PAPER – 4 : TAXATION

SECTION B: INDIRECT TAXES

1. Section B comprises of questions from 5-8. In Section B, answer question no. 5 which is compulsory and any two questions from question nos 6-8.

2. Working notes should form part of the answer.

3. All questions in Section B should be answered on the basis of position of GST law as amended by the significant notifications/ circulars issued upto 31st October, 2021.

 

Question-5 [M-8]

Zeon Ltd., a GST registered supplier located in Ranchi, Jharkhand, is engaged in the manufacturing of washing machines & mixer grinders. It provides you the details of various activities undertaken during the month of September, 2021 as follows

SN	Particulars	Amount
(i)	Outward supplies made during the month
(a)	Within Jharkhand	24,00,000
(b)	Outside Jharkhand	5,00,000
(ii)	Purchase of raw materials from registered dealers within Jharkhand which includes materials worth Rs.2,00,000 purchased from Mr. Krishna, a registered person who is paying tax under composition scheme.	7,00,000
(iii)	Bus purchased from a registered dealer in Tatanagar, Jharkhand. Bus used to ferry its 25 workers to and from factory.	12,00,000

Assume the rates of GST applicable on various supplies as follows:

Nature of supply	CGST	SGST	IGST
Composition supplies	0.5%	0.5%
Bus	14%	14%	28%
Raw Material	6%	6%	12%
Washing machines & mixer grinders	9%	9%	18%

Opening balances of input tax credit as on 01/09/2021 were as follows

CGST (Rs.)	SGST (Rs.)	IGST (Rs.)
20,000	5,000	95,000

Note:

(i) All the figures mentioned above are exclusive of taxes.

(ii) Both inward & outward supplies within the State of Jharkhand are to be considered intra-State supplies and outside the State of Jharkhand are inter-State supplies.

(iii) Subject to information given above, all the other conditions necessary for availing ITC have been fulfilled.

Calculate the amount of net minimum GST payable in cash by Zeon Ltd. for the month of Sep, 2021.

Brief and suitable notes should form part of your answer.

Answer

Payment of Tax as per section 49

SN	Particulars	ITC	CGST	SGST	IGST
(a)	Output Tax [WN-1]	-	2,16,000	2,16,000	90,000
(b)	Utilisation of IGST	95,000	-	5,000	90,000
(c)	Utilisation of CGST	2,18,000	2,16,000	-	-
(d)	Utilisation of SGST	2,03,000	-	2,03,000	-
(e)	Payable in Cash		-	8,000	-

 

WN-1 Calculation of Output Tax

SN	Particulars	WN	CGST	SGST	IGST
(a)	Outward supplies made Within Jharkhand	24,00,000*9%	2,16,000	2,16,000	-
(b)	Outward supplies made outside Jharkhand	5,00,000*18%	-	-	90,000
	Output Tax		2,16,000	2,16,000	90,000

 

WN-2 Calculation of Input Tax and balance thereof

SN	Particulars	WN	CGST	SGST	IGST
(a)	OP Bal	-	20,000	5,000	95,000
(b)	ITC on purchase of RM from composition dealer	Not available	-	-	-
(c)	ITC on purchase of RM from RP within Jharkand	5,00,000*6%	30,000	30,000	-
(d)	ITC on bus purchased within Jharkand [ITC on motor vehicles for transportation of persons with seating capacity > 13 persons (including the driver) used for any purpose is allowed.]	12,00,000*14%	1,68,000	1,68,000	-
	Total ITC available for utilization		2,18,000	2,03,000	95,000
	ITC utilized		2,16,000	2,03,000	95,000
	Balance of ITC		2,000	-	-

 

Question-6a [M-6]

XYZ Pvt. Ltd. provided the following particulars relating to goods sold by it to ABC Pvt. Ltd.

Particulars	Rs.
List price of the goods (exclusive of taxes and discount)	50,000
Tax levied by the Municipal Authority on the sale of such goods	6,000
Packing charges (not included in the list price above)	2,500
Subsidy received from a NGO, directly linked to price (included in the list price above)	3,000
Paid to one of the vendors by ABC Pvt.in relation to the service provided by the vendor to XYZ Pvt. Ltd. (not included in the list price above)	2,000

XYZ Pvt. Ltd. offers 2% turnover discount on the list price after reviewing the performance of ABC Pvt. Ltd. The discount was not known at the time of supply.

