ICAI INTERMEDIATE EXAMINATION - NOV, 2018- OLD SYLLABUS

PAPER – 4 : TAXATION

SECTION B: INDIRECT TAXES

1. Question No. 7 is compulsory.

2. Attempt any four questions from the rest.

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

4. “All questions should be answered on the basis of the position of GST law as amended by the significant notifications/circulars issued till 30^TH April, 2018

Question-7(a) [M-6]

Worldwide Pvt. Ltd. (a registered taxable person) having the gross receipt of Rs.50 lakh in the previous financial year provides the following information relating to their services for the month of July, 2018.

Compute the value of taxable supply and the amount of GST payable. The above receipts don't include the GST amount. Rate of GST is 18%.

Answer

Computation of value of taxable supply and amount of GST payable

 **Note: It has been assumed that total rent per day is less than Rs.1,000 per flat. However, if it is assumed that total rent per day exceeds Rs.1,000 per flat, services of renting of flats become taxable and thus, value of taxable supply and GST payable is Rs.9,00,000 and Rs.1,62,000 respectively.

Question-7(b) [M-4]

M/s J & Co. Chartered Accountants, a partnership firm, having its registered and head office in Mumbai and registered under the GST Act in the State of Maharashtra only. It does not have any branches in other State. The gross receipts of the firm in the Financial Year 2017-18 was Rs.60 lakh. Firm has submitted following information for the month of August, 2018:

Firm has also furnished following information in respect of input services availed from registered dealers for providing output services during the month August, 2018:

Notes:

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

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

(iii) Opening balance of available input tax credit is Nil for CGST, SGST and IGST.

Compute the net gst payable by M/s J & Co. for the month August, 2018 after adjusting the GST credit. Brief reasoning should form part of your answer.

Answer

Computation of net GST payable by M/s J & Co. for the month of August, 2018

Working note: Computation of ITC available for set-off

Note: Read amount of GST Rs.3,600 given against services availed from another professional firm at Mumbai as given against IGST. However, it is also possible to assume the said amount of Rs.3,600 as entirely the amount of CGST (as given in question) or as Rs.1,800 - CGST and SGST each.

Question-8(a) [M-5]

JP Charitable Institution, an entity registered under Section 12AA of Income Tax Act, 1961 and registered in GST, has furnished you the following details with respect to the activities undertaken by it during the month of January, 2018. You are required to compute its taxable value of GST from the information given below, assuming that the rate of GST is 18%. Brief reasoning should be part of your answer.

Answer

Computation of value of taxable supply of JP Charitable Institution for the month of January, 2018

Notes:

Entry 1 of N No. 12/2017-CT Rate

Services by an entity registered u/s 12AA or 12AB of the Income-tax Act, 1961  by way of following charitable activities is exempt from GST.

“charitable activities” means activities relating to -

(i) public health by way of ,-

(A) care or counseling of

    (I) terminally ill persons or persons with severe physical or mental disability;

    (II) persons afflicted with HIV or AIDS;

    (III) persons addicted to a dependence-forming substance such as narcotics drugs or alcohol; or

(B) public awareness of preventive health, family planning or prevention of HIV infection;

(ii) advancement of religion , spirituality or yoga;  

(iii) advancement of educational programmes or skill development relating to,-

(A) abandoned, orphaned or homeless children;

(B) physically or mentally abused and traumatized persons;

(C) prisoners; or

(D) persons over the age of 65 years residing in a rural area;

(iv) preservation of environment including watershed, forests and wildlife;

Question-8(b) [M-5]

Mr. XYZ & Co., a firm of Chartered Accountants, issued invoice for services rendered to Mr. A on 7^th September, 2017. Determine the time of supply in the following independent cases:

(1) The provision of service was completed on 1^st August, 2017.

(2) The provision of service was completed on 14^th August, 2017.

(3) Mr. A made the payment on 3^rd August, 2017 where provision of service was remaining to be completed.

(4) Mr. A made the payment on 15^th September, 2017 where provision of service was remaining to be completed.                                                                              [M-5]

Answer

Answer

(a) Section 13(2) - The time of supply of services shall be as follows

(a) If invoice is issued within period prescribed u/s 31, TOS shall be earlier of

date of issue of invoice or

date of receipt of payment

(b) If invoice is not issued within period prescribed u/s 31, TOS shall be earlier of

date of supply of service, or

date of receipt of payment, or

(b) Section 31(2) read with Rule 47 – Due date for issue of invoice

RP supplying taxable services shall issue a tax invoice,

before supply of service or

within 30 days from the date of supply of service

Advice

In accordance with aforesaid provisions, time of supply is:

1. 01.08.2017 since the invoice is not issued within 30 days of supply of service.

2. 07.09.2017 since the invoice is issued within 30 days of supply of service.

