SUGGESTED SOLUTION

CA INTERMEDIATE
SUBJECT- TAXATION

Test Code – IMP 2423

BRANCH - () (Date :)

Head Office :Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666

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 Division – A Multiple choice question

Q. No. ANSWER
1. i. (A) Income from house property
ii.(C) The annual value of both vacant residential and commercial units would be
Nil for A.Y.2024-25. Hence, no income is chargeable for such units under the
head “Income from house property” for A.Y. 2024-25.
iii .(A) Rs.1,00,00,000
iv.(D) Nil, since section 56(2)(x) is not applicable in this case
2. (B) Resident but not ordinarily resident
3. (A) In the hands of Mr. Suraj – STCG of Rs. 11 lakhs; In the hands of Mr. Prakash
– Rs. 8 lakhs as income under the head “Other sources”
4. (D)
Arun is required to file his return of income u/s 139(1) for P.Y. 2023 – 24,
since his electricity bills exceed Rs. 1,00,000 for the P.Y. 2023 – 24.
5. (A) An area at a distance of 3 kms from the local limits of a municipality and has
a population of 80,000 as per last census
6. (B) Only Mr. Harsh Gupta, Mr. Gautam Gupta, Mr. Deepak Gupta and Miss
Preeti Gupta
7. (C) No tax is deductible at source

Division – B
ANSWER : 1

Computation of total income of Mr. Sunil for A.Y. 2024 – 25 under default tax regime under
section 115BAC
Particulars Rs. Rs.
I Income from house property
Let out portion [First floor]
Gross Annual Value [Rent received is taken as GAV, in the absence of 2,95,000
other information]
Less : Municipal taxes paid by him in the P.Y. 2023 – 24 pertaining to 12,500
let out portion [rs. 25,000/2]
Net Annual Value (NAV) 2,82,500
Less : Deduction u/s 24
(a) 30% of Rs. 2,82,500 84,750
(b) Interest on housing loan [Rs. 1,50,000/2] 75,000 1,59,750
1,22,750
Self – occupied portion [Ground Floor]
Annual Value Nil
[No deduction is allowable in respect of municipal taxes paid]
Less : Interest on housing loan [Not allowable under section 115BAC] Nil

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 Nil
Income from house property 1,22,750
II Profits and gains of business or profession
Income from SEZ unit 40,00,000
III Capital Gains
Long – term capital gains on sale of land (since held for more than
24 months)
Full Value of Consideration [Actual consideration of Rs. 15 lakhs, since 15,00,000
stamp duty value of Rs. 16 lakhs does not exceed actual consideration
by more than 10%]
Less : Indexed Cost of acquisition [Rs. 4,00,000  348/100] 13,92,000 1,08,000
Cost of acquisition
Higher of -
- Actual cost Rs. 2.80 lakhs + Rs. 0.12 lakhs = Rs. 2.92 lakhs and
- Fair Market Value (FMV) as on 1.4.2001 = Rs. 4.8 lakhs but
cannot exceed stamp duty value of Rs. 4 lakhs
IV Income from Other Sources
Interest on savings bank deposits 30,000
Interest on fixed deposits 40,000 70,000
Gross Total Income 43,00,750
Less : Deduction under Chapter VI – A
Deduction under Section 80 JJAA 7,12,800
30% of the employee cost of the new employees employed during
the P.Y. 2023 – 24 for 240 days or more during the P.Y. 2023 – 24
allowable as deduction [30% of Rs. 23,76,000 (12  18,000  11)
As per section 115BAC, no deduction under section 10AA or under
Chapter VI – A is allowable except u/s 80JJAA
Total Income 35,87,950

