SUGGESTED ANSWER – DECEMBER 2021 WITH LATEST AMENDMENTS

PAPER – 4 : TAXATION

SECTION B: INDIRECT TAXES

1. Question No. 5 is compulsory.

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

3. All questions should be answered on the basis of position of GST law as amended upto 30th April 2021.

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-5 [M-8]

ABC Ltd., a registered supplier in Surat, Gujarat has calculated output net GST liability after adjusting ITC in the books for the month of Feb 2021:

During the above month, the following additional information is provided by ABC Ltd.:

The rate of GST is 9% CGST, 9% SGST and 18% IGST.

You are required to compute the actual net liability of GST to be paid in cash along with working notes for the month of Feb 2021.

Answer

WN-1 Calculation of Net Tax payable

WN-2 Calculation of Input Tax and balance thereof

Note

1. Vide entry 22(b) of Notification No. 12/2017-Central Tax (Rate) dt. 28-06-2017, Services by way of giving a means of transportation of goods on hire to a GTA are exempt.

2. As per section 15(2)(d) – Value of supply includes interest or late fee or penalty for delayed payment of any consideration for any supply.

As per section 12(6), time of supply of such interest, late fees or penalty shall be date of receipts of such amount. Hence interest received on Feb, shall be taxable on feb.

3. Vide entry no 2 of Notification No. 13/2017-Central Tax (Rate) dt. 28-06-2017, Recipient of legal services has to pay GST under RCM.

4. As per 1^st Proviso to Section 16(2), if goods are received in lots or instalments, RP shall take ITC upon receipt of the last lot or instalment. Hence on purchase of 3,000 packets of tools, ITC shall be available in the month of April.

5. As per Section 15(3)(b), since discount given by ABC Ltd. on the packets of tools was not known at the time of supply, it shall not be excluded from its value of supply

Question-6(a) [M-6]

AB Ltd., a registered company of Chennai, Tamil Nadu has provided following services for the month of Oct, 2021

All the above amounts are exclusive of GST.

Compute the taxable supplies of AB Ltd. for the month of October 2021 with necessary explanations.

Answer

Calculation of taxable value

Notes

1. Entry-66 of N-12/2017 CT-Rate - Services by way of transportation of students, faculty and staff provided to an educational institution providing pre-school education and education up to higher secondary school or equivalent is exempt from GST.

In given case, said services provided to private college is not exempt.

2. Entry-66(b)(v) of N-12/2017 CT-Rate - Supply of online educational journals or periodicals to educational institute who is providing education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force is exempt.

In the given case, LLB and LLM is qualification recognised by law, hence it is exempt.  

3. Entry-66(b)(iii) of N-12/2017 CT-Rate - Security or cleaning or house-keeping services provided to an educational institution providing pre-school education and education up to higher secondary school or equivalent is exempt from GST.

In given case, such is provided to coaching centre which is not exempt.

4. In view of above provision, security services provided to N Higher Secondary School is exempt.

5. Entry-66(b)(ii) of N-12/2017 CT-Rate - catering services provided to an educational institution providing pre-school education and education up to higher secondary school or equivalent is exempt from GST.

In given case, such services provided to medical college is not exempt.

Question-6(b) [M-4]

Q Ltd. is engaged exclusively in supply of taxable goods from the following states. The particulars of intra-state supplies for the month of May 2021 are as follows:

(i) Q Ltd. seeks to know whether it is liable for registration under GST. Give your explanation.

(ii) Will your answer be different if Q Ltd. supplies only petrol & diesel from Tripura instead of any other taxable goods?

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”

b) As person section 2(6) AT Includes

• Taxable and Exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Calculation of AT

If RP is engaged in supply from more than one states, the lower threshold limit shall apply. In given case, threshold limit of Tripura of Rs.10 lacs shall apply.

(i) Aggregate turnover of Q Ltd. is Rs.31,00,000 lacs which is more than threshold limit, hence he is liable to be registered.

(ii) In case Q Ltd. is making supply of non-taxable goods [petrol and diesel] from Tripura, the applicable threshold limit will not be reduced to Rs.10 lakh; enhanced threshold limit of Rs.40 lakh will be applicable.