3. 03.08.2017 viz. earlier of 07.09.2017 or 03.08.2017

4. 07.09.2017 viz. earlier of 07.09.2017 or 15.09.2017

Question 9(a) [M-5]

M/s Maheshwari Corporation Pvt. Ltd. is a supplier of goods and services at Bangalore, registered in the State of Karnataka, having turnover of Rs.200 lakhs in the last financial year. It has furnished the following information for the month of June, 2018.

Compute net GST liability (CGST, SGST, IGST as the case may be) of M/s Maheshwari Corporation Pvt. Ltd. for the month of June, 2018 assuming the rates of GST, unless otherwise specified, as under:

CGST –9%, SGST –9%, IGST –18%

Answer

Computation of net GST liability of M/s Maheshwari Corporation Pvt. Ltd.

Question 9(b) [M-5]

Harshgeet Pvt. Ltd., a registered supplier, is engaged in the manufacture of taxable goods. The company provides the following information pertaining to GST paid on the purchases made/input services availed by it during the month of July, 2018:

Determine the amount of tax credit available with Harshgeet Pvt. Ltd. for the month of July, 2018 by giving the necessary explanation for treatment of various items. All the conditions necessary for availing the ITC have been fulfilled.

Answer

Computation of ITC available with Harshgeet Pvt. Ltd. for the month of July, 2018

Notes:

(a) 1^st Proviso to section 16(2) provides that if goods are received in lots or instalments, RP shall take ITC upon receipt of the last lot or instalment.

(b) Section 17(5)(b)(ii) denies ITC on membership of a club, health and fitness centre.

(c) Section 17(5)(a) denies ITC on motor vehicles for transportation of persons of seating capacity =< 13 persons (including driver). Truck is not for transportation of person, hence ITC on purchase of truck is allowed.

(d) Section 16(2)(a) provides that RP is in possession of a tax invoice or DN or other tax paying documents for availing ITC. Hence ITC on missing invoice will not available.

Question-10(a)(i) [M-2]

There is a dairy farm selling milk and milk products in Delhi. The turnover of his dairy farm is as below:

Milk (Exempted): Rs.19,90,000

Butter (Taxable): Rs.50,000

What is the registration liability under GST for the above mentioned person assuming he has same PAN?

Answer

Every supplier becomes liable to registration if his aggregate turnover in a financial year exceeds Rs.20 lakh in a State/UT [Rs.10 lakh in case of Special Category States other than Jammu and Kashmir].

Further, aggregate turnover, inter alia, means the aggregate value of all taxable supplies as well as exempt supplies.

Thus, in the given case, aggregate turnover:

= Rs.19,90,000 + Rs.50,000 = Rs.20,40,000

Since aggregate turnover of the dairy farm in Delhi exceeds Rs.20 lakh, it is liable to get registered.

Question-10(a)(ii) [M-2]

Amit, a taxable person, is operating in Tamil Nadu, Punjab and West Bengal, with the same PAN. Can he operate with a single registration in West Bengal?

Answer

No, Amit cannot operate with a single registration in West Bengal if he is making taxable supplies from Tamil Nadu and Punjab also. Every person who is liable to take a registration will have to get registered separately for each of the States where he has a business operation and is liable to pay GST.

However, if he is not making taxable supplies from Tamil Nadu and Punjab, he can operate with a single registration in West Bengal.

Question-10(b)(i) [M-2]

Mr. X is running a consulting firm and also a readymade garment showroom in Kolkata registered in same PAN. Turnover of the showroom is Rs.70 lakh and receipt of consultancy firm is Rs.15 lakh in the preceding financial year. You are required to answer the following:

(1) Is Mr. X eligible for composition scheme?

(2) Is it possible for Mr. X to opt for composition scheme only for showroom?

Answer

A registered person, whose aggregate turnover in the preceding financial year did not exceed Rs.1 crore in a State/UT [Rs.75 lakh in case of Special Category States except Jammu and Kashmir and Uttarakhand], may opt for composition scheme.

However, he shall not be eligible to opt for composition scheme if, inter alia, he is engaged in the supply of services other than restaurant services.

(1) In the given case, since Mr. X is engaged in the supply of consultancy service, he is not eligible to opt for composition scheme irrespective of its turnover in the preceding financial year.

(2) No, it is not possible for Mr. X to opt for composition scheme only for showroom as all the registrations under the same PAN have to opt for composition scheme and since the supply of consultancy service is ineligible for composition scheme, supply of readymade garments too becomes ineligible for composition scheme.

Question-10(b)(ii) [M-2]

Differentiate between direct and indirect taxes (Give any two points)

Answer

(a) In case of direct taxes, the person paying the tax to the Government directly bears the incidence of the tax whereas in case of indirect taxes, the person paying the tax to the Government collects the same from the ultimate consumer, i.e. incidence of tax is shifted to the other person.