Computation of tax liability of Mr. Sunil under section 115BAC

Tax on total income of Rs. 35,87,950
Tax on LTCG of Rs. 1,08,000 @ 20% 21,600
Tax on remaining total income of Rs. 34,79,950
Upto Rs. 3,00,000 Nil
Rs. 3,00,001 – Rs. 6,00,000 [@ 5% of Rs. 3 lakhs] 15,000
Rs. 6,00,001 – Rs. 9,00,000 [ @ 10% of Rs. 3 lakhs] 30,000
Rs. 9,00,001 – Rs. 12,00,000[@ 15% of Rs. 3 lakhs] 45,000
Rs. 12,00,001 – Rs. 15,00,000 [@ 20% of Rs. 3 lakhs] 60,000
Rs. 15,00,001 – Rs. 34,79,950 [@ 30% of Rs. 19,79,950] 5,93,985 7,43,985
7,65,585
Add : Health and education cess @ 4% 30,623
Total tax liability 7,96,208
Tax liability (rounded off) 7,96,210

Note – An individual paying tax u/s 115BAC is not liable to alternate minimum tax u/s 115JC.

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 Computation of total income of Mr. Sunil for A.Y. 2024 – 25 unit normal provisions of the Act

Particulars Rs. Rs.

Gross Total Income as per default tax regime under section 43,00,750
115BAC
Less : Interest on borrowing in respect of Self – occupied house 75,000
property [Rs. 1,50,000/2]
Gross Total Income as per section 115BAC 42,25,750
Less : Deduction u/s 10AA 12,00,000
[Since the industrial undertaking is established in SEZ, it is entitled
to deduction u/s 10AA@ 100% of export profits, since P.Y. 2023 –
24 being the 5th year of operations]
[Profits of the SEZ  Export Turnover received in convertible
foreign exchange/ Total Turnover]  100%
[Rs. 40 lakhs  Rs. 120 lakhs/ Rs. 400 lakhs  100%]
Less : Deduction under Chapter VI – A
Deduction under section 80C
Repayment of principal amount of housing loan 80,000
Insurance premium paid on life insurance policy of son allowable, 40,000 1,20,000
even though not dependent on Mr. Sunil
Deduction under section 80JJAA [As computed above] 7,12,800
Deduction under section 80TTA 10,000
Interest on savings bank account, restricted to Rs. 10,000
Total Income as per regular provisions of the Act 21,82,950

Computation of tax liability of Mr. Sunil for A.Y. 2024 – 25 under the regular provisions of the Act

Tax on total income of Rs. 21,82,950

Tax on LTCG of Rs. 1,08,000@ 20% 21,600
Tax on remaining total income of Rs. 20,74,950
Upto Rs. 2,50,000 Nil
Rs. 2,50,001 – Rs. 5,00,000[@ 5% of Rs. 2.50 lakhs] 12,500
Rs. 5,00,001 – Rs. 10,00,000[@ 20% of Rs. 5 lakhs] 1,00,000
Rs. 10,00,001 – Rs. 20,74,950 [@ 30% of Rs. 10,74,950] 3,22,485 4,34,985
4,56,585
Add : Health and education cess @ 4% 18,263
Total tax liability 4,74,848
Tax liability (rounded off) 4,74,850

Computation of adjusted total income and AMT of Mr. Sunil for A.Y. 2024 – 25
Particulars Rs.
Computation of adjusted total income
Total income as per the normal provisions of the Act 21,82,950
Add : Deduction u/s 10AA 12,00,000
Deduction u/s 80JJAA 7,12,800
Adjusted Total Income 40,95,750

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 Alternative Minimum Tax @ 18.5% 7,57,714
Add : Health and education cess @ 4% 30,309
AMT liability 7,88,023
AMT liability (Rounded off) 7,88,020

Since the regular income – tax payable is less than the alternate minimum tax payable, the adjusted
total income shall be deemed to be the total income and tax is leviable @ 18.5% thereof plus cess
@ 4%. Therefore, liability as per section 115JC is Rs. 7,88,020.