Thus, it is not liable to be registered under GST as its aggregate turnover [Rs.31 lakh] does not exceed the said threshold limit

Question-7(a)(i) [M-2.5]

An order is placed to T & Co;, Sholapur on 18th Aug, 2021 for supply of fabrics to make garments. Company delivered the fabrics on 4th Sep, 2021 and after completion of the order issued the invoice on 15th Sep, 2021. The payment against the same was received on 30th Sep, 2021. Determine the time of supply for the purpose of payment under CGST Act, 2017 with your explanations. [Ans 4^th Sep]

Answer

1) Statutory Provision

Section 12)(2)(a) read with Notification No. 66/2017 CT dated 15.11.2017, time of supply of goods for a registered person (excluding composition supplier) shall be earlier of

date of issue of invoice or

last date on which invoice ought to have been issued as prescribed u/s 31.

Hence payment date is not relevant in this case.

2) Facts

Removal date of goods = 4^th Sep, 2021

Due date of Inv to be issued u/s 31 = 4^th Sep, 202

Inv Date = 15^th Sep, 2021

3) Advice

In this case, the invoice is issued after due date, hence time of supply shall be due date of Invoice as per section 31

Hence time of supply = 4^th Sep, 2021

Qustion-7(a)(ii) [M-2.5]

HM Industries Ltd. engaged the services of a transporter for road transport of a consignment on 20th May, 2021. However, the consignment could not be sent immediately on account of a strike in the factory, and instead was sent on 20th July 2021. Invoice was received from the transporter on 20th June 2021 and payment was made on 25th August 2021.

What is the time of supply of the transporter’s service?

Answer

Alternative 1: Assuming that services of transportation of goods by road have been provided by a GTA which has paid GST @ 12%. Thus, GST is payable under forward charge.

1. Statutory Provision

(a) Section 31(2) read with Rule 47 - RP supplying taxable services shall issue a tax invoice,

(i) before supply of service or

(ii) within 30 days from the date of supply of service

(b) Section 13(2) – If invoice is issued within prescribed period, time of supply shall be earlier of

(i) Date of issue of invoice

(ii) Date of receipts of payment

2. Facts

Date of supply of services = 20-07-2021

Due date of issue of invoice = 18-07-2021

Date of issue of invoice = 20-06-2021 [Within prescribed time limit]

Date of receipts of payment = 25-08-2021

Hence, time of supply of services is early of

Date of issue of invoice = 20-06-2021 or

Date of receipt of payment = 25-08-2021

TOS = 25-08-2021

Alternative 2 : Assuming that services of transportation of goods by road have been provided by a GTA which has not paid GST @ 12%; i.e. GST is payable @ 5%

1. Statutory Provision

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

(a) date of payment as entered in the books of account of the 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 advice

In the given case, time of supply is earlier of

(a) 25th August or (b) 20th August 2021 (61st day from 20th June)

Thus, in the given case, time of supply 20th August 2021

Quesiton-7(b) [M-5]

PQR Ltd., have filed their GSTR-3B return for the month of August, 2020 within the due date i.e. 20.09.2020. It was noticed in October, 2020 that tax dues for the month of August, 2020 have been short paid by Rs.10,000. The shortfall of Rs.10,000 was paid through cash ledger and credit ledger amounting to Rs.7,500 and Rs.2,500 respectively while filing GSTR-3B of October, 2020 which was filed on 20.11.2020.

(i) Examine and compute the interest payable if any under the CGST Act, 2017.

(ii) What would be your answer if, GSTR-3B for the month of August 2020 had been filed belatedly on 20.11.2020 as above.

Note: Ignore the effect of the leap year. Electronic cash ledger and credit ledger carried sufficient balance for the above shortfall.

Answer

(1) Proviso to Section 50(1) read with Rule 88B(1) - If GSTRB is late furnished, then interest is payable @18% on portion of tax which is paid by debiting the electronic cash ledger, for the period of delay.

(2) Rule 88B(2) - In all other cases, interest shall be paid on tax which remains unpaid, for the period starting from the due date till the date such tax is paid, at 18% rate.