(b) Direct taxes are progressive in nature - high rate of taxes for people having higher ability to pay. However, indirect taxes are regressive in nature - All the consumers equally bear the burden, irrespective of their ability to pay.

Question-10(c) [M-2]

Can a person get himself voluntarily registered though he may not be liable to pay GST? [M-2]

Answer

Yes. a person, though not liable to be registered under sections 22 or 24 of CGST Act, 2017 may get himself registered voluntarily. Once a person obtains voluntary registration, he has to pay tax even though his aggregate turnover does not exceed Rs.20 Lakhs / Rs.10 Lakhs.

Question-11(a) [M-4]

Insight Ltd. is operating in West Bengal. The tax liability for the month of August, 2017 is as follows:

Calculate tax payable and carry forward for the month of August, 2017.

Answer

Computation of net tax payable and carry forward for the month of August, 2017

Note: ITC of IGST has been used to pay IGST and CGST in that order. Further, ITC of SGST cannot be utilised towards payment of CGST.

Question-11(b) [M-4]

M/s Software Limited reduced the amount of Rs.2,00,000 from the output tax liability in contravention of provisions of section 42(10) of the CGST Act, 2017 in the month of December 2017, which is ineligible credit. A show cause notice was issued by the Tax Department to pay tax along with interest. M/s Software Limited paid the tax and interest on 31^st March, 2018. Calculate interest liability (Ignore penalty).

Answer

A taxable person who makes an undue or excess claim of input tax credit shall pay interest @ 24% p.a. on such undue or excess claim. The period of interest will be from the date following the due date of payment to the actual date of payment of tax.

Due date of payment is 20^th Jan, 2018.

Period for which interest is due = 21^st Jan, 2018 to 31st March, 2018

= 70 days

Thus, interest liability = Rs.2,00,000 x 24% x 70/365

= Rs.9,205 (approx.)

Question-11(c) [M-2]

The aggregate turnover of Vikas Enterprise of Mumbai (Maharashtra) has exceeded Rs.20 lakh on 25^th January, 2018. It submits the application for registration on 15^th February, 2018. Registration certificate is granted on 20^th February, 2018. Determine the effective date of registration under CGST Act, 2017.

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.

Where the application is submitted within 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.

Since Vikas Enterprise applied for registration within 30 days of becoming liable to registration, the effective date of registration is 25thJanuary, 2018.

Question-12(a) [M-5]

What kinds of invoice details of outward supplies are required to be furnished in GSTR-1 for outward supplies?

Answer

The invoice details of outward supplies required to be furnished in GSTR-1 are-name of Buyer, GST N of buyer, invoice no., date, value, taxable value, rate of tax, amount of tax, HSN code in respect of supply of goods, accounting code in respect of supply of services and place of supply.

Further, following invoice details of outward supplies are required to be furnished invoice-wise in GSTR-1

(i) intra-State supplies made to the registered persons

(ii) inter-State supplies made to the registered persons;

(iii) inter-State supplies made to unregistered persons with invoice value exceeding Rs.2,50,000

Note: The question may be answered either on the basis of invoice details of outward supplies required to be furnished in GSTR-1 or on the basis of invoice details of outward supplies required to be furnished invoice-wise in GSTR-1.

Question-12(b) [M-5]

Discuss the provisions relating to issuance of credit notes and debit notes under CGST Act and rules there under.

Answer

Credit note is required to be issued:

(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

(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-12(c) [M-5]

State whether the following supplies would be treated as supply of goods or supply of services as per Schedule II of CGST Act:

(i) Renting of immovable property

(ii) Transfer of right in goods without transfer of title in goods.

(iii) Works contract services

(iv) Temporary transfer of permitting use or enjoyment of any intellectual property right

(v) Sale of personal car to dealer.

Answer

(i) Renting of immovable property would be treated as supply of services in terms of Schedule-II of CGST Act, 2017.

(ii) As per Schedule-II of CGST Act, 2017, transfer of right in goods without transfer of title in goods would be treated as supply of services.

(iii) As per Schedule-II of CGST Act, 2017, works contract services would be treated as supply of services.

(iv) As per Schedule-II of CGST Act, 2017, temporary transfer of permitting use or enjoyment of any intellectual property right would be treated as supply of services.

(v) As per Schedule-II of CGST Act, 2017, sale of personal car to dealer would be treated as supply of goods as any transfer of the title in goods is a supply of goods.

However, it is also possible to take view that sale of personal car to dealer is not a supply per se as supply is not made by the individual in the course or furtherance of business–in terms of CBIC FAQs [Q. 10 of Chapter 4 -Meaning and scope of supply].

Note: The question may be answered on the basis of either of the two views.