ICAI INTERMEDIATE EXAMINATION - SEP, 2024

PAPER – 3 : TAXATION

SECTION B: GOODS AND SERVICES TAX

1. For Part-II, 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 Finance Act, 2023 and the significant notifications/circulars issued upto 29 th February, 2024.

Quesiton-5(a) [M-10]

DEF Pvt. Ltd., a registered supplier of goods and services in Pune, Maharashtra, has furnished the following details for the month of January, 2024. The turnover of DEF Pvt. Ltd. was Rs.3.2 crores in last financial year.

Opening balance of Input Tax credit at the beginning of Jan 2024.

Additional Information:

(1) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively unless otherwise mentioned.

(2) Both inward and outward supplies are exclusive of taxes, wherever applicable.

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

From the information given above, compute the output tax liability and input tax credit available to DEF Pvt. Ltd., for the month of January, 2024. Make suitable assumptions wherever required.

Answer

WN-1 Calculation of Total output Tax

Notes

1. Para 5€ of Sch-II

agreeing to the obligation

to refrain from an act, or

to tolerate an act or a situation, or

to do an act; and

Tolerating non-performance of a contract in lieu of damages or fines is a supply in terms of section 7 of the CGST Act, 2017 as it is made for a consideration by a person in the course or furtherance of business. Further, tolerating non-performance of a contract is treated as a supply of service in terms of section 7 read with Schedule II of CGST Act, 2017.

Hence consideration for non-performance of contract is taxable.

2. Entry 15 of N N. 12/2017 – CT(R)

Transport of passengers, with or without accompanied belongings, by

(a) air in economy class, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal is exempt from GST.

However, it is assumed that Rs.20,000 is on account of service provided by DEF Ltd, hence it is taxable.

3. Entry 2 of N N. 12/2017 – CT(R)

Services by way of transfer of a going concern, as a whole or an independent part thereof is exempt from GST.

3. Entry 52 of N N. 12/2017 – CT(R)

Services by an organiser to any person in respect of a business exhibition held outside India is exempt from GST.

WN-2 Computation of ITC available

Notes:

1. Section 17(5)(b) - ITC is not available on food and beverages, outdoor catering,

WN-3 Net Payment of Tax

Question-5(b) [M-5]

ABC Infra, is a partnership firm registered under GST. It furnishes the following details about services provided during the month of February 2024:

All supplies mentioned above are intra-State supplies. GST rates for CGST, SGST, IGST are 9%, 9%, 18% respectively. Compute the GST payable by the ABC Infra for the month of February, 2024.

Answer

ABC Infra, is a partnership firm registered under GST. It furnishes the following details about services provided during the month of February 2024:

Calculation of Taxable Value

Note:

1. Entry 81 of N N. 12/2017 – CT(R)

Services by way of right to admission to-

(b) award function, concert, pageant, musical performance or any sporting event other than a recognised sporting event;

where the consideration for right to admission to the events or places as referred to in items (a), (b), (c) or (d) above is not more than Rs 500 per person.

Hence, in the given case it is exempt

2. Entry 15 of N N. 12/2017 – CT(R)

Transport of passengers, with or without accompanied belongings, by

(a) air in economy class, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal is exempt from GST.

However, it is assumed that Rs.1,20,000 is on account of service provided, hence it is taxable.

3. Entry 3A of N N. 12/2017 – CT(R)

Composite supply of goods and services in which the value of supply of goods constitutes not more than 25%. of the value of the said composite supply provided to the Central Government, State Government or Union territory or local authority [5][***] by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution.

% of Goods = 2,79,375/8,20,000 = 34%

Hence given supply is taxable

Question-6(a) [M-5]

M/s. T is a registered dealer of Andhra Pradesh trading in different types of machinery and its related different types of services. Their aggregate turnover for the preceding financial year 2022-23 for sale of machinery was Rs.1.32 crores, it was first year so they had not started for providing service related to machinery. From FY 2023-24 they are planning to provide repair and maintenance service of Rs.6.25 lakh for which they have to purchase some raw material of Rs.5 lakh from the other State (till date they are purchasing within State only).

From the information given above, examine whether M/s. T can opt for composition scheme under Section 10(1), 10(2A) or 10(2) of the CGST Act, 2017 for FY 2023-24?

Answer

1. Conditions for composition levy

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 2^nd Proviso of Section 10(1), Composition dealer may supply services (other than Restaurant service), of value not exceeding 10% of turnover in a State or UT in preceding FY or Rs.5 lacs, whichever is higher.

2. Facts

a) AT of M/s T for preceding FY = Rs.1.32 cr

b) Value of supply of services by M/s T  = Rs.6.25 lacs

3. Comment

a) AT of M/s T for preceding FY is less than Rs.150 lacs and

b) Value of supply of services by M/s X & Co is less than Rs.10% of state turnover

Therefore, the benefit of composition scheme may be availed by M/s T.

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

Garima having its permanent residence in Bhavnagar, Gujarat purchased car from Kiara Motors of Jaipur, Rajasthan to take the advantage of lower registration charges and road tax. Garima took the delivery of the car from Jaipur and returned with car to her residence in Bhavnagar, Gujarat. Address of Garima recorded in the invoice issued by Kiara Motors mentions only the name of the State i.e. Gujarat.

Garima is an unregistered person whereas Kiara Motors is a registered person under GST. Determine the place of supply for supply made by Kiara Motors to Garima.

Answer

Section 10(1)(ca) of IGST Act

where the supply of goods is made to a person other than a registered person, the place of supply shall, be the location as per the address of the said person recorded in the invoice issued in respect of the said supply and the location of the supplier where the address of the said person is not recorded in the invoice.

