CA FINAL

TEST SERIES
NOV 24 EXAM
Test – 3
suggested answers

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 CA FINAL TEST SERIES NOVEMBER’ 24 EXAM
TEST – 3 SUGGESTED ANSWER

Portion Covered
Segment – 9: Input Tax Credit
Segment – 10: Composition Scheme
Segment – 11: Invoice, Debit & Credit Note
Segment – 12: Registration

Section – A: MCQ’S (8 Marks)

1. C) Required for both Puducherry and Goa As per Sec 22 read with Sec 25: Every supplier
shall be liable to be registered in the State or Union territory, from where he makes a taxable
supply of goods or services or both, if his aggregate turnover in a financial year exceeds
Registration threshold limit (Aggregate Turnover Includes Value of all outward supplies =
Taxable supplies + Exempt supplies + Exports + Inter-State supplies of persons having same
PAN be computed on all India basis). Aggregate Turnover = `32,34,000 + `18,38,000 =
`50,72,000. The applicable threshold limit is `20,00,000 as they are exclusively engaged in
supply of goods, But located in USTAMP, Hence Registration required for both Puducherry
and Goa
[2 MARKS]

2. B) ` 300
As per Rule 42 of CGST Rules
ITC attributable to Exempt Supply (D1) D1 = C2 x E/F of Tax Period = common Credit (C2)
x Exempt Supply (E) / Total Turnover (F)
Note- Exempt Supply & Total TO taken excluding Excise duty/ VAT/CST
Common Credit. ITC Eligible (C3) = Common Credit (C2) - ITC attributable to Exempt Supply
(D1)
D1 = `3000*`1800/`2000 = `2700 [Where `3000 is the common credit]
[Where `1800 is Exempt Turnover [i.e., `3400-`1000-`600 = `1800]
[Where `2000 is Total Turnover [i.e., `1800 + `200 = `2000]
Eligible ITC = Common Credit - ITC Reversed = `3000 - `2700 = `300
[2 MARKS]

3. D) ` 11,820.
Common credit for all CG having useful life in that tax period = (Tc)
Common Credit of CG during useful life for Tax Period (Tm) = Tc/60
Note: Useful life of any CG = 5 years from date of invoice and above formula shall be
applicable during the useful life of the said capital goods.
ITC attributable To Exempt Supply (Te) = Tr * E(ES) /F(TS of State)
Tr = ITC for all Common CG E(ES) = Exempt supply for Tax Period F(TS) = Total supply for
Tax Period

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 Note- Exempt Supply & Total Supply taken excluding Excise duty/ VAT/CST
Te i.e. Reversal = `200 X `900/`1000 = `180
[Where Tc = `12000 is the Common credit on Capital Goods]
[Where Tm = `12000/60 = `200 Common Credit for the Tax Period i.e. Month of Jan as life
of asset is taken as 60 Months under GST law]
[Where `900 is Exempt Turnover [calculated as `1650 - `500 - `250 = `900] [Where `1000
is Total Turnover [calculated as `900 + `100 = `1000]
Eligible ITC = Common Credit Availed -ITC Reversed = `12000 -`180= `11820
[2 MARKS]

4. C) ABC Petroleum Limited should not avail ITC of tax paid on the spares. As per Sec 17(5):
ITC not available on goods lost or destroyed.

[2 MARKS]

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 Section B: Descriptive (14 Marks X 3 Question = 42 Marks)
(Question No. 1 is compulsory and answer any 2 out of 3 given below)

ANSWER FOR QUESTION 1:

