TYBMS SEM 6 Financial: Indirect Tax (Q.P. November 2019 with Solution)

 Paper / Subject Code: 86017/Finance: Indirect Taxes

TYBMS SEM 6 

Financial: 

Indirect Tax

(Q.P. November 2019 with Solution)

Duration: 2½ hours

Marks-75

Note: 1) All questions are compulsory.

2) Working Notes should form part of your answer.

3) Figures to the right indicate full marks.

Q.1. A) Multiple Choice Question (Any 8/10) based consumption.        (08)

1) GST is based on the principle of ______ 

a) Origin

b) Source

c) Destination

d) Production

2) M/s Chetan of Gujarat supplies goods to M/s Iyer of Delhi, this will classify a ______

a) Intra state supply

b) Export supply

c) Inter state supply

d) Deemed Supply

3) Non Resident taxable person can file return in form ______

a) GSTR 1

b) GSTR 4

c) GSTR 5

d) GSTR 10

4) Aggregate Turnover excludes _______

a) Inward Supplies

b) Exempt Supplies

c) Taxable supplies

d) Interstate supplies

5) The deductor has to deduct tax from deductee where the total value of supply under a contract exceeds

a) Rs.1,00,000

b) Rs.2.50,000

c) Rs.10.00,000

d) Rs.50,000

6) Every operator who collect the amount of tax has to furnish the details of the same within _______ after the end of the month.

a) 15 days

b) 1 month

c) 20 days

d) 10 days

7) The Input tax credit as per the return filed by registered person shall be credited to _______

a) Electronic cash ledger

b) Electronic Credit ledger

c) Electronic liability registered

d) Electronic Account ledger

8) Interest @ ________ is payable in case of excess claim of credit / excess reduction of output tax liability.

a) 18%

b) 15%

c) 28%

d) 24%

9) Electronic way bill is to be generated for a value of more than

a) Rs. 10,000

b) Rs.5.000

c) Rs.50,000

d) Rs.1,00,000

10) Chairperson of the GST Council is _______

a) Union Minister of state in charge of revenue

b) Union Finance Minister

c) One elected person amongst the state finance minister

d) Minister in charge of finance or taxation

B) Match the following (Any 7/10)            (07)

Column “A”		Column “B”
1.	Petroleum products	a	Compulsory registration
2	Not liable for registration	b	Exempt Supply of Services
3	Goods are assembled at site	c	31 December
4	GST is applicable on	d.	Person supplying goods wholly exempt from tax
5	Electronic Cash Ledger	e.	Person paying consideration
6	E-Commerce Operator	f.	Location of such Installation
7	Services to Education Institution	g.	GST yet to be applicable
8	Recipient of goods or services	h.	Special Category State
9	Annual Return	i.	Supply of goods and services
10	Manipur	j.	All tax payments

Q.2.A) Find out the time of supply of goods in following independent cases as per the provisions. of CGST Act, 2017. (08)

Q.2.B) Find the place of supply of goods and give explanation to your answer in following case:- (07)

(1) Mr. Prashant Agare from Chennai supplied goods to M/s Indian Airline of Chennai flying between Delhi to Mumbai. The goods are loaded in the aircraft in Delhi.

(2) Mr. Raj of Pune places an order to Ramakant of Mumbai for delivery of certain goods. Mr. Raj direct Mr. Ramakant to deliver the goods to Anand of Indore.

(3) Mr. Prakash of Nashik, Maharashtra sells 5 Motar vehicle to Mr. Pankaj of Pune, Maharashtra for delivery at Mr. Pankaj place of Business in Pune.

OR

Q.2.P) Determine Time of Supply of Services in following independent cases:- (08)

Q.2.Q) M/s AmolChemicals entered into a contract with M/s Simran Industries for supply of goods worth Rs.3,47,000. It was agreed that any additional expenses incurred to complete the sale will also be included in the contract value. M/s Simran Industries following expenses to complete the sale: Charges: Rs.800.

