ICAI INTERMEDIATE EXAMINATION - NOV, 2019

PAPER – 4 : TAXATION

SECTION B: INDIRECT TAXES

Question-5 [M-8]

M/s. Grey, a registered taxable person under regular scheme provides following information in respect of supplies made by it during the month of April 2019:

M/s. Grey has also received the following inward supplies:

Details of opening balances of ITC as on 1-4-2019 are as follows:

Following additional information is provided:

(a) Rate of GST in respect of all inward and outward supplies except item (ii) above is 18%. i.e. CGST and SGST @9% and IGST @18%.

(b) All figures mentioned above are exclusive of taxes.

(c) All the conditions for availing the ITC have been fulfilled except specifically given and M/s. Grey is not eligible for any threshold exemption.

Compute the minimum net GST payable in cash by M/s. Grey for the month of April 2019.

Answer

WN-1 Calculation of Total output Tax

Note:

1. Mixed Supply [Section 2(74)] - Two or more individual supplies of goods or services made in conjunction with each other for a single price where such supply does not constitute a composite supply.

In the given case, prices of detergent and bucket are singled price, it is mixed supply.

2. Exempt Supply [E No-66 of NN 12/2017-CT Rate]

Services provided to an educational institution by supply of online educational journals or periodicals is exempt from GST. However, in the given case, such supply is made to private coachin center, hence it is taxable.

WN-1 Calculation of Total Input Tax

Note:

1. Section 16(2)(a) – RP shall take ITC  on any inward supplies only if all the conditions are fulfilled

(a) he is in possession of a tax invoice or DN or other tax paying documents as prescribed in Rule 36(1);

In the given case, since Tax Invoice/Other tax paying documents is missing, hence ITC is not available on Rs.20,000

2. Section 17(5)(a) - ITC on motor vehicles for transportation of persons of seating capacity =< 13 persons (including driver) shall not be available. In the given case, seating capacity is more than 13 person, hence ITC shall be available.

WN-3 Net Payment of Tax

Question-6(a) [M-6]

Mr. Zafar of Assam, provides the following information for the preceding financial year 2018-19. You are required to find out the aggregate turnover for the purpose of eligibility of composition levy scheme and determine whether he is eligible for composition levy scheme or not, for the F.Y. 2019-20.

Answer

1. Statutory Provisions

a) As per Section 10(1), RP, whose AT in preceding FY did not exceed Rs.1.5 Cr, may opt for composition levy

b) As per Section 2(6), AT = All supplies of (Taxable + Exempt + Export + Inter State supplies by RP of same PAN) but AT does not include GST & Inward supplies on RCM.

c) As per Explanation-1 of Section 10 AT does not include interest income

d) As per section 10(2)(c) for composition levy, RP should not be engaged in interstate outward supply of goods.

2. Facts

a) AT as per section 2(6) AT = 50 + 70 + 5 = 125 lacs

b) AT of Mr. Zafar for Preceding FY 2018-19 for composition levy = 50+40+5 = Rs.95 lacs.

* AT does not include Interest income & Inward supplies under RCM, hence not included above.

b) Mr. Zafar is engaged in in interstate outward supplies of goods & export.

3. Comment for FY 2019-20

a) AT of Mr. Zafar Ltd for preceding FY 2018-19 is less than Rs.1.5 Cr lacs, hence he satisfied first condition.

b) However Mr. Zafar is not eligible for composition levy, since Mr. Zafar engaged in in interstate outward supplies of goods & export.

Question-6(b) [M-4]

Know & Grow publishers, a registered dealer in India, paid an advance Rs.50,000 to Mr. Ganatra, an author, for the copyright covered u/s 13(1)(a) of the Copyright Act, 1957, of his original literary work on 5-9-2018. It made the balance payment Rs.1,50,000 on 12-12-2018. You are required to determine the time of supply, if Mr. Ganatra raised the invoice on:

(i) 6-10-2018, or (ii) 17-12-2018.