Computation of gross GST liability on outward supply of Adityanath Private Limited for the
month of August
Particulars Value (`) GST (`) Classification
for ITC
Supply of Product Alpha [Liable to GST @ 12%] 50,00,000 6,00,000 Taxable
Supply of Product Gamma [Exempt from GST] 1,00,00,000 Nil Exempted
Supply of management consultancy services [Liable to GST 50,00,000 9,00,000 Taxable
@ 18%]
Renting of commercial complex to local traders of 50,00,000 9,00,000 Taxable
electronic goods
[Services by way of renting of residential dwelling for use
as residence are exempt from GST. Thus, renting of
commercial complex is taxable and GST is payable on the
same @ 18%.]
Export of Product Beta 1,00,00,000 Nil Taxable
[Export of goods is a zero-rated supply in terms of section
16(1)(a) of the IGST Act, 2017. A zero-rated supply can be
made without payment of tax under a LUT in terms of
section 16(3)(a) of that Act.]
Export of consultancy services [As per section 2(6) of the 20,00,000 Nil Taxable
IGST Act, 2017, an activity is treated as export of service if,
inter alia, payment for the service is received in convertible
foreign exchange or in Indian rupees wherever permitted
by the RBI. Since in case of exports to Nepal, RBI
regulations allow receipt of payment in Indian rupees,
exports of services to Nepal are treated as 'normal exports'.
Export of services is a zero-rated supply in terms of section
16(1 )(a) of the IGST Act, 2017. A zero-rated supply can be
made without payment of tax under a LUT in terms of
section 16(3)(a) of that Act.]
Sale of building 1,25,00,000 Nil Exempted
[Sale of building is neither a supply of goods nor a supply
of services in terms of para 5 of Schedule III to the CGST
Act, 2017, provided the entire consideration has been
received after issue of completion certificate by the
competent authority or after its occupation, whichever is
earlier. Hence, the same is not liable to GST. Also, value
shall be considered as stamp duty value i.e., 2,50,000/0.02]
Interest received on investment in fixed deposits with 10,50,000 Nil Taxable
Manimani Bank
[Services by way of extending deposits, loans or advances
in so far as the consideration is represented by way of

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interest are exempt vide Notification No. 12/2017 CT (R)
dated 28.06.2017]
Sale of shares 2,50,000 Nil Exempted
[Shares are neither goods nor services in terms of section
2(52) and 2(102) of the CGST Act, 2017. Hence, sale of
shares is neither a supply of goods nor a supply of services
and hence, is not liable to GST. Value shall be 1% of sale
value of securities]
Supply of cigarettes [Liable to GST @ 28%] 1,00,00,000 28,00,000 Taxable
[Excise duty is included in the value since as per section
15(2)(a) of the CGST Act, 2017, value of supply includes all For ITC –
taxes, duties, cesses other than GST. However, excise duty 87,50,000
not included while computing reversal of ITC]
Supply of petrol and diesel 62,50,000 Nil Exempted
[Supply of petrol and diesel is not leviable to GST as per
section 9 of the CGST Act, 2017. Also, excise duty and VAT
not included in the value for computing reversal of ITC]
Amount received from Durga Das Private Limited for 6,00,000 Nil Exempted
sponsorship of the business exhibition [Tax on services
provided by any person by way of sponsorship to any body-
corporate located in taxable territory is payable by the
recipient (Durga Das Private Limited) under reverse charge.
Thus, tax on such services is not payable by Adityanath
Private Limited.]
Total GST liability on outward supply 6,64,00,000 52,00,000

Computation of net GST liability on outward supply of Adityanath Private Limited for the month
of August:
ITC availed w.r.to inputs (`150 lakhs X 12%) = `18,00,000
ITC availed w.r.to input services (`100 lakhs X 18%) = `18,00,000
Total ITC availed = `36,00,000

Exempted turnover = `1,00,00,000 + `1,25,00,000 + `2,50,000 + `62,50,000 + `6,00,000 =

`2,96,00,000
Total turnover = 6,64,00,000
ITC reversed = `36,00,000 X 296/664 = `16,04,819
Net Eligible ITC for setoff = `36,00,000 - `16,04,819 = `19,95,181

Net GST payable = `52,00,000 (-) `19,95,181 = `32,04,819.

[14 MARKS]

ANSWER FOR QUESTION NO. 2(A):

As per Sec. 41 read with Rule 37A, as Rudra ltd., not filed GSTR-3B of sept 2023 by 30th Sept
2024, ITC availed by Abhi Ltd needs to be reversed by 30th Sept 2024, ITC availed by Abhi Ltd
not reversed ITC by 30th Nov 2024, they shall pay interest as follows:
Interest computed on ` 1,00,000 x 18% = ` 18,000
Interest from the date of Utilization = 20/12/2023

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Interest till the date of reversal = 17/01/2025
No of days = 394 days
Interest payable = ` 18,000 x 18% x 394/366 = ` 3,488/-

When Rudra Ltd files GSTR-3B of Sept 2023 on 18th February 2025, ITC reversed by Abhi Ltd
can be re-availed in the GSTR 3B of Feb 2025 filed on 20/03/2025, even though the time limit
for availing ITC is expired, as the time limit for availing ITC is not applicable in case of re-
availment of ITC reversed earlier. However, interest of ` 3,488/- cannot be availed.

