory whichever is lower.

Note:- It may be noted that filing of GSTR-9 has been made voluntary in respect of financial years 2017-18 and 2018-19 for the registered persons whose turnover is less than Rs.2 crores and who have not furnished the said annual return before due date. Here, the annual return is deemed to be furnished on the due date if it has not been furnished before the due date.

Question-8(a) [M-5]

Mr. Anurag, a famous Author is engaged in supply of services by the way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary works to a publisher.

Explain in brief the conditions under which an Author can choose to pay tax under forward charge.

Answer

Entry-9A of N N-13/2017-CT

RCM is applicable on supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright covered u/s 13(1)(a) of the Copyright Act, 1957 relating to original literary works to a publisher.

However, he may choose to pay tax under forward charge provided he fulfills the following conditions:-

(i) He has taken registration under the GST law.

(ii) He has filed a declaration, in the prescribed form, that he exercises the option to pay tax on the said service under forward charge and, to comply with all the provisions of the GST law as they apply to a person liable for paying the tax in relation to the supply of any goods and/or services and

that he shall not withdraw the said option within a period of 1 year from the date of exercising such option.

(iii) He makes a declaration on the invoice issued by him in prescribed form to the publisher

Question-8b [M-5]

Under the provision of section 29(1) of CGST Act, 2017 read with rule 21A of CGST Rules, 2017 related to suspension of registration if the registered person has applied for cancellation of registration, what is the period and manner of suspension of registration?

Answer

Rule-21A(1)

Where a registered person has applied for cancellation of registration, the registration shall be deemed to be suspended from:

(a) the date of submission of the application or

(b) the date from which the cancellation is sought,

whichever is later,

pending the completion of proceedings for cancellation of registration.

Such person shall not make any taxable supply during the period of suspension and shall not be required to furnish any return.

The expression “shall not make any taxable supply” mean that the registered person shall not issue a tax invoice and, accordingly, not charge tax on supplies made by him during the suspension period.

Quesiton-8(b) [M-5]

Explain circumstances when the Proper Officer can cancel registration under GST laws on his own.

Answer

Section 29(2) read with Rule 21

PO may cancel the registration from such date, including any retrospective date, as he may deem fit, where,–

(a) a RP has contravened such provisions of the Act or the rules made thereunder as may be prescribed [Rule 21]; or

(b) a Composition Dealer paying tax u/s 10 has not furnished [3][the return for a FY beyond 3 months from the due date of furnishing the said return]; or

(c) any RP, other than composition dealer, has not furnished returns for continuous periods of 6 months or 2 tax periods; or

(d) any person who has taken voluntary registration u/s 25(3) has not commenced business within 6 months from the date of registration; or

(e) registration has been obtained by means of fraud, wilful misstatement or suppression of facts:

Rule 21

1. does not conduct any business from the declared place of business; or

(b) issues invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or rules; or

(c) violates section 171 or rules thereunder [Anti Profiteering measure]

[4][(d) violates rule 10A] [i.e. Furnishing Bank A/c Details]

[5][(e) avails ITC in violation of section 16 or the rules made thereunder; or]

[6][(f) furnishes the details of outward supplies in GSTR-1 u/s 37 for one or more tax periods which is in excess of the outward supplies declared by him in his valid return u/s 39 for the said tax periods; or]

[7][(g) violates rule 86B.] [i.e. Restriction on use of ITC available in ECrL]