ICAI INTERMEDIATE EXAMINATION - MAY, 2019

PAPER – 4 : TAXATION

SECTION B: INDIRECT TAXES

1. Question No. 5 is compulsory.

2. Attempt any three questions from the rest.

3. “Working notes should form part of the respective answers.”

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

5. All questions should be answered on the basis of position of GST law as amended upto 31st October,2018.

Question-5 [M-8]

Mr. Himanshu, a registered supplier of chemicals, pays GST under regular scheme. He is not eligible for any threshold exemption. He has made the following outward taxable supplies for the month of September 2018

Additional Information:

He purchased a car (Intra-State supply) used for business purpose at a price of Rs.6,72,000/ (including CGST of Rs.36,000 & SGST of Rs.36,000) on September 15, 2018. He capitalized the full value including GST in the books on the same date to claim depreciation.

Out of Inter-State purchase from registered dealer, goods worth Rs.1,00,000 were received on October 3, 2018 due to road traffic jams.

Note:

(i) Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively.

(ii) Both inward and outward supplies given above are exclusive of taxes, wherever applicable.

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

Compute the net CGST, SGST and IGST payable in cash by Mr. Himanshu for the month of September,2018.

Answer

Computation of net GST payable in cash of Mr. Himanshu for September,2018

Notes:

1. Every registered person is entitled to take credit of input tax charged on any inward supply of goods used/intended to be used in the course/furtherance of his business.

2. Intra-State supplies received by a registered person from any unregistered supplier, are exempt from the whole of the tax leviable thereon under reverse charge till 30.09.2019. Since no tax has been paid, so no credit is available.

3. Input tax paid on capital goods cannot be availed as ITC if depreciation has been claimed on such tax component. Moreover, ITC on motor vehicle (car) is blocked under section17(5) of CGST Act, 2017.

4. A registered person is entitled to avail input tax in respect of any supply of goods to him only if he has actually received the said goods. Since goods worth Rs.1,00,000 have not been received by Mr. Himanshu in the month of September 2018, credit in respect of same cannot be claimed in the said month.

5. Input tax credit of IGST has been used to pay IGST, CGST and SGST in that order.

Question-6(a) [M-6]

M/s. Apna Bank Limited, a Scheduled Commercial Bank has furnished the following details for the month of August, 2018:

Compute the value of taxable supply. Give reasons with sui table assumptions.

Answer

Computation of value of taxable supply of M/s. Apna Bank Limited for the month of August,2018

Question-6(b) [M-4]

Decide with reason whether the following independent services are exempt under CGST Act, 2017:

(i) Gokul Residents' Welfare Association received Rs.9,000 per month as contribution from each member for sourcing of goods and services from third persons for common use of its members.

(ii) Mr. Vikalp, a performing artist, has received Rs.1,58,000 from performance of classical dance and Rs.90,000 from acting in TV Serial during the month of June 2018.

Answer

(i) Service by an unincorporated body or a registered non-profit entity, to its own members by way of share of contribution up to an amount of Rs.7,500 per month per member for sourcing of goods/services from a third person for the common use of its members in a housing society or residential complex, is exempt.

In the given case, monthly contribution per month per member received by Gokul Residents’ Welfare Association exceeds Rs.7,500.

Therefore, exemption will be available up to Rs.7,500 and GST would be payable on the amount in excess of Rs.7,500 (viz. Rs.1,500 in this case).

(ii) Services by an artist by way of a performance in folk or classical art forms of music, dance, or theatre, if the consideration charged for such performance is not more than Rs.1,50,000 are exempt from GST.

In the given case, since the consideration received by the performing artist Mr. Vikalp for performance of classical dance is more than Rs.1,50,000, said services are not exempt.

Further, consideration received for acting in T V serial is also not exempt since said performance is not in folk/classical art forms of theatre.

Question-7(a) [M-4]

Examine the following independent cases of supply of goods and services and determine the time of issue of invoice under each of the cases as per the provisions of CGST Act, 2017:

(i) Sakthi Enterprises, Kolkata entered into a contract with Suraj Enterprises, Surat for supply of goods on 31st October, 2018. The goods were removed from the factory at Kolkata on 11^th October, 2018. As per the agreement, the goods were to be delivered by 31^st October, 2018. Suraj Enterprises has received the goods on 14th October, 2018.

(ii) Trust and Fun Ltd, an event management company, has provided its services for an event at Kapoor Film Agencies, Mumbai on 5^th June, 2018. Payment for the event was made on 19^th June, 2018.

Answer

(i) A registered person supplying taxable goods shall issue a tax invoice, before or at the time of removal of goods for supply to the recipient, where the supply involves movement of goods.

Therefore, in the given case, invoice has to be issued on or before, 11^th October 2018 (the time of removal of goods).

(ii) A registered person [other than an insurer/banking company/financial institution, including an NBFC] supplying taxable services shall issue a tax invoice before or after the provision of service, but within a period of 30 days from the date of supply of service.