Answer

GST on supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary works to a publisher is payable under reverse charge by such publisher, i.e. Know & Grow Publishers.

(1) Statutory Provision

Section 13(3) - In case of supplies taxable on RCM basis, time of supply shall be the earlier of:–

(a) date of payment as entered in the books of recipient or debit date of payment in his bank account; or

(b) date immediately following 60 days from date of invoice or any other document

(2) Facts and Conclusion

Assuming invoice was issued within due date.

Question-7(a) [M-5]

Explain the registration requirements under GST law in the following independent cases:

(i) Mr. Ahmad of Jammu engaged in the business of supplying tobacco based Pan Masala with an aggregate turnover of Rs.24 lacs.

(ii) Mr. Lepcha of Mizoram is engaged in the supply of papers with an aggregate turnover of Rs.13 lacs. Will your answer be different if Mr. Lepcha is located in Meghalaya?

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

2) Advice

(i) A person is eligible for enhanced threshold limit of Rs.40 lakh in the State of Jammu and Kashmir if he is engaged exclusively in intra-State supply of goods.

However, the enhanced threshold limit is not applicable if the person is engaged, inter alia, in the supply of pan masala and all goods of chapter 24 i.e. Tobacco and manufactured tobacco substitutes. In that case, the normal threshold limit of Rs.20 lakh will be applicable.

In view of said provisions, in the given case, Mr. Ahmad is liable to register since his aggregate turnover (Rs.24 lakh) exceeds the applicable threshold limit for registration of Rs.20 lakh.

(ii)(a) The enhanced threshold limit of Rs.40 lakh as applicable to a person engaged exclusively in intra-State supply of goods, is not applicable to Mizoram [a specified Special Category State]. Instead, a lower threshold limit of Rs.10 lakh for registration is applicable for Mizoram.

Thus, in the given case, Mr. Lepcha of Mizoram is liable to register since his aggregate turnover (Rs.13 lakh) exceeds the applicable threshold limit for registration of Rs.10 lakh.

(ii)(b) The enhanced threshold limit of Rs.40 lakh is also specifically not applicable in the State of Meghalaya. Instead, the normal threshold limit of Rs.20 lakh for registration is applicable to it.

Therefore, if Mr. Lepcha is located in Meghalaya, he is not liable to register since his aggregate turnover (Rs.13 lakh) does not exceed the applicable threshold limit for registration of Rs.20 lakh.

Question-7(b) [M-5]

Mr. Shah, a consignor is required to move goods from Ahmedabad (Gujarat) to Nadiad (Gujarat). He appoints Mehta Transporter for movement of goods. Mehta Transporter moves the goods from Ahmedabad (Gujarat) to Kheda (Gujarat). For completing the movement of goods from Kheda (Gujarat) to Nadiad (Gujarat), Mehta Transporter now hands over the goods to Parikh Transporter.

Explain the procedure regarding e-way bill to be followed by consignor and transporter as per provisions of GST law and rules made thereunder.

Answer

In the given scenario, only one e-way bill is required to be issued.

Part A can be filled by either Mr. Shah or recipient of goods or Mehta Transporter on the appropriate authorisation.

Where the goods are transferred from one conveyance to another, the consignor or the recipient, who has provided information in Part A, or the transporter shall, before such transfer and further movement of goods, update the details of conveyance in the e-way bill on the common portal in Part B

Thus, on reaching Kheda, Mr. Shah or the recipient of the goods, who has filled Part A of the e-way bill, or Mehta Transporter can, before the transfer and further movement of goods, update the details of conveyance in Part B of the e-way bill.

Further, the consignor or the recipient, who has furnished the information in Part A, or the transporter, may assign the e-way bill number to another registered or enrolled transporter for updating the information in Part B for further movement of the consignment.

