Indirect Tax: Test Paper 2 - Full Syallabus

CA FINAL FR TEST SERIES (NEW) APNA MENTOR TEST SERIES- NOV 2021
Indirect Tax
Test Paper 2 -FULL SYALLABUS
Duration: 3 Hour Suggested Answer Marks: 100
This Question Paper comprises of two parts, Part I and Part II

Part I comprise of multiple choice questions (MCQ’s)
Part II Comprise 6 questions which require descriptive type answers. 1 question is
in choice.
Part I
Question 1 (a) (Case Scenario) (5 Marks)
Bunge India Logistics Limited (XLL) is into warehousing and logistics business. It has two Container Freight
Stations (CFS): one at Inland Container Depot (ICD) Dadri, Uttar Pradesh and other at ICD Tughlakabad, Delhi.
XLL is also engaged in the business of freight forwarding and multimodal transportation. Intermittently, XLL also
deals in trading of goods, primarily in export to countries outside India.
XLL started its operations on 30 th June by setting up head/ corporate office in Gurgaon, Haryana and two CFS at
U.P. and Delhi. Services as well as invoicing to customers was done from Delhi and U.P. unit only. Top
management was placed at the head office for the management of the company.
The aggregate turnover of the XLL’s Delhi unit crossed Rs. 20 lakh on 31st October. It applied for GST
registration for Delhi on 25th November. Registration was granted on 7th December. GST in respect of stock of
goods at Delhi as on 30th October was Rs. 50 lakh, on 25th November was Rs. 40 lakh and on 7th December
was Rs. 20 lakh.
The primary business of XLL is container handling service of import/export containers. In July next year, a
shipper placed a work order on XLL for handling of an export container from ICD Tughlakabad to Dubai UAE,
through Nhava Sheva seaport in Mumbai. XLL was responsible for stuffing goods in containers at ICD, assisting in
obtaining customs clearance, and transportation of goods from ICD to seaport. XLL requested the customer to
issue e-way bill for the movement of customs sealed containers from ICD to seaport as the value of goods in
container exceeded Rs. 50,000. However, the customer denied issuing e-way bill stating that the responsibility to
issue the same is on the person who arranges the transport of goods. Consequently, the management of XLL
issued e-way bill with the assistance of a consultant.
There is a green cess that is applicable on the goods handled through CFS for exports outside India. XLL as a
policy deposits green cess with the Government in the name of the customer and recovers such cess at actuals
from the customer.
Few customers of XLL are based out of Nepal & Bhutan. It provides container handling services for their
containers/ cargo which are in transit to Nepal or Bhutan. It receives consideration from Nepal/ Bhutan
customers in INR (Rs.).
All the above amounts are exclusive of GST, wherever applicable. Subject to the information given above,
assume that all the other conditions necessary for availing ITC have been fulfilled.
Based on the facts of the case scenario given above, choose the most appropriate answer to Q. Nos. 1.1. to
1.5.:-
1.1. Which of the following statements is correct regarding eligibility of ITC on opening stock at the time
of new registration?
(a) XLL can avail credit of Rs. 50 lakh.
(b) XLL can avail credit of Rs. 40 lakh.
(c) XLL can avail credit of Rs. 20 lakh.
(d) XLL cannot avail credit on opening stock.
1.2. Which of the following statements is correct regarding GST registration by XLL?
(a) XLL was liable for registration of only Delhi unit.
(b) XLL was liable for registration of Delhi and UP units.
(c) XLL was liable for registration of Delhi, UP and Haryana units.
(d) XLL was liable for normal registration at Delhi and UP unit, and ISD registration at Haryana unit.
1.3. Which of the following statements is correct regarding generation of e-way bill for movement from ICD
Tughlakabad to Nhava Sheva seaport in Mumbai?
(a) E-way bill was not required to be generated since goods were being transported from ICD to seaport.
(b) E-way bill was mandatorily required to be generated irrespective of the value of the goods being
transported as such goods were being transported from ICD to seaport.
(c) E-way bill was required to be generated since the value of goods being transported exceeded Rs.
50,000.
(d) E-way bill was rightfully issued by Bunge India Logistics Limited being the transporter of goods.
1.4. Which of the following statements is correct regarding value of container handling services provided by
the company?
(a) Value of the taxable container handling services should exclude transportation cost and green cess.
(b) Value of the taxable container handling services should exclude green cess but include
transportation cost.
(c) Value of the taxable container handling services should exclude transportation cost but include
green cess.
(d) Value of the taxable container handling services should include transportation cost and green cess.
1.5. Which of the following statements is correct regarding invoicing to Nepal/ Bhutan customers?
(a) GST is not chargeable on container handling services provided to Nepal/ Bhutan customers as the place
of supply of such services is outside India.
(b) GST is not chargeable on container handling services provided to Nepal/ Bhutan customers as the same
qualifies as export of service.
(c) GST is not payable on container handling services provided to Nepal/ Bhutan customers as the supply
of services associated with transit cargo to Nepal and Bhutan are exempt services.
(d) GST is chargeable on container handling services provided to Nepal/ Bhutan customers.
Answer (a) (5 Marks)
Question Answer
No.
1.1 (a) XLL can avail credit of Rs. 50 lakh.
1.2 (c) XLL was liable for registration of Delhi, UP and Haryana units.
1.3 (a) E-way bill was not required to be generated since goods were being transported from ICD to
seaport.
1.4 (b) Value of the taxable container handling services should exclude green cess but include
transportation cost.
1.5 (c) GST is not payable on container handling services provided to Nepal/ Bhutan customers as the
supply of services associated with transit cargo to Nepal and Bhutan are exempt services.
Question 1 (b) (Case Scenario) (5 Marks)
VARUN Textile Pvt. Ltd. (hereinafter referred to as VTPL) is engaged in manufacturing and trading of textile
products. Its head office is located in Surat, Gujarat. Besides, it has three other units – Darsh, Kunj and Nitya
located in Mumbai (Maharashtra), Surat (Gujarat) and Pune (Maharashtra) respectively.
The head office (hereinafter referred to as VTPL-HO) and Units Kunj and Nitya are registered under GST. Unit
Darsh is not registered under GST as it is exclusively engaged in supply of exempt goods. Further, VTPL- HO in
Surat, Gujarat is also separately registered under GST as Input Service Distributor (ISD).
VTPL-HO purchased goods worth Rs. 5,00,000 from Mr. Jayesh. However, such goods were directly sent to the
premises of registered job worker, Mr. Dinesh, without being first received at VTPL’s manufacturing unit.
Goods were cleared by supplier – Mr. Jayesh - on 10 th April, but were received by the job worker on 16 th April. The
job worker carried out the job work and supplied the goods to M/s. Mahendra Enterprises on 13th April of next
year on payment of tax on the direction of VTPL-HO. VTPL-HO has not declared Mr. Dinesh’s premises as additional
place of business in registration details on GSTN portal.
VTPL-HO bought a new motor vehicle worth Rs. 12,00,000 in exchange of old motor vehicle (Exchange value of
old motor vehicle is Rs. 4,50,000) on 5th July, having seating capacity of 13 persons excluding the driver for
the daily transport of its employees. Old motor vehicle was purchased 2 years before on 1st September for Rs.
8,00,000. Seating capacity of the old motor vehicle was 10 persons including driver. Rate of GST on motor
vehicle is 18%.
On 25th July, VTPL-HO engaged Bahubali Ltd., a company (registered under GST in Mumbai, Maharashtra) dealing
in textile machineries, to supply machineries worth Rs. 30,00,000 for a spinning unit to be set up at Satara,
Maharashtra. Machineries are supplied in completely knocked down condition at the Satara unit and assembled by
the engineers of Bahubali Ltd. Satara unit is yet to be registered under GST.
Following information is available in respect of the units for which VTPL is registered under GST as an ISD, for
month of July:
Input Service CGST (Rs.) SGST IGST Remarks