Insurance Charges: Rs.2,200, Transportation Charges: Rs.1,600, Packaging Charges: Rs.1,650, Testing Charges: Rs.1,170, Inspection Charges: Rs.2,600, Loading

M/s Simran Industries received subsidy of Rs. 10.000 from the Sawant Manufacturer's Association per transaction. Calculate the value of supply.            (07)

Q.3. A) Mr.Arvind gives you following information of his transactions for November, 2017, (15)

Q.3. A) Mr. Arvind gives you following information of his transactions for November, 2017, (15)

Particulars	Amount
For Hotel Rooms (Declared Tariff per day Rs. 1,200)	4,20,000
Houses are let out to individuals for residential purpose.	300000
Placement services	250000
Renting of Agricultural Vacant Land for Rearing Horses	185000
Storage and Warehousing of Agricultural Produce	85000
Building was let out to Vidya Prasarak School	820000
Training in recreational activities relating to culture	150000
Royalty from authorship of books.	80000
Margin earned from trading in derivatives	165000
Coaching in Private coaching class for college students.	195000
Consultancy given in Relation to Cultivation of Mango	40000
Performing in television serial	280000
Services by way of Public convenience such as provision  of facilities of washrooms	10000

As per provisions related to Goods and Services Tax, classify above items as taxable or nontaxable and calculate the value of taxable services, assuming that Goods and Services Tax is not included in above amounts, Applicable rate of GST was 18%.

Particulars	Taxable	Non-Taxable
For Hotel Rooms (Declared Tariff per day Rs. 1,200)	420000
Houses are let out to individuals for residential purpose.		300000
Placement services	250000
Renting of Agricultural Vacant Land for Rearing Horses	185000
Storage and Warehousing of Agricultural Produce		85000
Building was let out to Vidya Prasarak School		820000
Training in recreational activities relating to culture		150000
Royalty from authorship of books.	80000
Margin earned from trading in derivatives		165000
Coaching in Private coaching class for college students.	195000
Consultancy given in Relation to Cultivation of Mango		40000
Performing in television serial	280000
Services by way of Public convenience such as provision  of facilities of washrooms		10000
TOTAL	1410000	1570000
+ CGST @9% + SGST @ 9%	126900 126900
Total Tax	253800

OR

Q.3. B) M/s Anand and Company is carrying business in Nashik and they having PAN Number ZA1234A. The company started business on 18/01/2018. His turnover is as follows: Determine the day from which the company is liable. (15)

Date	Taxable Sales within  State of Maharashtra (Rs.)	Export Sale	Exempt Sales (Rs.)
28/01/2018	1,50,000	8,02,000	21000
09/02/2018	204000	-	32000
10/02/2018	2,65,000	-	18000
18/02/2018	2.72,000	-	16000
19/02/2018	1,92,000	-	12000
20/02/2018	2.20,000	-	-
26/02/2018	1,80,000	-	15,000

 

Date	Taxable Sales within  State of Maharashtra (Rs.)	Export Sale	Exempt Sales (Rs.)	Total	Cumulative Total
28/01/2018	1,50,000	8,02,000	21000	973000	973000
09/02/2018	204000	-	32000	236000	1209000
10/02/2018	2,65,000	-	18000	283000	1492000
18/02/2018	2.72,000	-	16000	288000	1780000
19/02/2018	1,92,000	-	12000	204000	1984000
20/02/2018	2.20,000	-	-	220000	2204000
26/02/2018	1,80,000	-	15,000	195000	2399000

Since the aggregate Turnover does not exceed Rs. 40 Lakhs in any month given, M/s Anand and Co. is not liable to register under GST.