Thus, on reaching Kheda, Mr. Shah or the recipient of the goods, or Mehta Transporter can assign the said e-way bill to Parikh Transporter who will thereafter update the details of conveyance in Part B.

However, upon updation of the details of the conveyance by Parikh transporter in Part B, Mr. Shah or recipient, as the case may be, who has furnished the information in Part A shall not be allowed to assign the e-way bill number to another transporter.

Question-8(a) [M-5]

Explain in brief the conditions to be fulfilled by a registered person under GST law for
availing the option to pay concessional tax @ 3% (effective rate 6%) under GST as per
the provisions of notification number 2/2019 CT(R) dated 7-3-2019 as amended, with
effect from 1st April, 2019.

Answer

Notifications N 02/2019 – CT(R) provides that registered person who provides services may also opt for composition levy is his aggregate turnover in the preceding FY did not exceed Rs. 50 lacs subject to following conditions

He is not

(a) engaged in making any exempt supply of goods/ services;

(b) engaged in making any inter-State outward supplies of goods or services;

(c) engaged in making any supply of goods or services through an ECO who is required to collect tax at source u/s 52;

(d) a manufacturer of such goods or supplier of such services notified by the Government; and

(e) a casual taxable person or a non-resident taxable person:

Other conditions for applicability of Composition levy

1. RP shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.

2. RP shall issue, instead of tax invoice, a bill of supply as referred to section 31(3)(c) with particulars as prescribed in rule 49.

3. RP shall mention the following words at the top of the bill of supply, namely: - ‘taxable person paying tax in terms of notification No. 2/2019-Central Tax (Rate) dated 07.03.2019, not eligible to collect tax on supplies’.

4. RP opting to pay central tax at the rate of 3% under this notification shall be liable to pay central tax at the rate of 3% on all outward supplies specified in column (1) notwithstanding any other notification issued u/s 9(1) or 11 of said Act.

5. RP opting to pay central tax at the rate of 3% under this notification shall be liable to pay central tax on inward supplies on which he is liable to pay tax u/s 9(3) or (4) of said Act at the applicable rates.

Question-8(b) [M-5]

Discuss the provisions of Section 39(9) of the CGST Act, 2017,relating to rectification of
errors/omissions in GST returns already filed and also state its exceptions. State the time
limit for making such rectification.

Answer

Omission or incorrect particulars discovered in the returns filed under section 39 can be rectified in the return to be filed for the month/quarter during which such omission or incorrect particulars are noticed. Any tax payable as a result of such error or omission will be required to be paid along with interest.

Exception

Section 39(9) of the CGST Act does not permit rectification of error/omission discovered on account of scrutiny, audit, inspection or enforcement activities by tax authorities.

The time limit for making such rectification is earlier of the following dates:

(i) [1][30^th Nov] following [2][the end of the financial year to which such details pertain] or

(ii) Actual date of filing annual return

Question-8(c)(i) [M-2]

Explain the consequences, if the taxable person under GST law files the GST returns under section 39(1) of the CGST Act, 2017, but does not make payment of self-assessment tax.

Answer

If the taxable person under GST law files the GST return u/s 39(1) of the CGST Act, 2017, but does not pay the self-assessment tax, the return is not considered as a valid return.

Since the input tax credit can be availed only on the basis of a valid return, the taxable person, in the given case, will not be able to claim any input tax credit. He shall pay interest, penalty, fees or any other amount payable under the CGST Act for filing return without payment of tax.

Question-8(c)(ii) [M-3]

State the items which are to be debited to electronic liability register of the taxable person under the CGST Act, 2017 and rules thereunder.

Answer

Rule 85(2)

The e-liability register shall be debited by-

(a) tax, interest, late fee or other amount payable as per the return furnished by the said person;

(b) tax, interest, penalty or other amount payable as determined by a PO in pursuance of any proceedings under the Act or as ascertained by the said person;

[3][(c) ***]

(d) any amount of interest that may accrue from time to time.