ABC Pvt. Ltd. delayed the payment and paid Rs.5,000 (including GST of 18%) as interest to XYZ Pvt. Ltd.

Determine the value of taxable supply made by XYZ Pvt. Ltd. under GST law

Answer

Particulars	Rs.
List price of the goods (exclusive of taxes and discount)	50,000
Tax levied by the Municipal Authority on the sale of such goods [Note-1]	6,000
Packing charges [Note-2]	2,500
Subsidy received from a NGO, directly linked to price (included in the list price above) [Note-3]	Nil
Paid to one of the vendors by ABC Pvt.in relation to the service provided by the vendor to XYZ Pvt. Ltd. [Note-4]	2,000
Interest for delayed payment [5,000*1/1.18] [Note-5]	4,238
Total	64,737
Less: Additional Dis. [Note-6]	Nil
Value of Taxable supply	67,737

Note

(1) Section 15(2)(a) - Value of supply includes 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.

(2) Section 15(2)(c) - Value of supply includes incidental expenses, including commission and packing, charged by the supplier to the recipient.

(3) Section 15(2)(e) - Value includes subsidies directly linked to the price excluding subsidies provided by the Central and State Governments.

(4) Section 15(2)(b) - Value of supply includes any amount that the supplier is liable to pay but which has been incurred by the recipient and not included in the price actually paid or payable for such supply.

 

Question-6(b)(i) [M-2]

Examine whether the following activities would amount to “supply” under GST law?

Glory Ltd. is engaged in manufacturing and selling of cosmetics products. Seva Trust, a charitable organization approached Glory Ltd. to provide financial assistance for its charitable activities. Glory Ltd. donated a sum of Rs.2 lakh to Seva Trust with a condition that Seva Trust will place a hoarding at the entrance of the trust premises displaying picture of products sold by Glory Ltd.

Answer

Section 7 - An activity qualifies as supply under GST only if it is for a consideration and is in course/furtherance of business. Donations received by the charitable organizations are treated as consideration only when there’s an obligation on part of the recipient of the donation to do anything.

Circular No. 116/35/2019 GST dated 11.10.2019 has clarified that GST is not leviable where all the following three conditions are satisfied namely:

(i) Gift or donation is made to a charitable organization

(ii) Payment has the character of gift or donation

(iii) Purpose is philanthropic (i.e., it leads to no commercial gain) and not advertisement.

Comments

Since in the given case, the display of products sold by the donor – Glory Ltd. – in charitable organization’s premises aims at advertising/promotion of its business, it is supply for consideration in course/furtherance of business and thus, qualifies as supply under GST law.

 

Question-6b(ii) [M-2]

Examine whether the following activities would amount to “supply” under GST law?

Mr. Swamy of Chennai is working as a manager with ABC Bank. He consulted M/s Jacobs a company of London and took its advice for buying a residential house in Mumbai and paid them consultancy fee of 200 UK Pound for his import of service.

Answer

Section 7(1)(b) - “supply” includes import of services for a consideration whether or not in course of business.

Thus, in the given case, the import of services by Mr. Swamy amounts to supply although it is not in course/furtherance of business.

 

Question-7a [M-4]

M/s. Xing Trans of Kolkata is engaged in the trading of transmitters. On 20/05/2021, M/s. Xing Trans has sent 500 units of transmitters for exhibition at Chennai on sale or return basis. Out of the said 500 units, 300 units have been sold on 28/07/2021 at the exhibition. Out of remaining 200 units, 150 units have been brought back to Kolkata on 25/11/2021 and balance 50 units have neither been sold nor brought back.

Explain the provisions under GST law relating to issue of invoices with exact dates on which tax invoices need to be issued by M/s. Xing Trans.