Since, tax liability as per section 115BAC of Rs. 7,96,210 is higher than the tax liability of Rs.
7,88,020, being higher of AMT liability and tax liability computed as per normal provisions of the
Income – tax Act, 1961, it is beneficial for Mr. Sunil to exercise the option to shift out of the default
tax regime under section 115BAC. In such a case, his tax liability would be Rs. 7,88,020 and Mr.
Sunil would be eligible to carry forward the AMT credit of Rs. 3,13,170 (Rs. 7,88,020 – Rs. 4,74,850).

(15 MARKS)
ANSWER : 2(A)
As per section 50B, any profits and gains arising from the slump sale effected in the previous year
shall be chargeable to income-tax as capital gains arising from the transfer of capital assets and
shall be deemed to be the income of the previous year in which the transfer took place.
If the assessee owned and held the undertaking transferred under slump sale for more than 36
months before slump sale, the capital gain shall be deemed to be long-term capital gain. Indexation
benefit is not available in case of slump sale as per section 50B(2).

Computation of capital gain on slump sale of Unit 2

Particulars Rs.
Full value of consideration for slump sale of Unit 2 [Fair market value of 18,10,000
capital asset transferred by way of slump sale (i.e., Rs. 18,10,000) or fair
market value of the consideration received (value of the monetary
consideration received i.e., Rs. 18,00,000) whichever is higher]
Less: Expenses on sale [professional fees & brokerage] 78,000
Net full value of consideration 17,32,000

Less: Cost of acquisition, being the net worth of Unit 2 (Note 1) 13,35,781
Long term capital gains arising on slump sale 3,96,219
(The capital gains is long-term as the Unit 2 is held for more than 36
months)
Notes
1. Computation of net worth of Unit 2
Particulars Rs.
(1) Book value of non-depreciable assets
(i) Land (Revaluation not to be considered) 5,00,000
(ii) Debtors 3,50,000
(2) Written down value of depreciable assets43(6) under section

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 (i) Furniture (See Note 2) 4,75,000
(ii) Patents (See Note 3) 4,75,781
Aggregate value of total assets 18,00,781
Less: Current liabilities of Unit 2
Bank Loan [Rs. 8,50,000 x 30%] 2,55,000
Trade Creditors [Rs. 4,50,000 x 20%] 90,000
Unsecured Loan [Rs. 4,00,000 x 30%] 1,20,000 4,65,000
Net worth of unit 2 13,35,781

2. Written down value of furniture as on 1.4.2023

Value of furniture Rs.

Cost as on 1.12.2021 5,00,000
Less: Depreciation @ 10% x 50% for Financial Year 2022-23 25,000
WDV as on 1.4.2023 4,75,000
3. Written down value of patents as on 1.4.2023

Value of patents Rs.

Cost as on 1.12.2021 7,25,000
Less: Depreciation @ 25% x 50% for Financial Year 2021-22 90,625
WDV as on 1.4.2022 6,34,375
Less: Depreciation@25% for Financial Year 2022-23 1,58,594
WDV as on 1.4.2023 4,75,781

(6 MARKS)
ANSWER : 2(B)
An Indian citizen or a person of Indian origin who, being outside India, comes on a visit to India (and
whose total income, other than from foreign sources, does not exceed Rs. 15,00,000) would be
resident in India only if he or she stays in India for a period of 182 days or more during the previous
year.
Since Mrs. Rohini is a person of Indian origin who comes on a visit to India only for 60 days in
the P.Y.2023-24 and her income other than from foreign sources does not exceed Rs.
15,00,000, she is non-resident for the A.Y. 2024-25.