(Rs.) (Rs.)
X 50,000 50,000 - Used in Unit Darsh

Y - - 1,20,000 Used in Unit Nitya and Darsh
Z 4,000 4,000 - Used in Unit Kunj [Input Service Z is in respect

of servicing of motor bike (with engine capacity
of 120 cc) used in Kunj Unit for business
purpose]
Total turnover of the units for the last financial year are given under.
Unit Turnover
(Rs.)
Darsh 15,00,000
Kunj 8,00,000
Nitya 10,00,000
Note:
1. Applicable rate of CGST and SGST is 6% each and IGST is 12% on all inward and outward
supplies, unless otherwise specified.
2. All the units are operational during the year unless specifically mentioned otherwise in the
question.
3. All the amounts given above are exclusive of GST, wherever applicable.
4. Subject to the information given above, assume that all the other conditions necessary for availing
ITC have been fulfilled.
Based on the facts of the case scenario given above, choose the most appropriate answer to Q. Nos. 1.1.
to 1.5. as follows:-
1.1. Which of the following statements is/are correct in respect of the goods sent for job work to Mr.
Dinesh?
1. VTPL is not eligible to take input tax credit as it has not declared the premises of the job worker
as its additional place of business.
2. VTPL is required to reverse the input tax credit as job worker returned the goods after 1 year
from 10th April.
3. VTPL is not required to reverse the input tax credit as job worker returned the goods before 1
year from 16th April.
4. VTPL cannot directly sell the goods to M/s Mahendra Enterprises from job worker’s premises as
VTPL has not declared the premises of the job worker as its additional place of business.
(a) 1st and 4th
(b) 2nd and 4th
(c) Only 3rd
(d) Only 4th
1.2. Which of the following statements is true in context of input tax credit to be distributed by ISD VTPL-
HO to Unit Kunj?
(a) CGST and SGST credit of Rs. 54,000 each and IGST credit of Rs. 1,20,000 will be distributed
as IGST credit, to Unit Kunj in proportion to its turnover of preceding financial year to the total
turnover of all the three units of the preceding financial year.
(b) Ineligible credit of CGST and SGST of Rs. 4,000 each will be distributed as ineligible credit of
IGST of Rs. 8,000 to Unit Kunj.
(c) Credit of CGST and SGST of Rs. 4,000 each will be distributed as credit of IGST of Rs. 8,000 to
Unit Kunj.
(d) Ineligible credit of CGST and SGST of Rs. 4,000 each will be distributed as ineligible credit of
CGST and SGST of Rs. 4,000 each to Unit Kunj.
1.3. Amount to be distributed by VTPL-HO to Unit Darsh is-

(a) CGST and SGST credit of Rs. 50,000 each; IGST credit of Rs. 72,000.
(b) CGST and SGST credit of Rs. 50,000 each; IGST credit of Rs. 54,545.
(c) IGST credit of Rs. 1,72,000.
(d) nil as Unit Darsh is not registered under GST and is exclusively engaged in supply of exempt
goods.
1.4. Place of supply of the machinery supplied by Bahubali Ltd. on 25th July and the tax charged
thereon is:
(a) Surat, Gujarat; CGST and SGST
(b) Satara, Maharashtra; CGST and SGST
(c) Mumbai, Maharashtra; IGST
(d) Surat, Gujarat; IGST
1.5. Amount of ITC available on purchase of new motor vehicle in exchange of old motor vehicle as
on 5th July is ___ _.
(a) nil as ITC is blocked on motor vehicle under section 17(5) of the CGST Act, 2017
(b) Rs. 2,16,000
(c) Rs. 1,35,000
(d) Rs. 2,97,000
Answer (5 Marks)
Question Answer
No.
1.1 (c) Only 3rd
1.2 (d) Ineligible credit of CGST and SGST of Rs. 4,000 each will be distributed as ineligible
credit of CGST and SGST of Rs. 4,000 each to Unit Kunj.
1.3 (c) IGST credit of Rs. 1,72,000
1.4 (b) Satara, Maharashtra; CGST and SGST
1.5 (b) Rs. 2,16,000
Question 2 (2 Marks)
M/s. Aman Plastics is a manufacturer of plastic toys. It is registered under GST in Shimla, Himachal Pradesh.
It procures its raw materials from Punjab. During the month of April 2020, it purchased material of Rs. 35.00
lakh and paid IGST thereon amounting to Rs. 6.30 lakh. It supplied 30% of its production in the State of
Jammu and Kashmir, whereas the 70% of its production was supplied taxable @ 0.1% to a merchant exporter
during the month of April 2020.
The returns for the month of April 2020 were duly filed in time, i.e. within the due date of 20 th May, 2020. The
last date upto which the taxpayer can claim refund of input tax credit on account of inverted duty structure is:
(a) 20th April, 2022
(b) 20th May, 2022
(c) 31st March, 2023
(d) 20th April, 2021
Answer (2 Marks)
(b) 20th May, 2022
Which of the following transactions does not qualify as supply under GST law?
(a) Disposal of car without consideration and where the supplier has not claimed input tax credit on such
car.
(b) When a principal makes supplies to his agent who is also registered under GST and is situated within
the same State and the invoice for further supply is issued by the agent in his name.
(c) When the Head Office makes a supply of services to its own branch outside the State.
(d) When a person imports services without consideration for the purposes of his business from his elder
son living outside India.
Answer (2 Marks)
(a) Disposal of car without consideration and where the supplier has not claimed input tax credit on such car.
Mrs. Arshiya is a consultant. She has provided the following details relating to services provided and
received by her:
1. Supply of management consultancy services for Rs. 500,000 p.a.
2. Supply of accounting services for Rs. 200,000 p.a.
3. Renting of immovable property for residential purposes for Rs. 10,000 p.m.
4. Management consultancy services provided to a hospital for Rs. 50,000 one time
5. Services provided to a client outside India for Rs. 50,000 p.m.
6. Services received from a lawyer for Rs. 1,00,000
Note: Assume that amounts given above are exclusive of GST, wherever applicable.
What shall be her aggregate turnover for the financial year under GST provided her aggregate turnover
during previous financial year was Rs. 24 lakh?
(a) Rs. 9,10,000
(b) Rs.15,70,000
(c) Rs. 14,70,000
(d) Rs. 8,20,000
Answer (2 Marks)
(c) Rs. 14,70,000
State whether the following statements are true or false:

1. Zero rated supply means supply of any goods or services or both which attracts nil rate of tax.
2. Exempt supply means export of goods or services or both or supply of goods or services or both to a
Special Economic Zone developer or a Special Economic Zone unit.
3. Non-taxable supply means supply of goods or services or both which is not leviable to tax under the CGST
Act, 2017 but leviable to tax under the IGST Act, 2017.
4. ITC may be availed for making zero rated supply of exempt goods.
(a) False, False, False, True
(b) True, False, False, False
(c) True, True, False, False
(d) False, False, False, False
Answer (2 Marks)
(a) False, False, False, True
Mr. Ronit Shekh, proprietor of M/s. Royal Shoe & Company, is running a business of manufacturing shoes with the
brand name of ‘JUNOON’. The manufacturing unit is located in Delhi and is registered under GST. However, due to
low profitability in the business, he has decided to transfer his business to his friend Mr. Dilip Tijori. Mr. Dilip Tijori
is already running the business of manufacturing shoes under a proprietorship firm named M/s Hawai Shoes &
Company which is located in Mumbai and registered under GST.
Mr. Ronit Shekh has approached you to help him with the issue of transfer of unutilized input tax credit in
electronic credit ledger of M/s. Royal Shoe & Company to M/s Hawai Shoes & Company.
Advise Mr. Rahul Roy with the correct option in accordance with the provisions of the CGST Act, 2017:
(a) M/s. Royal Shoe & Company cannot transfer unutilised input tax credit in its electronic credit ledger to M/s
Hawai Shoes & Company as the proprietors are different.
(b) M/s. Royal Shoe & Company can transfer the unutilized input tax credit in its electronic credit ledger to M/s
Hawai Shoes & Company and it can further be utilized in setting off GST liability for succeeding period.
(c) M/s. Royal Shoe & Company can transfer unutilized input tax credit in its electronic credit ledger to
M/s Hawai Shoes & Company and it can be further utilized in setting off GST liability for a period upto the
month of September following the year in which ITC was transferred.
(d) M/s. Royal Shoe & Company cannot transfer unutilized input tax credit in its electronic credit ledger to M/s
Hawai Shoes & Company but can claim refund of such unutilized input tax credit.
Answer (2 Marks)
(b) M/s. Royal Shoe & Company can transfer the unutilized input tax credit in its electronic credit ledger to M/s
Hawai Shoes & Company and it can further be utilized in setting off GST liability for succeeding period.
In which of the following cases, importer can claim pilferage and choose not to pay duty under section 13 of the
Customs Act, 1962 provided the goods are not restored to the importer after pilferage?
(i) Goods pilfered while on high seas
(ii) Goods pilfered before unloading
(iii) Goods pilfered after unloading but before order for home consumption given by proper officer
(iv) Goods cleared for home consumption
(a) (i) and (ii)
(b) (i) and (iii)
(c) Only (ii)
(d) Only (iii)
Answer (2 Marks)
(d) Only (iii)
Bata Shoe Co. sent certain goods abroad for repairs. Bata Shoe Co. has been advised by their consultants that
they will have to pay customs duty only on fair cost of repairs, freight and insurance charges, both ways, on
re-import of exported goods under Notification No. 45/2017 Cus dated 30.06.2017 provided they fulfill following
conditions:
(i) The re-importation is done within 3 years or, if time is extended, within 5 years.
(ii) The exported and re-imported goods are same.
(iii) The ownership of goods should not have changed. Which one of the above-mentioned conditions is/are
correct?
(a) (i), (ii) and (iii)
(b) (ii) and (iii)
(c) (i) and (iii)
(d) Only (ii)
Answer (2 Marks)
(a) (i), (ii) and (iii)
Certain goods were imported by air. The free on board value of goods is Rs. 100. The cost of transport,
loading, unloading and handling charges up to place of importation is Rs. 25. The cost of insurance is Rs. 10.
For the purposes of rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules,
2007, which of the following shall be added to the value of imported goods?
(a) Cost of transport, loading, unloading and handling charges – Rs. 25; and Cost of insurance Rs. 10
(b) Cost of transport, loading, unloading and handling charges – Rs. 25; and Cost of insurance Rs.
1.125
(c) Cost of transport, loading, unloading and handling charges – Rs. 20; and Cost of insurance Rs.
1.125
(d) Cost of transport, loading, unloading and handling charges – Rs. 20; and Cost of insurance Rs. 10
Answer (2 Marks)
(d) Cost of transport, loading, unloading and handling charges – Rs. 20; and Cost of
insurance Rs. 10
Which of the following statements is false?