Thus, in the given case, invoice has to be issued within 30 days of 5^th June 2018 (date of supply of service), i.e. on or before, 5^th July 2018.

Question-7(b) [M-2]

M/s. Daksha Enterprises has made a cash deposit of Rs.10,000 under minor head 'tax' of major head 'SGST’. It has a liability of Rs.2,000 for minor head "Interest" under the major head "SGST".

State whether M/s. Daksha Enterprises can utilize the amount available for payment of interest.

Answer

The cash available in any minor head of a major head cannot be utilized for any other minor head of the same major head.

Therefore, in the given case, amount of Rs.10,000 available under minor head ‘tax’ of major head ‘SGST’ cannot be utilized for payment of liability of Rs.2,000 under minor head ‘interest’ of the same major head.

Question-7(c) [M-2]

State with brief reason, whether following suppliers of taxable goods are required to register under the GST Law:

(i) Mr. Raghav is engaged in wholesale cum retail trading of medicines in the State of Assam. His aggregate turnover during the financial year is Rs.9,00,000 which consists of Rs.8,00,000 as Intra-State supply and Rs.1,00,000 as Inter-State supply.

(ii) Mr. S.N Gupta of Rajasthan is engaged in trading of taxable goods on his own account and also acting as an agent of Mr. Rishi of Delhi. His turnover in the financial year 2017-18 is of Rs.12 lakhs on his own account and Rs.9 lakhs on behalf of principal. Both turnovers are Intra-State supply.

Answer

(i) Person making any inter-State taxable supply of goods is required to obtain registration compulsorily under GST laws irrespective of the quantum of aggregate turnover.

Thus, in the given case Mr. Raghav is required to obtain registration compulsorily under GST laws even though his aggregate turnover does not exceed the threshold limit of Rs.10 lakh [since Assam is a Special Category State] in the financial year.

(ii) Persons who make taxable supply of goods on behalf of other taxable persons whether as an agent or otherwise are required to obtain registration compulsorily under GST laws irrespective of the quantum of aggregate turnover.

Aggregate turnover includes all supplies made by the taxable person, whether on his own account or made on behalf of all his principals.

Since Mr. S.N Gupta is also acting as an agent of Mr. Rishi of Delhi, he is required to obtain registration compulsorily under GST laws.

Question-8(a) [M-5]

Enumerate the persons who are not eligible to opt for Composition Scheme under section 10(2) of the CGST Act, 2017.

Answer

A registered person shall not be eligible to opt for composition scheme if:

(i) he is engaged in supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II.

(ii) he is engaged in supply of goods not leviable to tax

(iii) he is engaged in inter-State outward supplies of goods

(iv) he is engaged in supply of goods through an electronic commerce operator

(v) he is a manufacturer of notified goods, namely, manufacturer of ice cream, pan masala and tobacco.

Question-8(b) [M-5]

List out the situations in which a Credit note/Debit note may be issued under the CGST Act, 2017.

Answer

Credit note is required to be issued by the Supplier:

(i) If taxable value charged in the tax invoice is found to exceed the taxable value in respect of supply of goods and/or services, or

(ii) If tax charged in the tax invoice is found to exceed the tax payable in respect of supply of goods and/or services, or

(iii) if goods supplied are returned by the recipient, or

(iv) if goods and/or services supplied are found to be deficient.

Debit note is required to be issued by the Supplier:

(i) if taxable value charged in the tax invoice is found to be less than the taxable value in respect of supply of goods and/or services or

(ii) if tax charged in the tax invoice is found to be less than the tax payable in respect of supply of goods and/or services

Question-8(c) [M-5]

Answer the following questions with respect to casual taxable person under the CGST Act, 2017:

(i) Who is a casual taxable person?

(ii) Can a casual taxable person opt for the composition scheme?

(iii) When is the casual taxable person liable to get registered?

(iv)What is the validity period of the registration certificate issued to a casual taxable person?

(v) Can the validity of registration certificate issued to a casual taxable person be extended? If yes, what will be the period of extension.        [M-5]

Answer

(i) Casual taxable person means a person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State/UT where he has no fixed place of business.

(ii) No, a casual taxable person cannot opt for the composition scheme.

(iii) A casual taxable person (CTP) is liable to obtain registration compulsorily under GST laws, at least5 days prior to commencement of business. However, threshold limit of Rs.20 lakh (Rs.10 lakh in case of Special Category States other than Jammu & Kashmir) is available in case of CT P making taxable supplies of specified handicraft goods.

(iv) The registration certificate issued to a casual taxable person will be valid for:

(a) the period specified in the registration application, or

(b) 90 days from the effective date of registration whichever is earlier.

(v) Yes, the validity of registration certificate issued to a casual taxable person can be extended.

 It can be extended by a further period not exceeding 90 days.