A non-resident is chargeable to tax in respect of income received or deemed to be received in

India and income which accrues or arises or is deemed to accrue or arise to her in India.
Accordingly, her total income and tax liability would be determined in the following manner:

Computation of total income and tax liability of Mrs. Rohini for A.Y. 2024– 25

Particulars Amt
(Rs.)
Salaries
Pension received from Russian Government [Not taxable, since it Nil
neither accrues or arises in India nor is it received in India]

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 Income from House Property
Annual Value [Rental Income from house property in New 90,000
Delhi is taxable, since it is deemed to accrue or arise in India,
as it accrues or arises from a property situated in India]
Less: Deduction u/s 24(a) @ 30% 27,000 63,000
Capital Gains
Long-term capital gains on sale of land at New Delhi [Taxable, since 3,00,000
it is deemed to accrue or arise in India as it is arising from transfer of
land situated in India]
Short-term capital gains on sale of shares of Indian listed companies in 60,000
respect of which STT was paid [Taxable, since it is deemed to accrue or
arise in India, as such income arises on transfer of shares of Indian
listed companies]
Gross Total Income 4,23,000
Less: Deduction under Chapter VI-A
Deduction under section 80C 63,000
- Life insurance premium2 of Rs. 75,000 [Premium paid to Russian
Life Insurance Corporation allowable as deduction. However, the
same has to be restricted to gross total income excluding LTCG
and STCG, as Chapter VI-A deductions are not allowable against
such income chargeable to tax u/s 112 and 111A, respectively]
Total Income 3,60,000
Computation of Tax Liability
Long-term capital gains taxable @20% u/s 112 [3,00,000 x 20%] 60,000
Short-term capital gains taxable @15% u/s 111A [60,000 x 15%] 9,000
69,000
Add: Health and Education Cess @4% 2,760
Tax Liability 71,760

Note - The benefit of adjustment of unexhausted basic exemption limit against long-term capital
gains taxable u/s 112 and short-term capital gains taxable u/s 111A is not available in case of
non-resident. Further, rebate u/s 87A is not allowable to a non-resident, even if his income
does not exceed Rs. 5 lakh.
(4 MARKS)
ANSWER : 3(A)

Computation of advance tax of Mr. Ayaansh under Presumptive Income scheme as per section
44AD
The total turnover of Mr. Ayaansh, a dealer of garments, is Rs. 105 lakhs. Since his total turnover
from such business is less than Rs. 200 lakhs and he does not wish to get his books of account
audited, he can opt for presumptive tax scheme under section 44AD.

Profits and gains from business computed under section 44AD:

Particulars Rs.
6% of Rs. 15 lakhs, being turnover effected through account payee 90,000
cheque
8% of Rs. 90 lakhs, being cash turnover 7,20,000
8,10,000

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An eligible assessee opting for computation of profits and gains of business on presumptive basis
under section 44AD in respect of eligible business is required to pay advance tax of the whole
th
amount on or before 15 March of the financial year.

Computation of tax liability of Mr. Ayaansh as per normal provisions of

Income-tax Act, 1961

Particulars Amount in Rs.

Total Income 8,10,000
Tax on 8,10,000
Upto Rs. 2,50,000 Nil
Rs. 2,50,001 – Rs. 5,00,000@5% 12,500
Rs. 5,00,001 – Rs. 8,10,000@20% 62,000 74,500
Add: Health and Education cess@4% 2,980
Tax liability 77,480
th
Accordingly, he is required to pay advance tax of Rs. 77,480 on or before 15 March of the
st
financial year. However, any amount by way of advance tax on or before 31 March of the
financial year shall also be treated as advance tax paid during the financial year ending on that day
for all the purposes of the Act.
(4 MARK)
ANSWER : 3(B)
Computation of tax liability of Kashyap under both the options

Particulars Option I – Option II –

HRA (Rs.) RFA (Rs.)
Basic Salary (Rs. 40,000 x 12 Months) 4,80,000 4,80,000
Perquisite value of rent-free accommodation (15% of Rs. N.A. 72,000
4,80,000)
House rent Allowance (Rs. 8,000 x 12 Months) Rs. 96,000
Less: Exempt u/s 10(13A) – least of the following -
- 50% of Basic Salary Rs. 2,40,000
- Actual HRA received Rs. 96,000
- Rent paid less 10% of salary Rs.30,000 Rs. 30,000 66,000
Gross Salary 5,46,000 5,52,000
Less: Standard deduction u/s 16(ia) 50,000 50,000
Net Salary 4,96,000 5,02,000
Less: Deduction under Chapter VI-A - -
Total Income 4,96,000 5,02,000
Tax on total income 12,300 12,900
Less: Rebate under section 87A - Lower of Rs. 12,500 or
income-tax of Rs. 12,300, since total income does not exceed Rs.
12,300 Nil
5,00,000