Explanation.—For the purposes of this clause, recording of the name of the State of the said person in the invoice shall be deemed to be the recording of the address of the said person;]

Advice

In the given case, Gujrat is mentioned in invoice and Garima is unregistered person, hence POS shall be Gujrat.

Question-6(b)(ii)

Aakar Advertisement Agency, a registered person in Nagpur, Maharashtra, wants to display the products of its client's at most prominent places in different States. It took on rights to use the space on hoardings mounted on fixed surface attached to earth, situated in Udaipur, Rajasthan and in Gwalior, Madhya Pradesh from G.N. Enterprise registered in State of Chhattisgarh. Aakar Advertisement Agency has an exclusive right to use the space and also to manage the advertisements on the hoardings.

What will be the place of supply of services provided by the G.N. Enterprise to the Aakar Advertisement Agency?

Answer

Section 12(3) of IGST Act

The hoarding/structure erected on the land should be considered as immovable structure/fixture as it has been embedded in earth.

The place of supply of any service provided by way of supply/sale of space on an immovable property or grant of rights to use an immovable property is the location at which the immovable property is located, i.e. the location where such hoarding/ structure is located.

Thus, for hoarding located in Udaipur, place of supply is Udaipur, Rajasthan and for hoarding located in Gwalior, place of supply is Gwalior, Madhya Pradesh.

Question-7(a) [M-5]

Mohan, a registered person in Salem, Tamil Nadu, makes intra-State supply of taxable goods amounting to Rs.13,57,000 (inclusive of GST) to a Public Sector Undertaking (PSU). Consideration for same is received in 5 equal instalments from the PSU.

Tax rates applicable: CGST 9%, SGST 9%, IGST 18%

What will be your view with respect to applicability of TDS provisions as per section 51 of the CGST Act, 2017 regarding above transaction?

What is the period by which TDS is required to be deposited to the Government account?

Answer

1. Section 51(1) of CGST Act

Specified person shall deduct TDS from the payment made or credited to the supplier  of taxable goods and/or services, where total value of such supply, under a contract > Rs.2,50,000.

2. Specified person u/s 51

Following person were notified vide Notification No. 50/2018-Central Tax dt. 13-09-2018

(a) an authority or a board or any other body, -

(i) set up by an Act of Parliament or a State Legislature; or

(ii) established by any Government,

with 51% or more participation by way of equity or control with government, to carry out any function;

(b) society established by the CG or the SG or a Local Authority under the Societies Registration Act, 1860 (21 of 1860);

(c) public sector undertakings:

Hence in view of above provisions, PSU is required to deduct TDS @1% on each payment because value of supply is = Rs.11,50,000 (Rs.13,57,000*100/118)

3. The amount of TDS deducted shall be paid to the Government by the deductor within 10 days after the end of the month in which such deduction is made or by 10^th of the succeeding month.

Question-7(b) [M-5]

Every registered person executing works contract shall keep separate accounts for works contract under CGST Rules, 2017. List the details to be maintained.

Answer

Rule 56(14)

Registered person executing works contract shall keep separate accounts for works contract showing -

(a) the names and addresses of the persons on whose behalf the works contract is executed;

(b) description, value and quantity (wherever applicable) of goods or services received for the execution of works contract;

(c) description, value and quantity (wherever applicable) of goods or services utilized in the execution of works contract;

(d) the details of payment received in respect of each works contract; and

(e) the names and addresses of suppliers from whom he received goods or services.

Question-8(a) [M-5]

Describe the provisions relating to import of services by a registered person as contained in the section 7(1)(b), 7(1)(c) and Schedule 1 of the CGST Act, 2017.

Answer

(i) Section 7(1)(b) – Supply shall include import of services for consideration whether or not in the course of business.

(ii) Para 4 of Sch I - Import of services by a person in course of business from

a related person or

any of his other establishments outside India,

shall be treated as deemed supply even without consideration.

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

List out category of persons who are exempted from the E-invoicing provisions.

Answer

e-invoicing requirements does not apply to

(i) a government department, a local authority,

(ii) a Special Economic Zone unit and

(iii) an insurer or a banking company or a financial institution, including a non-banking financial company [rules 54(2)];

(iv) a goods transport agency supplying services in relation to transportation of goods by road in a goods carriage [rules 54(3)];

(v) supplying passenger transportation service [rules 54(4)];

(vi) supplying services by way of admission to exhibition of cinematograph in films in multiplex screens [rules 54(4A)]

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

No act or proceedings of the Goods and Services Tax Council shall be invalid merely by certain reasons. What are they?

Answer

No act or proceedings of the Goods and Services Tax Council shall be invalid merely by reason of—

(a) any vacancy in, or any defect in, the constitution of the Council; or

(b) any defect in the appointment of a person as a Member of the Council; or

(c) any procedural irregularity of the Council not affecting the merits of the case.

Question-8(b) [M-5]

Commissioner has notified some specified persons to maintain additional accounts or documents as mentioned in rule 56 of the CGST Rules 2017, Agent as defined under Section 2(5) of the CGST Act, 2017 is one of them.

List the additional accounts or documents to be kept by agent.

Answer

Rule 56(11) of CGST Rules

Every agent referred in section 2(5) shall maintain accounts depicting the,-

(a) particulars of authorisation received by him from each principal to receive or supply goods or services on behalf of such principal separately;

(b) particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal;

(c) particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal;

(d) details of accounts furnished to every principal; and

(e) tax paid on receipts or on supply of goods or services effected on behalf of every principal.