(a) Anti-dumping duty is imposed when any article is exported from any country to India at more than its
normal value.
(b) Safeguard duty shall not be applicable on articles imported by a 100% EOU or SEZ unit unless specifically
made applicable.
(c) Safeguard duty shall not be imposed on articles originating from developing country if the share of
imports of that article from that country ≤ 3% of the total imports of that article into India.
(d) Central Government may exempt notified quantity of any article, when imported from any country into
India, from whole/part of the safeguard duty.
Answer (2 Marks)
(a) Anti-dumping duty is imposed when any article is exported from any country to India at more than its normal
value.
Which of the following statements is/are incorrect in relation to refund provisions under the Customs Act, 1962?
(i) Interest on delayed refund is payable to the applicant only if duty ordered to be refunded is not refunded
within 3 months from the date of receipt of application.
(ii) If imports were made by an individual for his personal use, the amount of duty found refundable, is paid to
the applicant instead of being credited to the Consumer Welfare Fund.
(iii) Application for refund has to be made within 1 year of payment of duty where duty is paid under
protest.
(iv) Doctrine of unjust enrichment is applicable if refund of duty is relatable to drawback of duty payable
under sections 74 and 75.
(a) (i) and (iv)
(b) (i) and (ii)
(c) (iii) and (iv)
(d) (ii), (iii) and (iv)
Answer (2 Marks)
(c) (iii) and (iv)
Part II
Question 12 (a) (8 Marks)
‘PQ’, a statutory body, deals with the all the advertisement and publicity of the Government. It has issued
a release order to ‘Star Plus’ channel (registered in State ‘A’) for telecasting an advertisement relating to one
of the schemes of the Government in the month of September 20XX. The advertisement will be telecasted in
the States of ‘A’, ‘B’, ‘C’, ‘D’ and ‘E’. The total value of the service contract entered into between ‘Star Plus’
and ‘PQ’ is ₹ 10,00,000 (exclusive of GST).
You are required to determine the place of supply of the services in the instant case as also the value of
supply attributable to the States of ‘A’, ‘B’, ‘C’, ‘D’ and ‘E’.
Further, compute the GST liability [CGST & SGST or IGST, as the case may be] of ‘Star Plus’ as also
advise it as to whether it should issue one invoice for the entire contract value or separate State- wise
invoices.
The other relevant information is given hereunder:
Table 1
Viewership figures of ‘Star Plus’ channel in the last week of June
States 20XX as provided by the Broadcast Audience Research Council
A 50,000
B+C 1,00,000
D+E 50,000
Table 2
Population as per latest census
States
(in crores)
A 50
B 180
C 20
D 100
E 25
The applicable rate of tax is as under:
CGST SGST IGST
9% 9% 18%
Answer (8 Marks)
As per section 12(14) of the IGST Act, 2017, the place of supply of advertisement services to the Central
Government, a State Government, a statutory body or a local authority meant for the States or Union
territories identified in the contract or agreement is taken as being in each of such States or Union
territories (where the advertisement is broadcasted/ run /played/disseminated).
Therefore, in the given case, the place of supply of advertisement service is in the States of ‘A’, ‘B’, ‘C’,
‘D’ and ‘E’.
The value of the supply of such advertisement services specific to each State/Union territory is in proportion
to the amount attributable to the services provided by way of dissemination in the respective States/Union
territories determined in terms of the contract or agreement entered into in this regard.
In the absence of such a contract or agreement between the supplier and recipient of services, the
proportionate value of advertisement services attributable to different States/Union territories (where the
advertisement is broadcasted/run/played/disseminated) is computed in accordance with rule 3 of the IGST
Rules, 2017.
As per rule 3(f) of the IGST Rules, 2017, in the case of advertisement on television channels, the amount
attributable to the value of advertisement service disseminated in a State shall be calculated on the basis of
the viewership of such channel in such State, which in turn, shall be calculated in the following manner,
namely: -
(i) the channel viewership figures for that channel for a State or Union territory shall be taken from the
figures published in this regard by the Broadcast Audience Research Council;
(ii) the figures published for the last week of a given quarter shall be used for calculating viewership for the
succeeding quarter;
(iii) where such channel viewership figures relate to a region comprising of more than one State or Union
territory, the viewership figures for a State or Union territory of that region, shall be calculated by applying
the ratio of the populations of that State or Union territory, as determined in the latest Census, to such
viewership figures;
(iv) the ratio of the viewership figures for each State or Union territory as so calculated, when applied to the
amount payable for that service, shall represent the portion of the value attributable to the dissemination in
that State or Union territory.
Therefore, value of supply attributable to ‘A’, ‘B’, ‘C’, ‘D’ and ‘E’, will be computed as under:
Viewership figures of ‘Star Plus’

Viewership ratio of ‘Star Proportionate value of
channel as provided by the
States Plus’ channel in the advertisement services for
Broadcast Audience Research
States ‘A’, (‘B’ + ‘C’) and States A’, (‘B’ + ‘C’)
Council in the last week of June
(‘D’ + ‘E’) and (‘D’ + ‘E’)
20XX
A 50,000 50,000: 1,00,000: ₹ 10,00,000 x 1/4 =
50,000 = 1:2:1 ₹ 2,50,000
B+C 1,00,000 ₹ 10,00,000 x 2/4 =
₹ 5,00,000
D+E 50,000 ₹ 10,00,000 x 1/4 =

₹ 2,50,000
States Population as per Population ratio Proportionate value of advertisement services

latest census in the States ‘B’ in the States ‘A’, ‘B’, ‘C’, ‘D’ & ‘E’
(in crores) & ‘C’ and ‘D’ &
‘E’
A 50 ₹ 2,50,000
B 180 B:C = 180:20 = ₹ 5,00,000 x 9/10 = ₹ 4,50,000
9:1
C 20 ₹ 5,00,000 x 1/10 = ₹ 50,000
D 100 D:E = 100:25 = ₹ 2,50,000 x 4/5 = ₹ 2,00,000
4:1
E 25 ₹ 2,50,000 x 1/5 = ₹ 50,000
Since, there are five different places of supply in the given case, ‘Star Plus’ channel will have to issue five
separate invoices for each of the States namely, ‘A’, ‘B’, ‘C’, ‘D’ & ‘E’ indicating the value pertaining to that
State. The GST liability of ‘Star Plus’ channel will, therefore, be worked out as under:
Computation of GST liability of ‘Star Plus’
Proportionate value of advertisement CGST @ SGST @ IGST @ 18%