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 Nil 12,900
Add: Health and Education cess@4% Nil 516
Total tax payable Nil 13,416
Tax Payable (Rounded off) Nil 13,420

Cash Flow Statement

Particulars Option I – Option II
HRA – RFA
Inflow: Salary 5,76,000 4,80,000
Less: Outflow: Rent paid (78,000) -
Tax on total income Nil (13,420)
Net Inflow 4,98,000 4,66,580
Since the net cash inflow under Option I (HRA) is higher than in Option II (RFA), it is beneficial for
Mr. Kashyap to avail Option I, i.e., House Rent Allowance
(4 MARKS)
ANSWER : 3(C)

Persons who are mandatorily required to apply for PAN as per section 139A(1)

(i) Every person whose total income or the total income of any other person in respect
of which he is assessable under the Income-tax Act, 1961 during any previous year
exceeds the basic exemption limit

(ii) Every person carrying on business or profession whose total sales, turnover or gross
receipts are or is likely to exceed Rs. 5 lakh in any previous year

(iii) Every person, being a resident, other than an individual, which enters into a financial
transaction of an amount aggregating to Rs. 2,50,000 or more in a financial year

(iv) Every person who is the managing director, director, partner, trustee, author,
founder, karta, chief executive officer, principal officer or office bearer of the person
referred to in (iii) above or any person competent to act on behalf of the person
referred to in (iii) above.

(2 MARKS)

ANSWER : 4(A)
In computing the total income of any individual, there shall be included all such income as arises
directly or indirectly, to the spouse of such individual from assets transferred directly or indirectly, to
the spouse by such individual otherwise than for adequate consideration or in connection with an
agreement to live apart.
Interest on loan: Accordingly, Rs. 75,000, being the amount of interest on loan received by Mrs.
Shagun, wife of Mr. Suresh, would be includible in the total income of Mr. Suresh, since such loan
was given out of the sum of money received by her as gift from her husband.

Short-term capital gain: Income from the accretion of the transferred asset is not liable to be
included in the hands of the transferor and, therefore, short-term capital gain of Rs. 15,000 (Rs.
90,000, being the sale consideration less Rs. 75,000, being the cost of acquisition) arising in
the hands of Mrs. Shagun from sale of shares acquired by investing the interest income of Rs.

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75,000 earned by her (from the loan given out of the sum gifted by her husband), would not be
included in the hands of Mr. Suresh. Thus, such income is taxable in the hands of Mrs. Shagun.
(3 MARKS)

ANSWER : 4(B)

(i) Royalty & Fee for technical services

Tax is not required to be deducted at source under section 194J on payment of royalty of
Rs. 20,000 and fee for technical services of Rs. 24,000 to Mr. A, since the limit of Rs. 30,000 for
non-deduction of tax at source is applicable for royalty and fees for technical services,
separately.

(ii) Director’s sitting fees

Kiara Ltd. is required deduct tax at source @10% under section 194J, on the amount of sitting
fees of Rs. 18,000 paid to a director, since the threshold limit of Rs. 30,000 is not applicable in
respect of sum paid to a director.

Therefore, tax to be deducted at source = Rs. 18,000 @10% = Rs. 1,800

(i) Compensation on compulsory acquisition of urban land

As per section 194LA, no tax is required to be deducted at source on the amount of Rs.
2,35,000 paid to Mr. Sumit by State Government on compulsory acquisition of his urban land,
since amount does not exceed Rs. 2,50,000.
(3 MARKS)
ANSWER : 4(C)
As per section 139(3), an assessee is required to file a return of loss within the due date specified
u/s 139(1) for filing return of income.