Q.4.A) Mr. Govind Patil is a registered dealer in the state of Maharashtra under GST, provides the following information about his business for the month of November, 2017. Compute Net Tax Liability of Mr. Govind Patil for the Month of November, 2017 (15)

	IGST	CGST	SGSt
Opening Balance in Electronic Credit Ledger as On 1.11.2017	90,000	90,000	90,000
Input Tax Credit available on Inward supplies during November 2017	15000	120000	120000

 

Transactions During the month	GST	Amount
Sold Goods to a Customer in Pune	18%	2,02,500
Sold Goods to a Customer in Shirdi	18%	4,50,000
Sold Goods to a Customer in Panvel	12%	7,50,000
Sold Goods to a Customer in Surat	5%	600000
Sold Goods to a Customer in Bangalore	18%	10,50,000
Sold Goods to a Customer in Virar	12%	2,02.500
Sold Goods to a Customer in Rajasthan	5%	3,75,000

 

Solution: Calculation of Tax on Supply

Particulars	IGST	CGST	SGSt
Sold Goods to a Customer in Pune		18225	18225
Sold Goods to a Customer in Shirdi		40500	40500
Sold Goods to a Customer in Panvel		45000	45000
Sold Goods to a Customer in Surat	30000
Sold Goods to a Customer in Bangalore	189000
Sold Goods to a Customer in Virar		12150	12150
Sold Goods to a Customer in Rajasthan	18750
Total	237750	115875	115875

Calculation of net Tax Liabilities

Particulars	IGST	CGST	SGSt
Tax on Supply	237750	115875	115875
Less: ITC	15000	120000	120000
Less : Opening Balance in Electronic Credit Ledger as On 1.11.2017	90000	90000	90000
Net Tax Payable	132750	-94125	-94125
Less: Credit adjust of CGST toward IGST	-94125	94125
Net Tax Payable	38625	0	-94125
Less: Credit adjust of SGST toward IGST	-38625		38625
Net Tax Payable	0		-55500

OR

Q.4.P) M/s Robert Industries provides you with the following information for the month of December, 2017. Calculate aggregate turnover under GST. (08)

Particulars	Amount
Intra-State Goods Taxable @18% (inclusive of GST)	2360000
Intra-State Goods Taxable @5% (Inclusive of GST)	1260000
Intra-State Services Taxable @12% (Inclusive of GST)	5,60,000
Export of goods to U.K	200000
Export of goods to Kenya	500000
Value of inward supplies under RCM	200000
Supply of Exempt Service	1,50,000
Supply of Exempt Goods	500000

Solution: Calculate aggregate turnover under GST

Particulars	Amount
Intra-State Goods Taxable @18% (inclusive of GST)	2000000
Intra-State Goods Taxable @5% (Inclusive of GST)	1200000
Intra-State Services Taxable @12% (Inclusive of GST)	5,00,000
Export of goods to U.K	200000
Export of goods to Kenya	500000
Supply of Exempt Service	1,50,000
Supply of Exempt Goods	500000
Total aggregate turnover	5050000

Working Note:

2,3,60,000 x 100/118 = 200,0000

12,60,000 x 100/105 = 12,00,000

5,60,000 x 100/112 = 5,00,000

Q.4.Q) M/s Steve Archer Ltd being a manufacturer of TV has five factories in Panvel, Palghar, Virar, Andheri and Kalyan Is M/s Steve Archer Ltd is eligible for Composition levy in the current year? (07)

Place	Previous year Turnover Rs. in lakh (Including Taxes @ 18%)
Panvel	60
Palghar	20
Virar	12
Andheri	8
Kalyan	12.10
Total	112.10
Total Aggregate turnover (112.10 x 100 / 118)	95

Calculation of tax liabilities under Composition Scheme

Particulars	Amount
CGST @ 0.5% of 95,00,000	47500
SGSt @ ,0.5%	47500
Total	95000

Steve Aggregate turnover is Rs.9500000 which is less than the threshold limit of Rs.1.5 Crores. Therefor he is eligible to opt for the composition scheme.

Q.5.A) Discuss composition schemes.    (08)

Ans: Composition schemes are tax mechanisms implemented by governments to simplify the collection of value-added tax (VAT) or goods and services tax (GST) for small businesses. These schemes are designed to reduce the administrative burden on small enterprises by offering simplified methods for calculating and remitting taxes.

1. Threshold-Based Schemes: Under this scheme, businesses with turnover below a certain threshold are eligible to opt for a simplified tax calculation method. The threshold varies from country to country and is usually determined based on annual revenue.

