2 Marks answers

Q1. Interstate supply of goods

Interstate supply of goods or services is when the location of the supplier and the place of supply
are in different states. Also, in cases of export or import of goods or services or when the supply
of goods or services is made to or by an SEZ unit, the transaction is assumed to be interstate. In
an interstate transaction, a seller has to collect IGST from the buyer.

Q2. Supplies inclusive of tax

In business it is common to issue and receive invoices for goods or services where price is
inclusive of tax.in such case person has to do a back calculation to arrive at the value of tax.

Transaction value is the price actually paid(or payable) for the supply of goods/services between
un-related parties (i.e., price is the sole consideration) The value of supply under GST shall
includes Any taxes, duties, cess, fees, and charges levied under any act, except GST.

Q3. Exempted goods

1. All types of Food grains, it Wheat, Rice Corn, Jawar etc.

2. All types of pulses either separated or unseparated.
3. Any type of Salt (iodised or plain)
4. All types of seed
5. Books, Maps, Charts, slate pencils, chalk, news papers and Magarines.
6. Charcoal, fire wood
7. Curd, Lassi butter milk, separated milk, fresh milk. pasteurised milk. Chhena, Paneer etc.
(Unbranded)
8. Fresh vegetables, Fresh Fruits
9. All types of Bread, except pizza bread
10. Eggs, fresh meat, fish, live stocks.

Q4. Listout services under reverse charge

reverse charge mechanism is applicable in service tax for services like Insurance Agent,
Manpower Supply, Goods Transport Agency, etc. Unlike Service Tax, there is no concept of partial
reverse charge. The recipient has to pay 100% tax on the supply.

8 Marks answers

Q1. What do you understand input tax credit mechanism under gst regime

INPUT TAX CREDIT

Input Tax Credit (ITC) is the core concept of GST. ITC avoids cascading effects of taxes and ensures
that tax is collected in the State in which goods or services or both are consumed.A registered
person is entitled to take credit of input tax charged on supply of goods or services or both to
him which are used or intended to be used in the course or furtherance of business, subject to
other conditions and restrictions. Input Tax Credit is deducted against tax payable on goods or
services supplied.
PROVISIONS OUTPUT RELATING TO INPUT TAX CREDIT-SECTION 16 TO 19
Provisions regarding Input Tax Credit are given under section 16 to 19 of GST Act. Rules 36 to 45
applicable in this regard, detailed discussion is given below.
MEANING OF INPUT TAX CREDIT
“Input Tax Credit” means credit of ‘Input Tax’ – Section 2(56) of CGST Act. Input Tax Credit is
related to Input Tax, therefore the meaning of Input Tax i.e. tax paid by supplier in respect of
goods purchased or services obtained from registered person.Input Tax Credit is available for
inputs and capital goods both. When a registered person purchased goods or inputs for resupply,
he pays tax on such goods and services obtained. In this case he is entitled to get input tax credit
against tax payable on goods or services are both. Tax paid by him shall be deducted against
output tax and net amount shall be deposited.
MAIN FEATURES OF INPUT TAX CREDIT
Input Tax Credit is special factor of GST. Its salient features or main points are as follows-
1. ITC available for Input Tax
2. Eligible items for ITC
3. Only registered person eligible to take ITC
4. Conditions necessary for obtaining ITC?
5. Time limit for taking ITC
6. Is credit of tax paid every input generally allowed
7. Input tax Credit is not allowable
8. Composition every Levy not allowed
9. Claim of ITC on provisional basis
10. Inputs or capital goods received in installments
11. Utilization of ITC-For payment of output tax
12. Burden of proof-Person taking the credit
13. Input tax credit only after supplier makes payment of GST

14. Taking input tax credit in respect of inputs sent for job work.

Q2. Explain procedure for return of goods in tally erp 9

Gateway of Tally > Vouchers > press F10 (Other Vouchers) > type or select Debit Note > and press
Enter.

Alternatively, press Alt+G (Go To) > Create Voucher > press F10 (Other Vouchers) > type or select
Debit Note > and press Enter.

Press Ctrl+H (Change Mode) to select the required voucher mode (Item Invoice, in this case).

Party A/c Name: Select the party name.

Party Details: Provide the Supplier details. You can also provide the Receipt or Order details as
per your invoice requirements. You can also enter the Original Invoice No. and Date, against
which this purchase return is being recorded.
If you do not see the Party Details screen with options for Original Invoice No. and Date, press
F12 (Configure), and set Provide Dispatch, Order, and Export/Import details to Yes.

As always, you can press Ctrl+A to save and proceed.

Select the Purchase ledger to allocate the stock items.

Provide the stock item details.

As in other transactions, you can create the item by pressing Alt+C.

Select the stock item.

Enter the Quantity. The Rate will be auto-filled, based on the rate entered in the previous
transaction. However, you may choose to enter the Rate. The Amount appears automatically.

Select the bill-wise details.

Press F12 (Configure) > set Use default Bill-wise details for Bill Allocation to No.

Henceforth, you can select the bill references in the Bill-wise Details screen, until you change the
option in F12 (Configure) of the invoice.

Select Agst Ref, as the payment has not been received against the purchase.

Provide Narration, if needed.

Q3. Define unregistered dealers. Explain briefly regarding recording of purchase from
unregistered dealers

Persons whose aggregate turnover in a financial year does not exceed forty lakh rupees are not
required to be registered with the GST authorities. Such persons are called unregistered vendors.
Any purchases from unregistered vendors do not attract GST.