As per section 80, certain losses which have not been determined in pursuance of a return filed
under section 139(3) on or before the due date specified under section 139(1) cannot be
carried forward and set-off. Thus, the assessee has to file a return of loss under section 139(3)
within the time allowed u/s 139(1) in order to carry forward and set off of following losses:

- loss under the head “Capital Gains”,

- loss from activity of owning and maintaining race horses.
- business loss,
- speculation business loss and
- loss from specified business.
However, following can be carried forward for set-off even if the return of loss has not been
filed before the due date:

- Loss under the head “Income from house property” and

- Unabsorbed depreciation.
(4 MARKS)

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 Section B
Division – A
MULTIPLE CHOICE QUESTIONS

NO. ANSWER
1 (i)(d) i , ii & iii
(ii)(c) i & iii
(iii)(d) 1st October
(iv) (b) Explore Logistics is liable to pay GST
(v)(d) i, iii and iv
2. (c) Rs. 23,00,000/-
3. (c) Mr. Jambulal is liable to obtain registration as he makes the inter-State supply of
goods.
4. (b) No, service by way of renting of residential property is exempt.

Division B - Descriptive Questions

ANSWER : 1(A)
S. No. Particulars CGST @ SGST @ IGST @ Total
9% (Rs.) 9% (Rs.) 18% (Rs.) (Rs.)
(i) Intra-State supply of goods for 72,000 72,000 1,44,000
Rs. 8,00,000
(ii) Inter-State supply of goods for 54,000 54,000
Rs. 3,00,000
Total GST payable 1,98,000

Computation of total ITC

Particulars CGST@ SGST @ IGST @
9% (Rs.) 9% (Rs.) 18% (Rs.)
Opening ITC 57,000 Nil 70,000
Add: ITC on Intra-State purchases of goods 18,000 18,000 Nil
valuing Rs. 2,00,000
Add: ITC on Inter-State purchases of goods Nil Nil 9,000
valuing Rs. 50,000
Total ITC 75,000 18,000 79,000
Computation of minimum GST payable from electronic cash ledger

Particulars CGST @ SGST @ IGST @ 18% Total

9% (Rs.) 9% (Rs.) (Rs.) (Rs.)
GST payable 72,000 72,000 54,000 1,98,000

Less: ITC [First ITC of IGST should be (Nil) (25,000) (54,000) 79,000
utilized in full - first against IGST liability IGST IGST
IGST
and then against CGST and SGST
liabilities in a manner to minimize cash
outflow]
(72,000) (18,000) 90,000
CGST SGST
Minimum GST payable in cash Nil 29,000 Nil 29,000

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Note: Since sufficient balance of ITC of CGST is available for paying CGST liability and cross
utilization of ITC of CGST and SGST is not allowed, ITC of IGST has been used to pay SGST (after
paying IGST liability) to minimize cash outflow.
(10 MARKS)

ANSWER : 1(B)
Rule 138E of the CGST Rules, 2017 contains provisions pertaining to blocking of e-way bill
generation facility, i.e. disabling the generation of e-way bill.
A user will not be able to generate e-way bill for a GSTIN if the said GSTIN is not eligible for e-way
bill generation as per rule 138E.

Rule 138E as amended vide Notification No. 15/2021 CT dated 18.05.2021 provides that blocking of
GSTIN for e-way bill generation would only be for the defaulting supplier GSTIN and not for the
defaulting Recipient or Transporter GSTIN.

In terms of rule 138E, a person paying tax under regular scheme who has not furnished the returns
for a consecutive period of 2 tax periods is considered as a defaulting person.

Suspended GSTIN cannot generate e-way bill as supplier. However, the suspended GSTIN can get
the e-way bill generated as recipient or as transporter.