AS GSTR-3B is filed late by is filed late by Rudra ltd., they need to pay interest @ 18% pa.. from
the due date of GSTR – 3B i.e. 20/10/2023 till the date of filing GSTR – 3B i.e., 18/02/2025.
Interest payable for 487 days i.e., `18,000 X 18% X 487/366 = `4,311.
[5 MARKS]

ANSWER FOR QUESTION NO. 2(B):

I. As per Sec. 25 of CGST Act, 2017, a non-resident taxable person shall make application
for registration at least 5 days before commencement of business. In the present case, Mr.
Allan shall make application by 25/06/2024 as commencement of business is on
01/07/2024.
II. As per Sec. 25 of the CGST Act, PAN is mandatory for registration. However, in the case of
NTRP, registration is granted based on passport (or) any identification number in case of
person other than individual. However, such an application should be signed by an
authorized signatory having a Valid PAN.
III. The period of validity of registration granted to NTRP is 90 days (or) no of days specified
in the application, whichever is lower. It can be extended for a further period not exceeding
90 days.
IV. NTRP cannot avail ITC on inward supplies as per Sec. 17(5) of CGST Act, except w.r.to IGST
paid on import of goods. In the present case, Mr. Allan can avail ITC of IGST as follows:
Assessable value of import = ` 20,00,000
Basic customs duty @ 10% = ` 2,00,000
Social welfare surcharge @ 10% of BCD = ` 20,000
IGST @ 18% of (AV + BCD + SWS) = ` 3,99,600
i.e., ` 22,20,000 x 18%
V. As per Sec. 27 of CGST Act advance tax payable by NRTP is estimated net tax liability as
follows:
Estimated gross payable = 4,80,000
(40,00,000 x 12%)
(-) IGST on import = (3,99,600)
(Other inward supplies, ITC not available)
Estimated net GST payable ` 80,400
[5 MARKS]

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 ANSWER FOR QUESTION NO. 2(C):
Dynamic QR Code in invoice
E-invoice for B2B Supplies
B2B Supplies
Even though there is no
Not required as Govt. exemption to Govt.
I. Supply by Govt Department (or) local department but dynamic QR
department authority is covered under Code is not applicable as their
exclusion list for E-Invoice aggregate turnover during PY
≤ ` 500 Cr
II. Supply by Dream world E-Invoice applicable as ATO Dynamic QR Code is not
pvt ltd. to Nightmare ltd. during PY > ` 5 Cr & not applicable in case of B2B
(SEZ Ltd) covered under exceptions Supplies
Supply by SEZ not covered
under exceptions &
III. Supply by Bali Ltd to E-Invoice not applicable in aggregate turnover during PY
Adarsh Pvt Ltd case of B2C supplies > ` 500 Cr. Therefore,
dynamic QR Code is
applicable
IV. Supply by Harnam & E-Invoice always applicable in Dynamic QR Code not
Co to persons outside case of exports of goods (or) applicable if recipient is
India (Export) services located outside India
[4 MARKS]

ANSWER FOR QUESTION NO. 3(A):

I. As per Section 22 of the CGST Act, 2017 a supplier is liable to be registered under GST in the
state or UT, from where he makes a taxable supply of goods or service or both if his aggregate
turnover in a Financial Year exceeds ` 20 lakh in such state/UT (` 10 lakh in a special category
states). The term ‘aggregate turnover’ includes exempt turnover also. It shall also be noted that
if the manufacturer is exclusively engaged in supply of goods, the limit shall be ` 40 lakhs subject
to some exceptions, w.e.f. 01.04.2021. However, a person exclusively engaged in making exempt
supplies is not liable to registration in terms of Section 23(1) of CGST Act, 2017. In view of
combined reading of above provisions, although the ‘aggregate turnover’ of Happy Ltd. exceeds
the applicable threshold limit of ` 20 lakh on 30.09.2021 [` 45 lakh], it was not required to be
registered till 30.11.2021 as it supplied only exempted goods till that day. Therefore, Happy Ltd.
needs to register within 30 days from 01.12.2021 (the date on which its supplies became taxable)
as its turnover had already exceeded the threshold limit of ` 40 lakh on 01.12.2021.
II. As per Section 17 of the CGST Act, the input tax credit (ITC) on capital goods used or intended
to be used exclusively for effecting exempt supplies is disallowed. However, where an exempted
supply by a registered person becomes a taxable supply, such person gets entitled to take
proportionate ITC on such capital goods in terms of Section 18(1)(d) of CGST Act, 2017. Thus, a
non-registered person cannot take ITC on capital goods under this provision.
Further, a person who has applied for registration within 30 days from the date on which he
becomes liable to registration and has been granted such registration is also not entitled to take
ITC on capital goods held with him on the day immediately preceding the date from which he
becomes liable to pay tax in terms of Section 18(1)(a) of CGST Act, 2017. In the given case, Happy
Ltd. is not registered at the time when its exempted supply becomes taxable. Thus, the company
cannot take proportionate ITC on capital goods as mentioned above. Further the company will
also not be entitled for credit on capital goods held with it when it applies for registration in the
prescribed manner.
[5 MARKS]

