ICAI INTERMEDIATE EXAMINATION - MAY, 2018

PAPER – 4 : TAXATION

SECTION B: INDIRECT TAXES

1. Question No. 8 is compulsory.

2. Candidates are also required to answer any three questions from the remaining four questions.

3. All questions should be answered on the basis of position of GST law as amended upto 31st October,2017.

4. Working notes should form part of the answer.

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

Question-8a [M-6]

Mr. Ajay, a registered supplier of goods, pays GST under regular scheme and provides the following information for the month of August 2017:

He has the following input tax credit at the beginning of August 2017:

Rate of CGST, SGST and IGST are 9%, 9% and 18% respectively.

Both inward and outward supplies are exclusive of taxes wherever applicable.

All the conditions necessary for availing the ITC have been fulfilled. Compute the net GST payable by Mr. Ajay for the month of August 2017.

Answer

WN-1 Calculation of Output tax

WN-2 Calculation of Input Tax            

WN-3 Payment of Net GST

Note: ITC of IGST, CGST & SGST have been used to pay IGST in that order.

Question-8(b) [M-4]

Fun Pharma Private Limited, a registered supplier is engaged in the manufacture of taxable goods. The company provides the following information of GST paid on the purchases made/input services availed by it during the month of Sep 2017:

Determine the amount of input tax credit available with M/s Fun Pharma Private Limited for the month of Sep, 2017 by giving necessary explanations for treatment of various items. All the conditions necessary for availing the input tax credit have been fulfilled.

Answer

Computation of ITC available with Fun Pharma Private Ltd. for the month of Sep, 2017

Notes:

1.Section 17 - ITC on motor vehicles can be availed, inter alia, when they are used for making the taxable supply of transportation of passengers i.e., if the taxable person is in the business of transport of passengers. In the given case, since the supplier is a manufacturer, it cannot avail credit on cabs used for transportation of its employees.

2. When inputs are received in instalments, ITC can be availed only on receipt of last instalment in terms of section 16 of CGST Act, 2017.

3. ITC cannot be taken on missing invoice. The registered person should have the invoice in its possession to claim ITC vide section 16 of CGST Act, 2017.

4. ITC on outdoor catering is specifically disallowed unless the same is used for making outward taxable supply of the same category or as an element of the taxable composite or mixed supply in terms of section 17 of CGST Act, 2017.

Question 9(a) [M-5]

Candy Blue Ltd., Mumbai, a registered supplier, is manufacturing Chocolates and Biscuits. It provides the following details of taxable inter-state supply made by it for the month of October, 2017.

Calculate the value of taxable supply made by M/s Candy Blue Ltd. for the month of October,2017.

Answer

Computation of value of taxable supply made by Candy Blue Ltd. for the month of October, 2017

Note: In the above solution, list price of the goods and late fee for delayed payment of invoice have been assumed to be exclusive of taxes.

Quesiton-9(b) [M-5]

Explain the meaning of the term "recipient of supply of goods and/or services" under the CGST Act, 2017.

Answer

Section 2(93) - Recipient of supply of goods or services or both, means:

(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;

(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and

(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered,

and (i) any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply, and (ii) shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.

Question 10(a) [M-4]

M/s Mansh & Vansh Trading Company, a registered supplier, is liable to pay GST under forward charge. Determine the time of supply from the following information furnished by it:

(i) Goods were supplied on 03-10-2017

(ii) Invoice was issued on 05-10-2017

(iii) Payment received on 09-10-2017

Answer

(1) Statutory Provisions

(a) Section 12 of CGST Act - Time of supply of goods, tax on which is payable under forward charge, is the earlier of the following two dates:

(i) Date of issue of invoice/last date on which the invoice is required to be issued.

(ii) Date of receipt of payment

(b) Section 31 - A registered person is required to issue a tax invoice before or at the time of removal of goods for supply to the recipient.

(2) Advice

Thus, in the given case, the invoice for supply of goods should have been issued on or before the removal of goods i.e., on 03-10-2017.

However, since the invoice has not been issued within the prescribed time, the time of supply will be the last date on which the invoice is required to be issued (03-10-2017) or date of receipt of payment (09-10-2017), whichever is earlier.

Thus, the time of supply of the goods will be 03-10-2017.

Question 10(b) [M-3]

Examine whether GST is exempted on the following independent supply of services:

(i) Teja & Co, a tour operator, provides services to a foreign tourist for tour conducted in Jammu & Kashmir and receives a sum of Rs.3,00,000.

(ii) Ms. Poorva acts as a Team Manager for Indian Sports League (ISL), a recognised sports body, for a Tennis tournament organised by Multi brand retail company and received a remuneration of Rs.2,00,000.

Answer

(i) Entry – 52A of N N. 13/2017-CT Rate : Services provided by a tour operator to a foreign tourist are exempt from GST provided such services are in relation to a tour conducted wholly outside India. Thus, since in the given case, services provided by Teja & Co. are in relation to a tour conducted within India, the same are not exempt from GST.

(ii) Entry – 68 of N N. 13/2017-CT Rate : Services provided by a team manager to a recognized sports body for participation in a sporting event are exempt from GST provided said sporting event is organized by a recognized sports body. Thus, since in the given case, the sporting event is not organized by a recognized sports body, the services provided by Ms. Poorva are not exempt from GST.

Question 10(c) [M-3]

M/s Sai Trading Company, an eligible registered dealer in goods making intra-state supplies within the state of Andhra Pradesh, has reported an aggregate turnover of Rs.78 Lakhs in the preceding financial year.