In other words, e-way bill generation facility is blocked only in respect of any outward movement of
goods of the registered person who is not eligible for e-way bill generation as per rule 138E. E-way
bills can be generated in respect of inward supplies of said registered person.
(5 MARK)
ANSWER : 2(A)
As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a supplier is liable to be
registered in the State/Union territory from where he makes a taxable supply of goods and/or
services, if his aggregate turnover in a financial year exceeds the threshold limit. The threshold
limit for a person making exclusive intra-State taxable supplies of goods is as under:-
(a) Rs. 10 lakh for the Special Category States of Mizoram, Tripura, Manipur and Nagaland.
(b) Rs. 20 lakh for the States, namely, States of Arunachal Pradesh, Meghalaya, Puducherry,
Sikkim, Telangana and Uttarakhand.
(c) Rs. 40 lakh for rest of India except persons engaged in making supplies of ice cream and
other edible ice, whether or not containing cocoa, Pan masala and Tobacco and
manufactured tobacco substitutes.
The threshold limit for a person making exclusive taxable supply of services or supply of both
goods and services is as under:-

(a) Rs. 10 lakh for the Special Category States of Mizoram, Tripura, Manipur and Nagaland.
(b) Rs. 20 lakh for the rest of India.
As per section 2(6), aggregate turnover includes the aggregate value of:

(i) all taxable supplies,

(ii) all exempt supplies,
(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.

The above is computed on all India basis. Further, the aggregate turnover excludes central tax,
State tax, Union territory tax, integrated tax and cess. Moreover, the value of inward supplies on

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which tax is payable under reverse charge is not taken into account for calculation of ‘aggregate
turnover’.

Section 9(2) provides that CGST is not leviable on five petroleum products i.e. petroleum crude,
motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel. As per section
2(47), exempt supply includes non-taxable supply. Thus, supply of high speed diesel in Delhi, being
a non-taxable supply, is an exempt supply and is, therefore, includible while computing the
aggregate turnover.

In the backdrop of the above-mentioned discussion, the aggregate turnover of Fair Oils for the
month of April is computed as under:

S. No. Particulars Amount

(in Rs.)
(i) Supply of machine oils in Delhi 9,00,000

(ii) Add: Supply of high speed diesel in Delhi 18,00,000

(iii) Add: Supply of machine oil made by Fair Oils from its branch 12,00,000
located in Punjab

Aggregate Turnover 39,00,000

Fair Oils is making exclusive supply of goods and hence the threshold limit for registration would
be Rs. 40,00,000. Since the aggregate turnover does not exceed Rs. 40,00,000, Fair Oils is not liable
to be registered.
(5 MARKS)

ANSWER : 2(B)
Composite supply comprises of two or more taxable supplies of goods or services or both, or any
combination thereof, which are naturally bundled and supplied in conjunction with each other in
the ordinary course of business, one of which is a principal supply.
Mixed supply means two or more individual supplies of goods or services, or any combination
thereof, made in conjunction with each other by a taxable person for a single price where such
supply does not constitute a composite supply.

Items such as double bed, refrigerator, washing machine and wooden wardrobe are not naturally
bundled and also the invoice for the supply shows separate values for each item i.e., the
package is not supplied for a single price.

Therefore, supply of such items as a package will neither constitute a composite supply nor a mixed
supply. Thus, the various items of the package will be treated as being supplied individually.

Note: The question specifies that the various items are supplied at a ‘single rate’. The “single rate”
expression is construed as single rate of tax in the above answer. Further, the “single rate” may also
be construed as single price as given in the below mentioned answer.

Items such as double bed, refrigerator, washing machine and wooden wardrobe are not naturally
bundled. Therefore, supply of such items as a package will not constitute composite supply.
Further, a single price has been charged for the package.

Consequently, supply of such items as a package will be treated as mixed supply.