Answer

Statutory Provision

Section 31(7)

where the goods being sent or taken on approval for sale or return are removed before the supply takes place, invoice shall be issued earlier of

before or at the time of supply or

6 months from the date of removal

 

Conclusion

a) 300 units sold on 28/07/2021 i.e. before 6 months after removal, hence as per section 31(7), invoice must be issued on 28/07/2021

b) Remaining 200 (150+ 50) units have neither been sold nor brought back till the expiry of 6
months from removal date, i.e. 20/11/2021. Thus, tax invoice for said 200 units needs to be issued upto 20/11/2021.

 

Question-7b [M-3]

"One consolidated e-way bill can be generated for multiple invoices". Comment on the validity of the above statement with reference to GST law.

Answer

Statutory Provision

Rule 138(6) - After e-way bill has been generated as per rule 138(1) and where multiple consignments are intended to be transported in one conveyance, the transporter may indicate the serial number of e-way bills generated in respect of each such consignment electronically on the common portal and a consolidated e-way bill in GST EWB-02 maybe generated by him on the said common portal prior to the movement of goods.

 

Conclusion

Multiple invoices cannot be clubbed to generate one e-way bill. If multiple invoices are issued by multiple consignor for movement of goods, multiple e-way bills have to be generated for each such invoices.

However as per rule 138(6), after generating all these e-way bills, one consolidated e-way bill can be prepared for transportation purpose, if goods are going in one conveyance.

Hence, the statement is invalid.

 

Question-7c [M-3]

"All taxpayers are required to file GSTR-1 only after the end of the current tax period." Comment on the validity of the above statement with reference to GST law.

Answer

Statutory Provision

(a) Section 37(1) - GSTR-1 must be furnished on or before 10^th of the month succeeding the said tax period.

 

Conclusion

The statement is partially valid.

A taxpayer cannot file Form GSTR-1 before the end of the current tax period. However, following are the exceptions to this rule:

a. Casual taxpayers, after the closure of their business

b. Cancellation of GSTIN of a normal taxpayer.

 

Question-8a [M-5]

"Under the GST law, taxes on taxable services supplied by the Central Government or the State Government to a business entity in India are payable by recipient of services".

State the exceptions of the above statement.

Answer

Vide Notification Notifications No. 13/2017-Central Tax (Rate) dt. 28-06-2017, Services supplied by the Central/ State Government (CG or SG/UT) or local authority to a business entity are taxable on RCM basis except the following

(1) renting of immovable property, and

(2) services specified below-

(i) services by the Department of Posts;

(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) transport of goods or passengers.

 

Question-8b [M-5]

Mr. B, a registered supplier of Uttar Pradesh, is doing the trading of taxable goods. He approaches you to understand the manner of utilisation of available Input Tax Credit (ITC).

With reference to provisions of payment of tax, state the manner of uilisation of ITC under GST law.

Answer

Refer Section 49(5), 49A, 49B read with Rule 88A, 88B

The manner of utlisation of ITC under GST law is as under:

1. IGST credit should first be utilized towards payment of IGST.

2. Remaining IGST credit, if any, can be utilized towards payment of CGST and SGST/UTGST in any order and in any proportion.

3. Entire ITC of IGST should be fully utilized before utilizing the ITC of CGST or SGST/UTGST.

4. Subsequently, ITC of CGST should be utilized for payment of CGST and IGST in that order.

5. ITC of SGST /UTGST should be utilized for payment of SGST/UTGST and IGST in that order.

6. ITC of SGST/UTGST should be utilized for payment of IGST, only after ITC of CGST has been utilized fully.

7. ITC of SGST/UTGST cannot be utilized for payment of CGST and vice versa.

OR

 

Question-8b [M-5]

State any five circumstances under which the proper officer can cancel the registration on his own under the CGST Act, 2017.

Answer

Section 29(2)

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 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 such continuous tax period as may be prescribed; 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

The registration granted to a person is liable to be cancelled, if the said person,-

(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]

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

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

(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

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

(h) RP has not furnished returns u/s 39(1) for a continuous period of six months

(i) RP  has not furnished returns under proviso to section 39(1) for a continuous period of 2 tax periods.