Advice

(1) Since PQR Ld has furnished GSTR-3B for the month of aug, 20 within the prescribed due date, hence, interest is payable on the gross tax liability for late deposited for 29 days [21.09.2020 - 20.11.2022 (both inclusive)] as under

= Rs.10,000 x 18% x 61/365 = Rs.300 (rounded off)

(ii) If PQR Ltd. has furnished the return for August 2020 after the due date, interest is payable only on the short payment which is paid through electronic cash ledger, i.e.  Rs.7,500, as under:

= Rs.7,500×18%×61/365 = Rs.225.62 or 226 (rounded off)

Question-8(a) [M-5]

Mr. Q, a casual taxable person of Gujarat state is a trader of taxable notified handicraft goods. It makes supplies to the states of Maharashtra, Rajasthan and Andhra Pradesh. Turnover for Oct, 2021 is Rs.18 Lakh.

(i) Explain the provisions of registration for casual taxable person under GST. Examine whether Mr. Q is liable for registration or not?

(ii) What will be the answer if Mr. Q makes trading in taxable notified products instead of taxable notified handicraft goods which involves 75% making on machine and 25% by hand?

Answer

Section 24(ii) requires compulsory registration of CTP who is making taxable supplies, even if his aggregate turnover does not exceed threshold limit.

However, vide notification no 56/2018-Central Tax dt. 23-10-2018, a threshold limit of Rs.20 lakh (Rs.10 lakh in case of specified Special Category States) is available for registration to a casual taxable person:

(i) who is making inter-State taxable supplies of notified handicraft goods and notified hand-made goods,

(ii) whose aggregate turnover should be less than threshold limit, and

(iii) who has obtained a PAN and

(iv) who has generated an e-way bill.

Advice

(i) In the given case, since Mr. Q is engaged in supplying notified handicraft goods and its aggregate turnover does not exceed Rs.20 lakh, he will not be liable to registration provided he fulfills other conditions specified herein.

(ii) In case Mr. Q is engaged in trading of notified products which are predominantly made by machine, he will not be eligible for the exemption from registration under aforesaid provisions and needs to take compulsory (mandatory) registration.

Question-8(b) [M-5]

Is Dynamic Quick Response (QR) Code applicable to suppliers who issue invoice to unregistered persons? If no, list the suppliers to whom Dynamic QR Code is not applicable.

Answer

1. 6^th Proviso to Rule 46 read with N-14/2020-CT

Dynamic QR code is applicable to invoices issued in respect of supplies made to unregistered persons by a registered supplier provided its aggregate turnover in any preceding financial year from 2017-18 onwards exceeds Rs.500 crores.

2. Non Applicability of Dynamic QR Code

However, it is not applicable to following suppliers issuing invoices to unregistered persons:-

(i) Insurer or banking company or financial institution including NBFC

(ii) GTA supplying services in relation to transportation of goods by road in a goods carriage

(iii) Supplier of passenger transportation service

(iv) Person supplying services by way of admission to exhibition of cinematograph films in multiplex screens

(v) Supplier of online information and database access or retrieval (OIDAR) services

Question-8(b) [M-5]

(i) What is ‘e-invoicing’?

(ii) What is the threshold limit for mandatory issuance of E-invoice for all registered businesses?

(iii) A consignor hands over his goods for transportation on Friday to the transporter. However, assigned transporter starts the movement of goods from consigner’s warehouse to its depot located at distance of 600 Km. on Monday. When will the e-way bill be generated and for how many days it will be valid?

Answer

(i) ‘e-invoicing’ means reporting details of specified GST documents to a government-notified portal and obtaining a reference number.

(ii) Threshold limit - N-13/2020 CT

RP whose aggregate turnover in any preceding FY from 2017-18 onwards exceeds [1][Rs.5 Cr] shall prepare e-invoice in respect of supply   

1. to a registered person [B2B Supply] or
2. for exports

(iii) E-way bill will be generated before commencement of movement of goods by transporter on Monday.

The validity period of the e-way bill is one day from relevant date upto 200 km and one additional day for every 200 km or part thereof thereafter.

Thus, validity period in the given case, is 3 days.