States services (₹) 9% 9% (₹)
(₹) (₹)
A 2,50,000 22,500 22,500 -
B 4,50,000 81,000
C 50,000 9,000
D 2,00,000 36,000
E 50,000 9,000
Only in case of supply of services in State ‘A’, the location of supplier (State ‘A’) and the place of supply are
in the same State, hence the same is an intra-State supply in terms of section 8(1) of the IGST Act, 2017
and is thus, liable to CGST and SGST. In all the remaining cases of supply of services, the location of the
supplier (State ‘A’) and the places of supply (States ‘B’, ‘C’, ‘D’ & ‘E’) are in two different States, hence
the same are inter-State supplies liable to IGST [Section 7(1)(a) of the IGST Act, 2017 read with section
5(1) of that Act].
Question 12 (b) (3*2= 6 Marks)
Sachdeva Forex Private Limited, registered in Delhi, is a money changer. It has undertaken the following
purchase and sale of foreign currency:
1,000 US $ are purchased from Nandi Enterprises at the rate of ₹ 68 per US $. RBI reference rate for US $ on
that day is ₹ 68.60.
2,000 US $ are sold to Menavati at the rate of ₹ 67.50 per US$. RBI reference rate for US $ for that day is
not available.
Determine the value of supply in each of the above cases in terms of:
A. Rule 32(2)(a) of the CGST Rules, 2017
B. Rule 32(2)(b) of the CGST Rules, 2017.
Answer
Rule 32(2) of the CGST Rules, 2017 prescribes the provisions for determining the value of supply of
services in relation to the purchase or sale of foreign currency, including money changing.
A. Determination of value under rule 32(2)(a) of the CGST Rules, 2017
a.Rule 32(2)(a) of the CGST Rules, 2017 provides that the value of supply of services for a currency, when
exchanged from, or to, Indian Rupees, shall be equal to the difference in the buying rate or the
selling rate, as the case may be, and the Reserve Bank of India (RBI) reference rate for that currency
at that time, multiplied by the total units of currency. Thus, value of supply is:
= (RBI reference for US $ - Buying rate of US $) × Total number of units of US $ bought = (68.6 –
68) × 1,000 = ₹ 600/-
b. First proviso to rule 32(2)(a) of the CGST Act, 2017 lays down that when the RBI reference rate for a
currency is not available, the value shall be 1% of the gross amount of Indian Rupees provided or
received by the person changing the money. Thus, value of supply is:
= 1% of the gross amount of Indian Rupees received
= 1% of (67.50 × 2,000)
= ₹ 1,350/-
B. Determination of value under rule 32(2)(b) of the CGST Rules, 2017
Rule 32(2)(b) provides that value in relation to the supply of foreign currency, including money changing
shall be deemed to be –
S. Currency exchanged Value of supply

No.
1% of the gross amount of currency exchanged
1. Upto ₹ 1,00,000 OR
₹ 250 whichever is higher

₹ 1,000 + 0.50% of the (gross amount of

2. Exceeding ₹ 1,00,000 and currency exchanged -
upto ₹ 10,00,000
₹ 1,00,000)
₹ 5,500 + 0.1% of the (gross amount of

currency exchanged ₹ 10,00,000)
3. Exceeding ₹ OR
10,00,000
₹ 60,000 whichever is lower
Thus, the value of supply in the given cases would be computed as under:
a. Gross amount of currency exchanged = ₹ 68 × 1,000 =
₹ 68,000. Since the gross amount of currency exchanged is less than ₹ 1,00,000, value of supply is 1%
of the gross amount of currency exchanged i.e. 1% of ₹ 68,000 or ₹ 250, whichever is higher = ₹ 680/-
b. Gross amount of currency exchanged = ₹ 67.50 × 2,000 =
₹ 1,35,000. Since the gross amount of currency exchanged exceeds ₹ 1,00,000 but is less than ₹
10,00,000, value of supply is ₹ 1,000 + 0.50% of (₹ 1,35,000 - ₹ 1,00,000) = ₹ 1,175/-
Pride Flexibles Manufacturers Ltd., a manufacturer of bottle caps, is registered in Dhanbad (Jharkhand). It
imports a bottle caps making machine from Japan.
Pride Flexibles Manufacturers Ltd. avails the services of Baburao Logistics, a licensed customs broker in
Kolkata (West Bengal), in meeting all the legal formalities for getting the said machine cleared from the
customs station.
Pride Flexibles Manufacturers Ltd. also authorises Baburao Logist ics to incur, on its behalf, the expenses
in relation to clearance of the imported machine from the customs station and bringing the same to its
warehouse at Dhanbad. These expenses would be reimbursed by Pride Flexibles Manufacturers Ltd. to
Baburao Logistics on actual basis. In addition, Pride Flexibles Manufacturers Ltd. will also pay the
agency charges to Baburao Logistics for the services rendered by it
Baburao Logistics raised an invoice in July as follows:
S. No. Particulars Amount*

(₹)
(i) Agency charges 5,00,000
(ii) Customs duty on machine 3,80,000
(iii) Port charges 33,000
(iv) Dock dues 56,000
(v) Charges for transport of machine from Kolkata port, West Bengal to 48,000
Baburao Logistics’ godown in Asansol, West Bengal
(vi) Charges for transport of machine from Baburao Logistics’ Asansol 67,000
godown to the warehouse of Pride Flexibles Manufacturers Ltd. in Dhanbad,
Jharkhand
(vii) Unloading of machine at Kolkata port, West Bengal 83,000
(viii) Hotel expenses 45,000
(ix) Travelling expenses 50,000
(x) Telephone expenses 2,000
*exclusive of GST, wherever applicable
Compute the value of supply made by Baburao Logistics with the help of given information. Would your
answer be different if Baburao Logistics charges ₹ 13,00,000 as a lump sum consideration for clearing the
imported machine from the customs station and bringing the same to the warehouse of Pride Flexibles
Manufacturers Ltd.?
Answer (6 Marks)
As per explanation to rule 33 of the CGST Rules, 2017, a “pure agent” means a person who-
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur
expenditure or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied as pure
agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the amount
received for supply he provides on his own account.
The supplier needs to fulfil ALL the above conditions in order to qualify as a pure agent.
In the given case, Baburao Logistics has been authorised by the recipient of supply - Pride Flexibles
Manufacturers Ltd. - to incur, on its behalf, the expenses incurred in relation to clearance of the imported
machine from the customs station and bringing the same to the warehouse of the recipient, i.e. expenses
mentioned in S.No. (ii) to (vii). Further, Baburao Logistics does not hold any title to said services and
does not use them for his own interest.
Lastly, Baburao Logistics receives only the actual amount incurred to procure such services in addition to
agency charges. Thus, Baburao Logistics qualifies as a pure agent.
Further, rule 33 of the CGST Rules, 2017 stipulates that notwithstanding anything contained in the
provisions of Chapter IV – Determination of Value of Supply, the expenditure or costs incurred by a
supplier as a pure agent of the recipient of supply shall be excluded from the value of supply, if all the
following conditions are satisfied, namely-
(I) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the
third party on authorisation by such recipient; the payment made by the pure agent on behalf of the
recipient of supply has been separately indicated in the invoice issued by the pure agent to the
recipient of service; and
(II) the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply
are in addition to the services he supplies on his own account.
Since conditions (I) to (III) mentioned above are satisfied in the given case, expenses (ii) to (vii) incurred
by Baburao Logistics as a pure agent of Pride Flexibles Manufacturers Ltd. shall be excluded from the value
of supply.
Accordingly, value of supply made by Baburao Logistics will be computed as under:
Particulars Amount (₹)
Agency charges 5,00,000
Add: Customs duty Nil
Add: Port charges Nil
Add: Dock charges Nil
Add: Charges for transport of machine from Kolkata port, West Bengal to its Nil
Baburao Logistics’ godown in Asansol, West Bengal
Add: Charges for transport of machine from Baburao Logistics’ Asansol Nil
godown to the warehouse of Pride Flexibles Manufacturers Ltd.in Dhanbad,
Jharkhand
Add: Unloading of machine at Kolkata port, West Bengal Nil
Add: Hotel expenses 45,000
Add: Travelling expenses 50,000
Add: Telephone expenses 2,000
Value of supply 5,97,000
However, if Baburao Logistics charges ₹ 13,00,000 as a lump sum consideration for getting the imported
machine cleared from the customs station and bringing the same to the warehouse of Pride Flexibles
Manufacturers Ltd., Baburao Logistics would incur expenses (ii) to (vii) for its own interest (as the agreement
requires it to get the imported machine cleared from the customs station and bring the same to the Pride
Flexibles Manufacturers Ltd.’s warehouse). Thus, Jumroo Logistics would not be considered as a pure agent of
Pride Flexibles Manufacturers Ltd. for said services.
Consequently, in that case, value of supply will be ₹ 13,00,000 in terms of section 15 of the CGST Act,
2017.
Question 13 (b) (6 Marks)
Madhav Stelco Ltd., a registered supplier of Bengaluru (Karnataka), is a manufacturer of goods. The
company provides the following information pertaining to GST paid on input supplies during the month of
April, 20XX:
Sl. No. Items GST paid in