2. Fixed Rate Schemes: In fixed-rate schemes, businesses pay tax at a predetermined fixed rate on their turnover instead of calculating tax on each transaction. This fixed rate is typically lower than the standard VAT/GST rate, offering cost savings and administrative simplicity.

3. Turnover Tax Schemes: Turnover tax schemes impose tax based on the total sales turnover of a business, rather than on the value added at each stage of production or distribution. This simplifies tax calculation and compliance for small businesses.

4. Simplified Compliance Procedures: Composition schemes often come with simplified compliance procedures, such as reduced paperwork, fewer reporting requirements, and less frequent tax filings. This makes it easier for small businesses to comply with tax regulations.

5. Limited Input Tax Credit: Businesses under composition schemes may have limited or no access to input tax credits, meaning they cannot claim refunds for taxes paid on inputs such as raw materials, supplies, or services. This simplifies record-keeping and administration but may result in higher effective tax rates for these businesses.

6. Sector-Specific Schemes: Some composition schemes are tailored to specific sectors or industries, taking into account their unique characteristics and tax compliance challenges. For example, there may be separate schemes for retail businesses, restaurants, or small-scale manufacturers.

7. Voluntary vs. Mandatory Participation: In some jurisdictions, participation in composition schemes is voluntary, allowing businesses to choose whether or not to opt-in based on their individual circumstances. In others, participation may be mandatory for businesses below a certain turnover threshold.

Composition schemes can benefit small businesses by reducing their administrative burden, lowering compliance costs, and providing greater certainty in tax planning. However, businesses need to carefully evaluate the pros and cons of such schemes to determine whether they are the right fit for their operations. Additionally, tax authorities must ensure that composition schemes are implemented effectively to prevent abuse and ensure tax compliance.

B) Explain the benefits of GST.        (07)

Ans: The Goods and Services Tax (GST) system offers several benefits, both to the government and to businesses, consumers, and the economy as a whole. Here are some of the key benefits of GST:

1. Simplified Tax Structure: GST replaces multiple indirect taxes such as VAT, excise duty, service tax, etc., with a single unified tax. This simplifies the tax structure and makes compliance easier for businesses.

2. Elimination of Cascading Effect: Under the previous tax regime, taxes were levied at each stage of production and distribution, leading to a cascading effect of taxation. GST eliminates this cascading effect by allowing businesses to claim input tax credit on taxes paid on inputs.

3. Wider Tax Base: GST aims to bring more entities under the tax net by reducing the threshold for registration. This broadens the tax base, reducing the burden on existing taxpayers and contributing to increased tax revenue for the government.

4. Boost to Economic Growth: With simplified compliance procedures and reduced tax burden, GST promotes ease of doing business, encourages investment, and fosters economic growth. It also promotes a more efficient allocation of resources across sectors.

5. Reduction in Tax Evasion: GST is designed to be a self-policing tax system with its robust IT infrastructure and invoice matching mechanism. This helps in curbing tax evasion and increasing tax compliance.

6. Uniform Tax Rates: GST aims to create a uniform tax structure across states and union territories, reducing price distortions and promoting seamless interstate trade.

7. Promotion of Make in India: By providing seamless input tax credit across the supply chain, GST encourages domestic manufacturing and contributes to the government's Make in India initiative.

8. Benefits to Consumers: GST is expected to lead to lower prices for goods and services over time due to the elimination of cascading taxes and increased efficiency in the tax system. This benefits consumers by reducing the overall tax burden.

9. Improved Logistics and Supply Chain Efficiency: With the removal of interstate barriers and the introduction of e-way bills, GST has streamlined logistics and supply chain operations, leading to cost savings for businesses.

10. Transparency and Accountability: GST brings greater transparency in the tax system through online registration, filing, and payment of taxes. This enhances accountability and reduces corruption in tax administration.