To record purchases from unregistered dealers:

● Enable tax liability on reverse charge

● Update party ledgers

● Configure purchase ledgers

Enable tax liability on reverse charge

To calculate liability and input tax credit on purchases made from unregistered dealers, set the
option Enable tax liability on reverse charge (Purchase from unregistered dealer) to Yes , in the
Company GST Details screen. This will activate the reverse charge calculation for the applicable
period.

Update party ledgers

1. Go to Gateway of Tally > Accounts Info. > Ledgers > Alter > select the ledger.

2. Set/alter GST details? - Yes .

3. In GST Details screen, Registration Type - Unregistered

4. Save the ledger.

Configure purchase ledger for reverse charge applicability

1. Go to Gateway of Tally > Accounts Info. > Ledgers > Alter > select the purchase ledger.

2. GST applicability.

 Is GST Applicable? - Applicable .

 Set/alter GST details? - Yes .

3. GST Details.

 Press F12: Configure and set Enable reverse charge calculation? to Yes .
 Taxability - Taxable .
 Is reverse charge applicable? - Yes .
 Enter the GST rates.

4. Save the purchase ledger.

Record Inward Supply

You can do inward supply of goods or services from unregistered dealers in the same state or
other states.

Record inward supplies from intrastate unregistered dealers

Record inward supply of goods

1. Go to Gateway of Tally > Accounting Vouchers > Accounting Vouchers > F9: Purchase

2. Enter the details as required.

Record inward supplies from interstate unregistered dealers

You can record purchase of taxable, exempt, and nil rated supplies of goods from unregistered
dealers using the following natures of transaction:

● Interstate Purchase From Unregistered Dealer - Taxable

● Interstate Purchase From Unregistered Dealer - Exempt

● Interstate Purchase From Unregistered Dealer - Nil Rated

You can record purchase of services from unregistered dealers using the natures of transaction -
Interstate Purchase From Unregistered Dealer - Services

1. Go to Gateway of Tally > Accounting Vouchers > Accounting Vouchers > F9: Purchase

2. Select an interstate party ledger with Registration type as Unregistered .

3. Select a purchase ledger with:

 Nature of transaction - Interstate Purchase From Unregistered Dealer - Services

 Taxability - Exempt
 Type of Supply - Services

4. Record the purchase invoice

Q4. Discuss the applicability of gst for advance receipts and payments. Explain the procedure of
accounting of advance receipts and sales invoice in same month.

Applicability of gst on advance receipts and payments is as follows

Advance receipts if turnover is less than 1.5 crores:

If turnover in previous year is less than 1.5 chores you need not pay tax on advance receipts by
default tax liability is disabled.

Advance receipts if turnover is more than 1.5 crores

If turnover is above 1.5 crores set the option Enable tax liability on advance receipts to Yes and
liability will be included in GSTR 1 and GSTR 3B returns.

Procedure for accounting of advance receipts and sales invoice in same month

1. Gateway of Tally > Accounting Vouchers > F6 receipts

2. Click N: nature of receipt > advance receipts

3. Account: Select the bank to which payment will be made

4. Select the party ledger and ensure bill wise details at ledger master

5. Select stock item

6. Enter the advance amount inclusive of GST

7. Press Ctrl+A to accept the screen and return to receipt voucher

8. Select type of reference as advance and enter reference details in bill wise details screen

9. Accept the Receipt voucher

10. Click P: print. To print state name ,code, place of in voucher click F12 and enable the options
11. Set print GST advance receipts to Yes

12. Click enter to print.

Q5. What do you mean by recording of advanced entries. Explain with relevant examples.

Advance payment: An advance payment is that part of a contractually due that is paid in advance
for goods or services. Under the current article we would look into the provisions affecting the
advance payment under Goods and Service Tax (GST) like the time of supply, receipt voucher,
refund voucher, applicable exemption and reflection of advance payment entries in the Goods
and Service Tax Return.

PROVISIONS RELATING TO THE TIME OF SUPPLY IN CASE OF ADVANCE PAYMENT –

The time of supply is the base to determine the time of payment of tax and as per provisions of
section 12 (2) of the Central Goods and Service Tax Act, 2017 the time of supply shall be earliest
of the following – Date of issuance of the invoice or the last date on which invoice should have
been issued; and Date of receipt of the payment; Thus from the above it is clear that the tax
needs to be paid if the supplier receives the payment

EXEMPTION FROM PAYMENT OF GST ON ADVANCE PAYMENT RECEIVED –

specific exemption from the payment of GST on advance receipt has been granted to the supplier
of goods. In order words, when ‘supplier of goods’ receives advance payment, he is not required
to pay GST at the time of the receipt of advance payment, however, under this situation, the time
of supply would arise only at the time of issuance of the invoice and the tax liability needs to be
discharged only at that time.

Advance receipt: As per section 7 read with section 12 and section 13 of CGST Act, 2017, advance
receipts for supply of goods or services or both are liable to tax at the time of receipt of such
advances even if original supply of goods or services or both is yet to be supply. Section 12 or
Section 13 provides that time of supply of goods or services shall be earlier of “date of the issue
of tax invoice” or “the date of receipt of payment”. Thus, it is vital to understand the treatment
of ‘advance receipt’.

Taxability of advance receipts Initially as per notification No. 40/2017- Central Tax dated 13th
October, 2017 issued by CBIC which states that the registered person shall pay the tax on the
outward supply of goods at the time of supply as specified in Section 12(2)(a) i.e. date of issues
of Invoice. If he satisfied the following conditions:

1. The registered person whose Aggregate turnover in the preceding financial year did not
exceed 1.5 crore rupees or aggregate turnover in the year in which taxpayer has obtained
registration is likely to be less than 1.5 crore rupees, and
2. Taxpayer did not opt for the composition levy under section 10 of the said Act.