(Rs.)
(i) Life Insurance premium paid by the company on the life of 1,50,000
factory employees as per the policy of the company
(ii) Raw materials purchased for which invoice is missing but 38,000
delivery challan is available.
(iii) Raw materials purchased which are used for zero rated outward 50,000
supply.
(iv) Works contractor's service used for repair of factory building 30,000
which is debited in the profit and loss account of company.
(v) Company purchased the capital goods for
Rs. 4,00,000 and claimed depreciation of Rs. 44,800 (@ 10%) on the 48,000
full amount of Rs. 4,48,000 under Income Tax Act, 1961.
Other Information: -
i. In the month of September, 20XX, of previous financial year, PQR Company Ltd. availed input tax
credit of Rs. 2,40,000 on purchase of raw material which was directly sent to job worker's premises under a
challan on 25-09-20XX of the same financial year. The said raw material has not been received back from the
Job worker up to 30-04-20XX of the current financial year.
ii. All the above input supplies except (ii) above have been used in the manufacture of taxable goods.
Compute the amount of net input tax credit available for the month of April, 20XX with necessary
explanations for your conclusion for each item. You may assume that all the other conditions necessary for
availing the eligible input tax credits have been fulfilled.
Answer (6 Marks)
Computation of Input Tax Credit (ITC) available with PQR Ltd. for the month of April, 20XX
Particulars Rs.
Life Insurance premium paid by the company on the life of factory employees
[Note 1] Nil
Raw materials purchased [Note 2] Nil
Raw materials used for zero rated outward supply [Note 3] 50,000
Work contractor’s service [Note 4] 30,000
Capital goods purchased wherein the depreciation is claimed on the tax component
[Note 5] Nil
Total ITC available 80,000
Notes:
1) ITC on life insurance service is available only when it is obligatory for an employer to provide said services
to its employees under any law for the time being in force. In the absence of any information, it is assumed
that such services are not obligatory for the employer in the instant case and thus, the ITC thereon is blocked
[Proviso to section 17(5)(b) of the CGST Act, 2017].
2) ITC cannot be taken since invoice is missing and delivery challan is not a valid document to avail ITC
[Section 16 of the CGST Act, 2017]
3) ITC can be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt
supply – [Section 16 of the IGST Act, 2017]
4) ITC is blocked on works contract services when supplied for construction of an immovable property.
However, “construction” includes only that repairs which are capitalized along with the said immovable
property. In this case, since repairs of building is debited to P & L Account, the same does not amount to
‘construction’ and hence ITC thereon is available - [Section 17(5)(c) of the CGST Act, 2017].
5) ITC is not available when depreciation has been claimed on the tax component of the cost of capital goods
under the Income-tax Act - [Section 16(3) of the CGST Act, 2017]
6) The principal is entitled to take ITC of inputs sent for job work even if the said inputs are directly sent to
job worker. However, where said inputs are not received back by the principal within a period of 1 year of the
date of receipt of inputs by the job worker, it shall be deemed that such inputs had been supplied by the
principal to the job worker on the day when the said inputs were received by the job worker – [Section 19 of
the CGST Act, 2017].
Hence, the ITC taken by Madhav Stelco Ltd. in September, 20XX is valid and since 1 year period has yet
not lapsed in April, 20XX, there will be no tax liability on such inputs.
Varun Enterprises, registered in Delhi, is engaged in supply of various goods and services exclusively to
Government departments, agencies etc. and persons notified under section 51 of the CGST Act, 2017. It has
provided the information relating to the supplies made, their contract values and the payment due against
each of them in the month of October, 20XX as under:
Total contract Payment

S. Particulars value due in
No.
(inclusive of October,
GST) (₹) 20XX (₹)
Supply of stationery to Fisheries Department,
(i) 2,60,000 15,000
Kolkata
Supply of car rental services to Municipal Corporation of 20,000
(ii) 2,95,000
Delhi
Supply of a heavy machinery to Public Sector Undertaking 25,000
(iii) 5,90,000
located in Uttarakhand
Supply of taxable goods to Delhi office of
National Housing Bank, a society established by 50,000
(iv) 6,49,000
Government of India under
the Societies Registration Act, 1860
Interior decoration of Andhra Bhawan
located in Delhi. Service contract is entered
12,39,000
(v) into with the Government of Andhra 12,39,000
Pradesh (registered only in Andhra
Pradesh)
Supply of printed books and printed post
cards to a West Delhi Post Office [Out of 50,000
total contract value of ₹ 9,72,000, contract for books &
(vi) value for supply of books (exempt from 9,72,000 20,000 for
GST) is ₹ 7,00,000 and for supply of printed post
printed post cards (taxable under GST) is ₹ cards
2,72,000.]
Maintenance of street lights in Municipal
area of East Delhi* [The maintenance
contract entered into with the Municipal
Corporation of Delhi also involves
replacement of defunct lights and other
(vii) spares. However, the value of supply of goods is not more 3,50,000 3,50,000
than 25% of the value of
composite supply.]
*an activity in relation to any function
entrusted to a Municipality under article

243W of the Constitution
You are required to determine amount of tax, if any, to be deducted from each of the receivable given above
assuming the rate of CGST, SGST and IGST as 9%, 9% and 18% respectively.
Will your answer be different, if Varun Enterprises is registered under composition scheme.
Answer (10 Marks)
As per section 51 of the CGST Act, 2017 read with section 20 of the IGST Act, 2017 and Notification No.
50/2018 CT 13.09.2018,with effect from 01.10.2018, following persons are required to deduct CGST @ 1%
[Effective tax 2% (1% CGST + 1% SGST/UTGST)] or IGST @ 2% from the payment made/credited to the
supplier (deductee) of taxable goods or services or both, where the total value of such supply, under a
contract, exceeds ₹ 2,50,000:
a) a department or establishment of the Central Government or State Government; or
b) local authority; or
c) Governmental agencies; or
d) 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, to carry out any function; or
iii. Society established by the Central Government or the State Government or a Local Authority under the
Societies Registration Act, 1860, or
iv.Public sector undertakings.
Further, for the purpose of deduction of tax, the value of supply shall be taken as the amount excluding
CGST, SGST/UTGST, IGST and GST Compensation Cess indicated in the invoice.
Since in the given case, Manihaar Enterprises is supplying goods and services exclusively to Government
departments, agencies etc. and persons notified under section 51 of the CGST Act, 2017, applicability of TDS
provisions on its various receivables is examined in accordance with the above-mentioned provisions as
under:
Total
S. Payment due
Particulars contract Tax to be deducted
No. (₹)
value (₹)
CGST (₹) SGST (₹) IGST (₹)
Supply of stationery to
(i) Fisheries Department, 2,60,000 15,000 -- (i)
Kolkata (Note-1)
Supply of car rental
services to Municipal
(ii) 2,95,000 20,000 -- (ii)
Corporation of Delhi
(Note-2)
Supply of a heavy
machinery to Public
(iii) Sector Undertaking 5,90,000 25,000
located in Uttarakhand
(Note-3)
Supply of taxable goods
to Delhi office of National
Housing Bank, a society
established by
(iv) 6,49,000 50,000 500 500
Government of India
under the Societies
Registration Act, 1860
(Note-4)
Interior decoration of
(v) Andhra Bhawan located 12,39,000 12,39,000 --
in Delhi (Note-5)
Supply of printed books
and printed post cards to a
(vi) 9,72,000 --
West Delhi Post Office
(Note-6)
Maintenance of street
(vii) lights in Municipal area of 3,50,000 3,50,000 --
East Delhi (Note-7)
Supply of a heavy
machinery to Public
(iii) Sector Undertaking 5,90,000 25,000 500
located Uttarakhand
(Note-3)
Supply of taxable goods
to Delhi office of National
Housing Bank, a society
established by
(iv) 6,49,000 50,000 500
Government of India 500
under the Societies
Registration Act, 1860
(Note-4)
Interior decoration of
(v) Andhra Bhawan located in 12,39,000 12,39,000 --
Delhi (Note-5)
Notes:
1. Being an inter-State supply of goods, supply of stationery to Fisheries Department, Kolkata is subject to
IGST @ 18%. Therefore, total value of taxable supply [excluding IGST] under the contract is as follows:
= ₹ 2,60,000 × 100 / 118
= ₹ 2,20,339 (rounded off)
Since the total value of supply under the contract does not exceed ₹ 2,50,000, tax is not required to be
deducted.
2. Being an intra-State supply of services, supply of car rental services to Municipal Corporation of Delhi is
subject to CGST and SGST @ 9% each. Therefore, total value of taxable supply [excluding CGST and SGST]
under the contract is as follows:
= ₹ 2,95,000 × 100 / 118
= ₹ 2,50,000
Since the total value of supply under the contract does not exceed ₹ 2,50,000, tax is not required to be
deducted.
3. Being an inter-State supply of goods, supply of heavy machinery to PSU in Uttarakhand is subject to
IGST @ 18%. Therefore, total value of taxable supply [excluding IGST] under the contract is as follows:
= ₹ 5,90,000× 100 / 118
= ₹ 5,00,000
Since the total value of supply under the contract exceeds ₹ 2,50,000, PSU in Uttarakhand is required
to deduct tax @ 2% of ₹ 25,000, i.e. ₹ 500.
4. Being an intra-State supply of goods, supply of taxable goods to National Housing Bank, Delhi is
subject to CGST and SGST @ 9% each. Therefore, total value of taxable supply [excluding CGST and SGST]
under the contract is as follows:
= ₹ 6,49,000× 100 / 118
= ₹ 5,50,000
Since the total value of supply under the contract exceeds ₹ 2,50,000, National Housing Bank, Delhi is
required to deduct tax @ 2% (1% CGST + 1% SGST) of ₹ 50,000, i.e. ₹ 1,000.
5. Proviso to section 51(1) of the CGST Act, 2017 stipulates that no tax shall be deducted if the location of the
supplier and the place of supply is in a State or Union territory which is different from the State or as the
case may be, Union territory of registration of the recipient.
Section 12(3) of the IGST Act, 2017, inter alia, stipulates that the place of supply of services, directly
in relation to an immovable property, including services provided by interior decorators, shall be the
location at which the immovable property is located or intended to be located. Accordingly, the place
of supply of the interior decoration of Andhra Bhawan shall be Delhi.
Since the location of the supplier (Varun Enterprises) and the place of supply is Delhi and the State of
registration of the recipient i.e. Government of Andhra Pradesh is Andhra Pradesh, no tax is liable to
be deducted in the given case.
6. If the contract is made for both taxable supply and exempted supply, tax shall be deducted if the total
value of taxable supply in the contract exceeds ₹ 2,50,000. Being an intra-State supply of goods, supply of
printed post cards to a West Delhi Post Office is subject to CGST and SGST @ 9% each. Therefore, total
value of taxable supply [excluding CGST and SGST] under the contract is as follows:
= ₹ 2,72,000× 100 / 118
= ₹ 2,30,509 (rounded off)
Since the total value of taxable supply under the contract does not exceed ₹ 2,50,000, tax is not required
to be deducted.
7. 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, inter alia, local authority by way of any activity
in relation to any function entrusted to a Municipality under article 243W of the Constitution is exempt from
GST. Thus, maintenance of street lights (an activity in relation to a function entrusted to a Municipality) in
Municipal area of East Delhi involving replacement of defunct lights and other spares where the value of
supply of goods is not more than 25% of the value of composite supply is a service exempt from GST.
Since tax is liable to be deducted from the payment made or credited to the supplier of taxable goods or
services or both, no tax is required to be deducted in the given case as the supply is exempt.
The answer will remain unchanged even if Varun Enterprises is registered under composition scheme.
Tax will be deducted in all cases where it is required to be deducted under section 51 of the CGST Act,
2017 including the scenarios when the supplier is registered under composition scheme.
Batra Dynamics, having its head office in Chennai, Tamil Nadu carries on the following activities with
respective turnovers in a financial year:
Supply of petrol at Chennai, Tamil Nadu 18,00,000