(i) Determine whether Sai Trading Company will be eligible for composition levy, as on 31-10-2017.

(ii) Will your answer be different, if in the above scenario, M/s Sai Trading Company is making intra state supply within the state of Jammu and Kashmir?

Answer

(i) Section 10 of CGST Act, 2017 provides that a registered person, whose aggregate turnover in the preceding financial year did not exceed Rs.1.5 crore may opt for composition scheme. The turnover limit is Rs.75 lakh in case of Special Category States (Uttrakhand). However, for Jammu and Kashmir, the turnover limit is Rs.1.5 crore only.

In the given case, the applicable turnover limit for composition scheme will be Rs.1.5 lacs as Andhra Pradesh is not a Special Category State.

Further, since the aggregate turnover of the registered person in the given case does not exceed Rs.1.5 crore and it satisfies other conditions of composition scheme namely, not making inter-State supplies of goods, it is eligible for composition levy.

(ii) Since the turnover limit for determining the eligibility for composition scheme in the State of Jammu and Kashmir is also Rs.1.5 crore, Sai Trading Company will be eligible for composition levy with other condition of not making inter-State supplies of goods being fulfilled.

Question 11(a) [M-4]

Determine the effective date of registration in the following instances:

(i) The aggregate turnover of Madhu Ltd., engaged in taxable supply of services in the state of Punjab, exceeded Rs.20 lakh on 25th August, 2017. It applies for registration on 19th September, 2017 and is granted registration certificate on 29thSeptember, 2017.

(ii) What will be your answer, if in the above scenario, Madhu Ltd. submits the application for registration on 27^th September, 2017 and is granted registration on 5^th October, 2017? [M-4]

Answer

A supplier whose aggregate turnover in a financial year exceeds Rs.20 lakh in a State/UT [Rs.10 lakh in Special Category States except Jammu and Kashmir] is liable to apply for registration within 30 days from the date of becoming liable to registration (i.e., the date of crossing the threshold limit of Rs.20 lakh/Rs.10 lakh).

Where the application is submitted within the said period, the effective date of registration is the date on which the person becomes liable to registration; otherwise it is the date of grant of registration.

In the given case, the applicable turnover limit for registration will be Rs.20 lakh as Punjab is not a Special Category State.

(i) Since Madhu Ltd. applied for registration within 30 days of becoming liable to registration, the effective date of registration is 25^th August, 2017.

(ii) In this case, since Madhu Ltd. applies for registration after the expiry of 30 days from the date of becoming liable to registration, the effective date of registration is 5thOctober, 2017.

Question 11(b) [M-4]

Determine with reason whether the following statements are true or false:

(i) A registered person shall issue separate invoices for taxable and exempted goods when supplying both taxable as well as exempted goods to an unregistered person.

(ii) A Non-banking financial company can issue a consolidated tax invoice at the end of every month for the supply made during that month.

Answer

(i) The given statement is false. Where a registered person is supplying taxable as well as exempted goods or services or both to an unregistered person, a single “invoice-cum-bill of supply” may be issued for all such supplies.

(ii) The said statement is true.

By virtue of an amendment, a non-banking financial company has been allowed to issue a consolidated tax invoice or any other document in lieu thereof for the supply of services made during a month at the end of the month.

Question 11(c) [M-3]

List any six state levies, which are subsumed in GST.

Answer

The State levies which are subsumed in GST are as under:

• State surcharges and cesses in so far as they relate to supply of goods & services

• Entertainment Tax (except those levied by local bodies)

• Tax on lottery, betting and gambling

• Entry Tax (All Forms) & Purchase Tax

• VAT/ Sales tax

• Luxury Tax

• Taxes on advertisements

Note: Any of the six points may be mentioned.

Question 12(a) [M-5]

Discuss the following in terms of provisions of CGST Act, 2017:

When shall the interest be payable by a registered person and what is the maximum rate of interest chargeable for the same?

Answer

Section 50 - Interest is payable in the following cases:

• failure to pay tax, in full or in part within the prescribed period,

• undue or excess claim of input tax credit,

• undue or excess reduction in output tax liability.

The maximum rate of interest chargeable for the same is as under

(a) 18% p.a. in case of failure to pay full/part tax within the prescribed period

(b) 24% p.a. in case of undue or excess claim of input tax credit or undue or excess reduction in output tax liability.

Question 12(b) [M-5]

List the inclusions and exclusions for computing the "Aggregate Turnover" under CGST Act, 2017.

Answer

Section 2(6) - Aggregate turnover includes the aggregate value of all:

(i) taxable supplies,

(ii) exempt supplies,

(iii) exports of goods and/or services and

(iv) inter-State supplies of persons having the same PAN.,

to be computed on all India basis

Aggregate turnover excludes:

(i) value of inward supplies on which tax is payable by a person on reverse charge basis,

(ii) central tax, State tax, Union territory tax, integrated tax and

(iii) cess

Question 12(c) [M-5]

Who is required to furnish Final Return under CGST Act, 2017 and what is the time limit for the same? Discuss.

Answer

Every registered person who is required to furnish a return u/s 39(1)of the CGST Act, 2017 and whose registration has been surrendered or cancelled shall file a Final Return electronically in the prescribed form through the common portal.

Final Return has to be filed within 3 months of the:

(i) date of cancellation

                       OR

(ii) date of order of cancellation

whichever is later.