OR

Q.5. Write Short Note on: (Any 3)            (15)

(1) Business and Consideration Under GST

Ans: 

Business under GST:

The concept of "business" under GST is broad and encompasses various activities. Here's a breakdown:

• Definition: Section 2(17) of the CGST Act defines a business as:
  • Any trade, commerce, manufacture, profession, vocation, or any other similar activity, whether or not for a pecuniary benefit.
  • Any activity or transaction connected with or incidental or ancillary to the above.
  • Any activity or transaction in the nature of the above, regardless of volume, frequency, continuity, or regularity.
  • Supply or acquisition of goods and services in connection with starting or closing a business.
  • Provision of facilities or benefits to members by clubs, associations, etc., for a subscription or consideration.
  • Admission charges for entry into premises.
  • Services supplied by a person holding a public office.
  • Activities of a race club or licensed bookmaker.

Essentially, any activity involving the supply of goods or services for a consideration (monetary or non-monetary) is considered a business under GST, with some exceptions.

Consideration under GST:

Consideration is a crucial aspect of determining whether a supply has taken place under GST. Here's what it means:

• Definition: Section 2(31) of the CGST Act defines consideration as the monetary value of any act or forbearance, whether voluntary or not, made in respect of, in response to, or for the inducement of the supply of goods or services.
• Key Points:
  • Consideration can be monetary (payment) or non-monetary (barter of goods or services).
  • The recipient or another person can pay the consideration.
  • Deposits for future supplies are not considered payment unless used for the supply.

Importance of Business and Consideration:

• Knowing if an activity is a business under GST helps determine:
  • Registration requirement: Businesses exceeding a specific turnover threshold must register for GST.
  • Tax liability: Registered businesses need to collect, pay, and file GST returns.
• Identifying consideration helps determine:
  • Whether a supply has taken place: Without consideration, there's no supply under GST (except in specific cases).
  • Taxable value: The consideration forms the basis for calculating GST liability.

(2) Composite and Mixed Supply

Ans: 

Composite and Mixed Supply under GST

In India's Goods and Services Tax (GST) regime, differentiating between composite and mixed supply is crucial for determining the applicable tax rate. Here's a breakdown of both concepts:

Composite Supply:

• A composite supply is a single supply comprising two or more goods or services, naturally bundled in the ordinary course of business and offered at a single price.
• The key element is that the individual elements cannot be independently provided and are meant to be consumed together.

Example:

• Restaurant meal (food, beverage, service)
• Hotel stay (room, housekeeping, amenities)
• Movie ticket (admission, refreshments)

Tax treatment:

• The tax rate for a composite supply is determined by identifying the principal supply, which is the main element of the bundle that the customer primarily desires.
• The entire composite supply is taxed at the GST rate applicable to the principal supply.

Mixed Supply:

• A mixed supply involves two or more individually identifiable goods or services provided for a single price, but not naturally bundled.
• These elements can be independently supplied and have distinct values.

Example:

• Mobile phone with a free case
• Hairdresser service with a hair product
• Movie ticket with popcorn combo

Tax treatment:

• Each element in a mixed supply is taxed at its individual GST rate.
• If one element has a higher GST rate than the others, the entire supply is taxed at the highest rate.

Here's a table summarizing the key differences:

Feature	Composite Supply	Mixed Supply
Nature of elements	Naturally bundled	Individually identifiable
Independent supply	Not possible	Possible
Tax rate	Based on principal supply	Based on individual rates (highest rate for entire supply if one element has the highest rate)

(3) Tax deducted at sources

Ans: Tax deducted at source (TDS) is a mechanism in India where the government collects tax at the source of income, rather than waiting for individuals or businesses to file their tax returns and pay the tax themselves. Here's a breakdown of key aspects of TDS:

How it Works:

• When a specified payment is made (salary, rent, interest, etc.), the deductor (payer) is required to withhold a certain percentage of the amount as TDS.
• The deductor then deposits this collected TDS with the government on behalf of the deductee (recipient).
• The deductee receives a credit for the TDS deducted, which can be claimed when filing their income tax return.

Benefits:

• Reduces tax evasion: By collecting tax upfront, the government ensures a steady flow of revenue and discourages tax evasion.
• Simplifies tax filing: TDS reduces the tax burden on individuals and businesses by pre-collecting a portion of the tax liability.

Who Deducts TDS?