Value of inward supplies on which tax is payable on reverse charge 9,00,000
basis
Supply of transformer oil at Chennai, Tamil Nadu 2,00,000
Value of branch transfer from Chennai, Tamil Nadu to Bengaluru, Karnataka 1,50,000
without payment of consideration
Value of taxable supplies at Manipur branch 11,50,000
It argues that it does not have taxable turnover crossing threshold limit of ₹40,00,000 either at Chennai,
Tamil Nadu or Bengaluru, Karnataka and including turnover at Manipur branch. It believes that the
determination of aggregate turnover is not required for the purpose of obtaining registration, but is
required for determining composition levy.
Decide based on the above facts:
(i) The aggregate turnover of Batra Dynamics.
(ii) All conditions that fulfil the requirements for registration under CGST Act, 2017 in the given
circumstances.
Answer (4 Marks)
Computation of aggregate turnover of Batra Dynamics:
Particular ₹
s
Supply of petrol at Chennai, Tamil Nadu [Being a non-taxable supply, it is an
exempt supply and thus, includible in aggregate turnover vide section 2(6) of 18,00,000
CGST Act, 2017]
Value of inward supplies on which tax is payable on reverse charge basis Nil
Supply of transformer oil at Chennai, Tamil Nadu 2,00,000

Value of branch transfer from Chennai, Tamil Nadu to Bengaluru, Karnataka
without payment of consideration [Being a taxable supply, it is includible in 1,50,000
aggregate turnover]
Value of taxable supplies of Manipur Branch 11,50,000
Aggregate turnover 33,00,000
Batra Dynamics is not liable to be registered in Chennai, Tamil Nadu, if his aggregate turnover in a
financial year does not exceeds ₹ 40 lakh. However, since Batra Dynamics also makes supplies from
Manipur, a specified Special Category State, the threshold exemption gets reduced to ₹ 10 lakh in terms of
section 22(1) of CGST Act, 2017 [Notification No.10/2019-CT dated. 07.03.2019].
Batra Dynamics’ argument that it is not liable to registration since the threshold exemption of ₹ 40 lakh is
not being crossed either at Chennai, Tamil Nadu, Bengaluru, Karnataka or Manipur is not correct as
firstly, the aggregate turnover to be considered in its case is ₹ 10 lakh and not ₹ 40 lakh and secondly, the
same is computed on all India basis and not State- wise.
Further, Batra Dynamics is also wrong in believing that aggregate turnover is computed only for the
purpose of determining the eligibility limit for composition levy since the aggregate turnover is required for
determining the eligibility for both registration and composition levy.
Further, Batra Dynamics is compulsorily required to register under section 24 of the CGST Act, 2017
irrespective of the turnover limit as it is liable to pay tax on inward supplies under reverse charge and it
also makes inter-State taxable supply.
With reference to the Customs Tariff Act, 1975, discuss the validity of the imposition of customs duties in
the following cases:-
(a) Both countervailing duty and anti-dumping duty have been imposed on an article to compensate for the
same situation of dumping.
(b) Countervailing duty has been levied on an article for the reason that the same is exempt from duty borne
by a like article when meant for consumption in the country of origin.
(c) Definitive anti-dumping duty has been levied on articles imported from a member country of World Trade
Organization as a determination has been made in the prescribed manner that import of such article into
India threatens material injury to the indigenous industry.
Answer (6 Marks)
(a) Not valid. As per section 9B of the Customs Tariff Act, 1975, no article shall be subjected to both
countervailing and anti-dumping duties to compensate for the same situation of dumping or export
subsidization.
(b) Not valid. As per section 9B of the Customs Tariff Act, 1975, countervailing or anti-dumping duties shall
not be levied by reasons of exemption of such articles from duties or taxes borne by the like articles when
meant for consumption in the country of origin or exportation or by reasons of refund of such duties or
taxes.
(c) Valid. As per section 9B of the Customs Tariff Act, 1975, no definitive countervailing duty or anti-
dumping duty shall be levied on the import into India of any article from a member country of the World
Trade Organization or from a country with whom Government of India has a most favored nation
agreement, unless a determination has been made in the prescribed manner that import of such article into
India causes or threatens material injury to any established industry in India or materially retards the
establishment of any industry in India.
Karvy Ltd.. imported a machine from UK in May, 20XX. The details in this regard are as under:
(i) FOB value of the machine: 10,000 UK Pound
(ii) Freight (Air): 3,000 UK Pound
(iii) Licence fee, the buyer was required to pay in UK: 400 UK Pound
(iv) Buying commission paid in India Rs. 20,000
(v) Date of bill of entry was 20.05.20XX and the rate of exchange notified by CBIC on this date was Rs. 99.00
per one pound. Rate of BCD was 7.5%.
(vi) Date of arrival of aircraft was 25.05.20XX and the rate of exchange notified by CBIC on this date was Rs.
98.50 per pound and rate of BCD was 10%.
(vii) Integrated tax was 12% and ignore GST Compensation Cess.
(viii) Insurance premium details were not available.
You are required to compute the total customs duty and integrated tax payable on the importation of
machine. You may make suitable assumptions wherever required.
Answer (8 Marks)
Computation of assessable value and total customs duty and integrated tax payable by Karvy Ltd..
Particular Amount (£)
FOB value 10,000
Add: License fee required to be paid in UK [Note – 400
1] Customs FOB value 10,400
Exchange rate is Rs.99 per £ [Note – 2]