(5 MARKS)

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ANSWER : 3(A)
As per Notification No. 66/2017 CT dated 15.11.2017, a registered person (excluding composition
supplier) has to pay GST on the outward supply of goods at the time of supply as specified in
section 12(2)(a), i.e. date of issue of invoice or the last date on which invoice ought to have been
issued in terms of section 31.
In this case, the invoice is issued before the removal of the goods and is thus, within the time limit
prescribed under section 31(1). Therefore, the time of supply for the purpose of payment of tax is
the date of issue of invoice, which is 2nd December.
(5 MARKS)
ANSWER : 3(B)
The view taken by Bali Limited is not correct in law.
All notified registered businesses (except specified class of persons) with an aggregate turnover
(based on PAN) in the preceding financial year greater than Rs. 5 crore are required to issue e-
invoices.

The eligibility is based on aggregate annual turnover on the common PAN. Thus, the aggregate total
turnover of Bali Limited is more than Rs. 5 crores (considering both the GSTINs) and is required to
issue e-invoices.

Further, where e-invoicing is applicable, there is no need of issuing invoice copies in

triplicate/duplicate.

E-invoice has many advantages for businesses, which have been given as under:-

(i) Auto-reporting of invoices into GST return and auto-generation of e-way bill (wherever
required). Under e-invoicing, business has to report the B2B invoice data only once in the e-
invoice form and the same is reported in multiple forms (GSTR-1, e-way bill etc.). E-way bill
can be auto-generated using e- invoice data. GSTR-1 can also be auto-populated with the e-
invoice data. It will become part of the business process of the taxpayer.
(ii) Accuracy/Reconciliation. Since same data is reported to tax department as well as to the
buyer to prepare his inward supplies (purchase) register, transcription errors are reduced.
On receipt of information through GST System, buyer can do reconciliation with his
Purchase Order.
(iii) Early payment. E-invoicing facilitates standardisation and inter-operability leading to
reduction of disputes among transacting parties and thus, improving payment cycles.
(iv) Cost reduction. E-invoicing helps in reducing processing costs and thus, leads to
improvement of overall business efficiency.
(v) Reduction of tax evasion. Since a complete trail of B2B invoices is available with the
Department, it will enable the system-level matching of input tax credit and output tax
thereby reducing the tax evasion.
(vi) Elimination of fake invoices. E-invoicing eliminates the fake invoices. Claiming fictitious
input tax credit (ITC) by raising fake invoices is also one of the biggest challenges currently
faced by tax-authorities. The e-invoice system helps to curb the actions of unscrupulous
taxpayers and reduce the number of fraud cases as the tax authorities have access to data in
real-time.
Paper Elimination. E-invoicing helps in paper elimination and thereby it is eco- friendly.
(5 MARKS)

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ANSWER : 4(A)
Provisions of Section 49(10) of CGST Act, 2017 permit a registered person for transferring the
amount deposited under any of the minor head i.e. tax, interest, penalty, fees or others to any of
the heads under IGST/CGST/SGST/UTGST and make the payment of taxes there upon. Accordingly,
Mr. A need not deposit the tax amount under head “ tax” and claim a refund for the remittance of
amount deposited under head ”interest. Rather, using the Form GST PMT 09, such amount can be
transferred suo-moto on the common portal from “interest” to “tax” head and tax liability be paid
(5 MARKS)

ANSWER: 4 (B)
The amount available in the electronic credit ledger may be used for making any payment towards
output tax under the CGST Act or the IGST Act, subject to the provisions relating to the order of
utilisation of ITC.

Further, output tax in relation to a taxable person is defined as the tax chargeable on taxable supply
of goods or services or both but excludes tax payable on reverse charge mechanism.

Accordingly, it is clarified that any payment towards output tax, whether self-assessed in the return
or payable as a consequence of any proceeding instituted under the provisions of GST laws, can
be made by utilization of the amount available in the electronic credit ledger of a registered
person. It is further reiterated that as output tax does not include tax payable under reverse
charge mechanism, implying thereby that the electronic credit ledger cannot be used for
making payment of any tax which is payable under reverse charge mechanism.

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