• Various entities act as deductors, including:
  • Employers (deducting TDS from salaries)
  • Banks (deducting TDS on interest payments)
  • Tenants (deducting TDS on rent payments)
  • Government agencies (deducting TDS on certain payments)

Who is Subject to TDS?

• TDS applies to various types of income, including:
  • Salaries
  • Interest income
  • Rent income
  • Professional fees
  • Commissions
  • Dividends (in some cases)

TDS Rates:

• The TDS rate varies depending on the type of income, the deductee's tax residency status, and other factors.
• Rates are specified by the Income Tax Department and can be found on their official website.

Claiming TDS Credit:

• The deductee can claim the TDS deducted on their income tax return.
• The deductor provides a TDS certificate (Form 16, 182T, etc.) containing details of the TDS deducted, which can be used for claiming the credit.

Important Points:

• Not everyone is subject to TDS. Individuals below a certain income threshold might not have TDS deducted from their income.
• Deductible TDS helps reduce the final tax liability that needs to be paid.
• Excess TDS can be claimed as a refund if the total TDS deducted exceeds the actual tax liability.

(4) Electronic way bill

Ans: An electronic way bill (e-way bill) is a digital document required for the movement of goods within India. It serves as a documentation and verification tool for the Goods and Services Tax (GST) regime. Here's a breakdown of key aspects of e-way bills:

Purpose:

• Ensures compliance with GST regulations by tracking the movement of goods.
• Reduces the need for physical checkpoints, facilitating smoother movement of goods.
• Helps identify and prevent tax evasion.

Who Needs an E-way Bill:

• Generally, an e-way bill is mandatory for the movement of goods exceeding a value of ₹50,000 (within or outside a state).
• Some exceptions exist for specific goods, movement within a state (depending on state rules), and specific modes of transport.

Who Generates an E-way Bill:

• The e-way bill can be generated by the registered supplier, recipient, or the transporter (depending on the agreement).
• It's typically generated online through the eWay Bill Portal 

Information Required:

• Details of the supplier, recipient, and transporter
• Description and value of goods being transported
• Origin and destination of the goods
• E-way bill validity period (usually 100 days or less)

Benefits:

• Reduced paperwork: Eliminates the need for physical waybills.
• Improved logistics: Faster movement of goods due to fewer checkpoints.
• Enhanced transparency: Real-time tracking of goods helps in tax administration.
• Reduced tax evasion: Makes it difficult to transport goods illegally.

Penalties for Non-Compliance:

• Penalties are levied for non-generation or carrying an invalid e-way bill.
• The penalty amount can be a percentage of the value of goods being transported.

(5) Credit Note

Ans: A credit note, also known as a debit note to recipient, is a document issued by a registered supplier under the Goods and Services Tax (GST) regime in India. It serves various purposes related to reducing the tax liability of the supplier and adjusting the invoice amount for the recipient.

• There are several scenarios where a supplier might issue a credit note:
  • Return of goods: If a customer returns goods to the supplier, a credit note is issued to reflect the returned value and adjust the original invoice amount.
  • Price reduction: If there's a post-sale agreement to reduce the price of supplied goods or services, a credit note is issued for the difference.
  • Invoice error: If the original invoice contains an error (overcharged amount, incorrect tax rate), a credit note is used to rectify the mistake.
  • Deficiency in supply: If the quantity or quality of supplied goods or services falls short of what was invoiced, a credit note is issued for the difference in value.

Impact on Tax Liability:

• A credit note allows the supplier to reduce their tax liability for the transaction.
• The tax amount corresponding to the reduced invoice value is no longer payable by the supplier.

How Does it Work for the Recipient?

• The recipient should ideally accept the credit note issued by the supplier.
• Upon acceptance, the recipient can adjust their accounts payable and claim a corresponding reduction in their input tax credit (ITC) availed on the original invoice.
• However, the recipient is not obligated to accept the credit note, especially if they disagree with the reasons mentioned.

Important Points:

• A credit note needs to be issued within a specific timeframe (usually one year from the date of the original invoice).
• Specific information needs to be included in the credit note, such as details of the original invoice, reason for issuance, and the revised amount.
• Both the supplier and recipient should retain copies of the credit note for record-keeping purposes.