Rs.
Value in rupees 10,29,600.00
Add: Air freight [Restricted to 20% of Rs. 10,29,600 (customs FOB value)] 2,05,920.00
[Note – 3]
Insurance @ 1.125% of Rs.10,29,600 [Note – 4] 11,583.00
Buying commission is not includible in the assessable value [Note – 5]
CIF Value 12,47,103.00
Assessable value 12,47,103.00
Rate of duty is 10% [Note – 6]
Add: Basic custom duty @ 10% (Rs.12,47,103 × 10%) – rounded off (A) 1,24,710
Add: Social Welfare Surcharge (10% of Rs.1,24,710) [rounded off] (B) 12,471
Value for integrated tax 13,84,284
Add: Integrated tax @ 12% -rounded off (C) [Note – 7] 1,66,114
Total customs duty and integrated tax payable [(A) + (B) + (C)] 3,03,295
Note:
1. Engineering and design charges paid in UK, licence fee relating to imported goods payable by the buyer
as a condition of sale, materials and components supplied by the buyer free of cost and actual insurance
charges paid are all includible in the assessable value - Rule 10(1)(c) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 [hereinafter referred to as Customs Valuation
Rules].
2. Rate of exchange notified by CBIC on the date of filing of bill of entry has to be considered [Third proviso
to section 14 of the Customs Act, 1962].
3. In case of goods imported by air, freight cannot exceed 20% of FOB value [Fifth proviso to rule 10(2)
of the Customs Valuation Rules].
4. Insurance charges, when not ascertainable, have to be included @ 1.125% of FOB value of goods [Third
proviso to rule 10(2) of the Customs Valuation Rules].
5. Buying commission is not included in the assessable value [Clause (a)(i) of sub-rule (1) of rule 10 of the
Customs Valuation Rules].
6. Rate of duty will be the rate in force on the date of presentation of bill of entry or on the date of arrival
of the aircraft, whichever is later [Proviso to section 15 of the Customs Act, 1962].
7. Integrated tax is levied on the sum total of the assessable value of the imported goods, customs duties
and applicable social welfare surcharge.

Fibercromes Pvt. Ltd. imported five mainframe computer systems from Flexsonics Computers, USA on
31.01.20XX paying customs duty of Rs. 30.45 lakhs. The computers worked for some time but in June
20XX some technical faults developed in the systems resulting in complete closure of work. On being
informed about the problem, Flexsonics Computers sent his technicians from USA, to repair the systems in
June 20XX itself. However since no solution was found, the Management of Fibercromes Pvt. Ltd re-
shipped/returned the goods to Flexsonics Computers, USA on 31.12.20XX.
You are the Financial Controller of the Fibercromes Pvt. Ltd. Board of Directors has approached you for
advising whether import duty paid can be taken back from the Central Government when goods are sent
back. Advise, in the light of the provisions of Customs Act, 1962.
Answer (6 Marks)
Yes, the import duty already paid can be claimed back on five mainframe computer systems imported by
Fibercromes Pvt. Ltd. in accordance with the provision of section 74 of Customs Act.
Under this section, it is provided that when goods capable of being easily identified, which have been
imported into India and upon which duty has been paid on importation are entered for export and the
proper officer makes an order permitting clearance and loading of the goods for exportation, 98% of such
duty shall be paid back as drawback. However, the goods should be identified to the satisfaction of
Assistant Commissioner of Customs as the goods that were imported and the goods should have entered for
export within two years from the date of payment of duty on the importation thereof.
Further, it is provided in the section that 98% of drawback shall be allowed only in those cases where the
goods have not been used at all after the importation. Various percentages have been fixed by the
Government as the amount of drawback payable in respect of goods that are used after their importation.
In the instant case, all the conditions specified in provisions of section 74 are satisfied. The goods are
identifiable, import duty has been paid and they are scheduled to be exported within the prescribed time
limit. However, the goods have been used for some time. Here, the period between the date of clearance
for home consumption and the date when the goods are placed under the customs control for export is
more than 9 months, but not more than 12 months. Therefore, Fibercromes Pvt. Ltd will be eligible for the
drawback claim at the rate of 70% (rate notified by the Government in such case) of the import duty paid.
Jindal Mectec Pvt. Ltd. is a manufacturing company registered under GST in the State of Uttar Pradesh. It
manufactures two taxable products ‘Alpha’ and ‘Beta’ and one exempt product ‘Gama’. On 1st October
20XX, while product ‘Beta’ got exempted through an exemption notification, exemption available on ‘Gama’
got withdrawn on the same date. The turnover (exclusive of taxes) of ‘Alpha’, ‘Beta’ and ‘Gama’ in the
month of October, 20XX was ₹ 9,00,000, ₹ 10,00,000 and ₹ 6,00,000.
XYZ Pvt. Ltd. has furnished the following details:
S. No. Particulars Price (₹) GST

(₹)
(a) Machinery ‘U’ purchased on 01.10.20XX for being used in 2,00,000 36,000
manufacturing all the three products
(b) Machinery ‘V’ purchased on 01.10.20XX for being used 1,00,000 18,000
in manufacturing product ‘Alpha’ and ‘Gama’
(c) Machinery ‘W’ purchased on 01.10.20XX for being 3,00,000 54,000
exclusively used in manufacturing product ‘Beta’
(d) Machinery ‘Y’ purchased on October 1, four years 4,00,000 72,000
before
01.10.20XX for being exclusively used in manufacturing
product
‘Beta’. From 01.10.20XX, such machinery will also be used
for manufacturing product ‘Gama’.
(e) Machinery ‘Z’ purchased on October 1, two years 3,00,000 54,000
before
01.10.20XX for being used in manufacturing all the three
products
(f) Raw Material used for manufacturing ‘Alpha’ purchased on 1,50,000 27,000
05.10.20XX
(g) Raw Material used for manufacturing ‘Beta’ purchased on 2,00,000 36,000
10.10.20XX
(h) Raw Material used for manufacturing ‘Gama’ purchased on 1,00,000 18,000
15.10.20XX
Compute the following:

(i) Amount of input tax credit (ITC) credited to Electronic Credit Ledger, for the month of October 20XX
(ii) Amount of aggregate value of common credit (Tc)
(iii) Common credit attributable to exempt supplies, for the month of October 20XX
(iv) GST liability of the company payable through Electronic Cash Ledger, for the month of October 20XX
Note: Assume that all the procurements made by the company are from States other than Uttar Pradesh.
Similarly, the company sells all its products in States other than Uttar Pradesh. Rate of IGST is 18%. All the
conditions necessary for availing the ITC have been complied with. Ignore interest, if any and make suitable
assumptions wherever required.
Answer (6 Marks)
S. No. Particulars ITC (Rs.)
(i) Computation of amount of ITC credited to Electronic Credit Ledger,

for the month of October, 20XX
Machinery ‘U’ - ‘A’ [Note 1] 36,000
Machinery ‘V’ [Note 2] 18,000
Machinery ‘W’ [Note 3] -
Machinery ‘Y’ [Note 4] -
Machinery ‘Z’ [Note 5] -
Raw Material used for manufacturing ‘Alpha’ [Note 6] 27,000
Raw Material used for manufacturing ‘Beta’ [Note 6] -
Raw Material used for manufacturing ‘Gama’ [Note 6] 18,000
ITC credited to Electronic Credit Ledger, for the month of October, 99,000
20XX
(ii) Computation of common credit for the month of October, 20XX
Value of ‘A’ for Machinery ‘U’ purchased on 01.10.20XX 36,000
Value of ‘A’ for Machinery ‘Z’ purchased 2 years before 01.10.20XX for 54,000
effecting both taxable and exempt supplies
Input tax claimed on Machinery ‘Y’ purchased 4 years before 01.10.20XX 72,000
for effecting taxable supplies but used for effecting both taxable and
exempt supplies from 01.10.20XX [Note 8]
Total common credit for the month of October, 20XX – Tc [Note 7] 1,62,000
Common credit attributable to exempt supplies, for the month of October, 20XX
(iii) Common credit for the month of October, 20XX (Tm) [Note 9]
2,700
Common credit attributable to exempt supplies, for the month of October 20XX
(Te) – Note 10 1,080
Computation of GST liability of the company for October 20XX payable
through Electronic Cash Ledger
(iv)
IGST payable on ‘Alpha’ [Rs. 9,00,000 × 18%] 1,62,000
IGST payable on ‘Beta’ [Exempt] Nil
IGST payable on ‘Gama’ [Rs. 6,00,000 × 18%]

1,08,000
Total IGST payable on outward supply
2,70,000
Common credit attributable to exempt supplies for the month of October,

20XX [Note 11] 1,080
Total output tax liability of October, 20XX

2,71,080
Less: ITC available in the Electronic Credit Ledger

99,000
IGST payable from Electronic Cash Ledger 1,72,080
Question 17 (a) (4*2 = 8 Marks)
Write short notes on the following with reference to the provisions relating to EOU/EHTP/STP/BTP as contained
in the FTP:
(i) Entitlement for supplies from DTA
(ii) Inter-unit transfer
(iii) Sale of unutilized material
(iv) Exit from EOU Scheme
Answer (8
Marks)
(i) Entitlements for supplies from DTA
 Supplies from DTA to EOU/ EHTP/ STP/ BTP units will be regarded as “deemed
exports” and DTA supplier shall be eligible for relevant entitlements for deemed exports, besides discharge of
export obligation, if any, on the supplier. The refund of GST paid on such supply would be available to the
supplier subject to specified conditions and documentations under GST law.
 In addition, EOU / EHTP / STP / BTP units shall be entitled to following:-
 Imported goods are exempt from basic customs duty. Further, IGST and GST compensation cess is exempt
upto 31.03.2021.
 Input Tax Credit of GST paid on inputs and capital goods.
(ii) Inter Unit Transfer
 Transfer of manufactured goods from one EOU / EHTP / STP / BTP unit to another EOU / EHTP / STP / BTP
unit is allowed on payment of applicable GST and compensation cess with prior intimation to concerned
Development Commissioners of the transferor and transferee units as well as concerned Customs authorities,
following the prescribed procedure.
 Capital goods may be transferred or given on loan to other EOU/ EHTP/ STP/ BTP/ SEZ units, with
prior intimation to concerned DC and Customs authorities on payment of applicable GST and compensation
cess. Such transferred goods may also be returned by the second unit to the original unit in case of
rejection or for any reason on payment of applicable GST and compensation cess.
(iii) Sale of Unutilized Material

 In case an EOU/ EHTP/ STP/ BTP unit is unable to utilize goods (including capital goods and spares that
have become obsolete/surplus) and services, imported or procured from DTA, it may be transferred to
another EOU/ EHTP/ STP/ BTP/ SEZ unit; or
 disposed off in DTA with intimation to Customs authorities on payment of applicable duties and/ or taxes
and compensation cess. Further, exemption of basic customs duties availed, if any, on the goods, at the
time of import will also be payable and submission of import Authorisation; or
 exported.
Such transfer from EOU/ EHTP/ STP/ BTP unit to another such unit would be treated as import for
receiving unit.
 In case of capital goods, benefit of depreciation, as applicable, will be available in case of disposal in DTA
only when the unit has achieved positive NFE taking into consideration the depreciation allowed.
 No duty shall be payable other than the applicable taxes under GST laws in case capital goods, raw
material, consumables, spares, goods manufactured, processed or packaged, and scrap/ waste/ remnants/
rejects are destroyed within unit after intimation to Customs authorities or destroyed outside unit with
permission of Customs authorities.
 Disposal of used packing material will be allowed on payment of duty on transaction value.
(iv) EXIT FROM EOU SCHEME
With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of applicable
IGST/ CGST/ SGST/ UTGST and compensation cess, if any, and industrial policy in force. If unit has not
achieved obligations, it shall also be liable to penalty at the time of exit.
Pursuant to audit conducted by the tax authorities under section 65 of the CGST Act, 2017, a show cause
notice was issued to Home Furnishers, Surat, a registered supplier, alleging that it had wrongly availed the
input tax credit without actual receipt of goods for the month of July, 20XX. In the absence of a satisfactory
reply from Home Furnishers, Joint Commissioner of Central Tax passed an adjudication order dated 20.08.20XX
(received by Home Furnishers on 22.08.20XX) confirming a tax demand of ₹ 50,00,000 and imposing a penalty
of equal amount under section 122 of the CGST Act, 2017.
Home Furnishers does not agree with the order passed by the Joint Commissioner. It decides to file an appeal
with the Appellate Authority against the said adjudication order. It has approached you for seeking advice on
the following issues in this regard:
1) Can Home Furnishers file an appeal to Appellate Authority against the adjudication order passed by the
Joint Commissioner of Central Tax? If yes, till what date can the appeal be filed?
2) Does Home Furnishers need to approach both the Central and State Appellate Authorities for exercising its
right of appeal?
Home Furnishers is of the view that there is no requirement of paying pre-deposit of any kind before filing an appeal
with the Appellate Authority. Give your opinion on the issue.
Answer (6 Marks)
1) An appeal against a decision/order passed by any adjudicating authority under the CGST Act or SGST
Act/ UTGST Act is appealable before the Appellate Authority [Section 107(1) of the CGST Act]. Thus, Home
Furnishers can file an appeal to Appellate Authority against the adjudication order passed by the Joint
Commissioner of Central Tax.
Further, such appeal can be filed within 3 months from the date of communication of such decision/order
[Section 107(1) of the CGST Act]. Thus, Home Furnishers can file the appeal to Appellate Authority on or
before 22.11.20XX. Further, the Appellate Authority can also condone the delay in filing of appeal by 1
month if it is satisfied that there was sufficient cause for such delay [Section 107(4)].
2) GST law makes provisions for cross empowerment between CGST and SGST/ UTGST officers so as to
ensure that if a proper officer of one Act (say CGST) passes an order with respect to a transaction, he will also
act as the proper officer of SGST for the same transaction and issue the order with respect to the CGST as
well as the SGST/ UTGST component of the same transaction.
The law further provides that where a proper officer under one Act (say CGST) has passed an order, any
appeal/ review/ revision/ rectification against the said order will lie only with the proper officers of that Act
only (CGST Act). Similarly, if any order is passed by the proper officer of SGST, any appeal/ review/
revision/ rectification will lie with the proper officer of SGST only. Thus, Home Furnishers is required to file
an appeal only with the Central Tax Appellate Authority [Section 6 of CGST Act].
3) Home Furnishers’ view is not correct in law. Section 107(6) of the CGST Act provides that no appeal shall be
filed before the Appellate Authority, unless the appellant has paid—
a. full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him;
and
b. a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order subject to a
maximum of twenty-five crore rupees.
Since in the given case, Home Furnishers disagrees with the entire tax demanded, it has to make a pre-
deposit of 10% of the amount of tax in dispute arising from the impugned order, i.e., 10% of ₹50,00,000
which is ₹5,00,000.

Indirect Tax: Test Paper 2 - Full Syallabus

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Indirect Tax: Test Paper 2 - Full Syallabus

Uploaded by

Copyright:

Available Formats

CA FINAL FR TEST SERIES (NEW) APNA MENTOR TEST SERIES- NOV 2021

Duration: 3 Hour Suggested Answer Marks: 100

This Question Paper comprises of two parts, Part I and Part II

Question 1 (a) (Case Scenario) (5 Marks)

Answer (a) (5 Marks)

Question 1 (b) (Case Scenario) (5 Marks)

Input Service CGST (Rs.) SGST IGST Remarks

X 50,000 50,000 - Used in Unit Darsh

Z 4,000 4,000 - Used in Unit Kunj [Input Service Z is in respect

1.3. Amount to be distributed by VTPL-HO to Unit Darsh is-

(b) 20th May, 2022

(c) Rs. 14,70,000

State whether the following statements are true or false:

(a) False, False, False, True

(d) Only (iii)

(a) (i), (ii) and (iii)

Which of the following statements is false?

(c) (iii) and (iv)

Question 12 (a) (8 Marks)

Viewership figures of ‘Star Plus’

D+E 50,000 ₹ 10,00,000 x 1/4 =

States Population as per Population ratio Proportionate value of advertisement services

Proportionate value of advertisement CGST @ SGST @ IGST @ 18%

Question 12 (b) (3*2= 6 Marks)

that day is ₹ 68.60.

A. Rule 32(2)(a) of the CGST Rules, 2017

B. Rule 32(2)(b) of the CGST Rules, 2017.

A. Determination of value under rule 32(2)(a) of the CGST Rules, 2017

= 1% of the gross amount of Indian Rupees received

B. Determination of value under rule 32(2)(b) of the CGST Rules, 2017

S. Currency exchanged Value of supply

1% of the gross amount of currency exchanged

₹ 250 whichever is higher

₹ 1,000 + 0.50% of the (gross amount of

₹ 5,500 + 0.1% of the (gross amount of

a. Gross amount of currency exchanged = ₹ 68 × 1,000 =

Question 13 (a) (6 Marks)

Baburao Logistics raised an invoice in July as follows:

S. No. Particulars Amount*

(i) Agency charges 5,00,000

(ii) Customs duty on machine 3,80,000

(iii) Port charges 33,000

(iv) Dock dues 56,000

(vii) Unloading of machine at Kolkata port, West Bengal 83,000

(viii) Hotel expenses 45,000

(ix) Travelling expenses 50,000

(x) Telephone expenses 2,000

*exclusive of GST, wherever applicable

recipient of service; and

Accordingly, value of supply made by Baburao Logistics will be computed as under:

Particulars Amount (₹)

Agency charges 5,00,000

Add: Customs duty Nil

Add: Port charges Nil

Add: Dock charges Nil

godown to the warehouse of Pride Flexibles Manufacturers Ltd.in Dhanbad,

Add: Unloading of machine at Kolkata port, West Bengal Nil

Add: Hotel expenses 45,000

Add: Travelling expenses 50,000

Add: Telephone expenses 2,000

Value of supply 5,97,000

Question 13 (b) (6 Marks)