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ANSWER FOR QUESTION NO. 3(B):
Eligibility of Suraj Ltd. (manufacturer cum supplier of service) for Composition Scheme:
A supplier of goods will be eligible for composition scheme, if the value of services supplied by him
does not exceed higher of 10% of the turnover in the preceding Financial Year in a State (in given
case, 10% of 100 Lakhs); or ₹ 5 lakh.
Thus, Suraj Ltd. can supply services to the extent of 10% of ₹100 lakhs i.e. ₹10 lakhs.

Besides, as per Explanation to Sec. 10(1), interest income (service of extending loans for interest)
shall not be taken into account while determining the above permissible limits of services which can
be supplied.

Considering above provisions, Suraj Ltd. can provide services (excluding interest income) upto ₹10
lakhs while maintaining his eligibility for composition scheme. Since the value of services provided
excluding interest earned on deposits is ₹6,00,000 which is within the limit of ₹10 lakhs, hence Suraj
Ltd. is eligible for composition scheme.

Composition tax liability (considering composition tax rates as notified u/Rule 7 of CGST Rules,
2017):
Particulars of Supplies forming part of ATO of the year 2020-21 Manufacturer Trader
(1) Intra State Supplies of Goods X chargeable @5% GST 30,00,000 30,00,000
(2) Intra State Supplies of goods which are chargeable to GST at Nil rate 18,00,000 —
(3) Intra-State supplies of goods Y chargeable @18% GST 30,00,000 30,00,000
(4) Intra state supply of services chargeable with 5% GST 6,00,000 6,00,000
(5) Interest earned on fixed deposits (exempt service) [WN-1] — —
(6) Value of inward supplies of services on which tax payable under RCM — —
(GST Rate 5%)[WN-2]
Aggregate turnover (ATO) liable to composition tax 84,00,000 66,00,000
Rate of composite tax 1% 1%
Total Composite tax [A] 84,000 66,000

Working Note:
1.Interest earned on fixed deposits is exempt from tax vide Entry 27 of Notification No. 12/2017-CT
(Rate). The same shall not be taken into account for calculating tax liability under composition scheme.
2. Inward supplies of goods/ services on which tax payable under RCM (GST Rate 5%) does not form
part of ATO and hence, not to be included for determination of composition tax liability.
Additional, RCM liability:
Particulars of Supplies Manufacturer Trader
Value of inward supplies on which tax payable under RCM 5,00,000 5,00,000
Rate of GST 5% 5%
Tax Payable under RCM [B] 25,000 25,000

Total Tax liability:

Particulars of Supplies Manufacturer Trader
Tax Payable under FCM [B] 84,000 66,000
Tax Payable under RCM [B] 25,000 25,000
Total tax liability [A+B] 1,09,000 91,000

[5 MARKS]

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ANSWER FOR QUESTION NO. 3(C):
Where the goods supplied are found to be deficient, the taxpayer can issue a credit note. Credit
note should include the amount of tax credited to the recipient. In this case, GST liability would
be recalculated as follows:
`
Super structure of 1000 square feet (along with individual share of land) x
Less: Value of land (or undivided share of land) (it is always deemed to be 0.3333x
1/3 of total amount charged)
rd

Taxable value 0.6667x

Add: GST -
CGST @ 9% of Rs. 0.6667x 0.06x
SGST @ 9% of Rs. 0.6667x 0.06x
Total 1.12x

Total consideration is 1.12x which equal to Rs. 94,00,000 (i.e., the amount paid by Z is Rs.
70,00,000 + Rs. 24,00,000), x is equal to Rs. 83,92,857 (i.e., Rs. 94,00,000 + 1.12). Credit note can
be prepared with the help of data given below-
Data for credit
Original Amount paid
note [(1) – (2)]
invoice ` by Z `
`
(1) (2) (3)
Super structure (a) 90,00,000 83,92,857 6,07,143
Less: value of land [1/3rd of (a)] (b) (30,00,000) (27,97,619) (2,02,318)
Taxable value for the purpose of GST (c) (60,00,000) (55,95,238) (4,04,762)
Add: GST -
CGST @ 9% @ 9% of (c) (d) 5,40,000 5,03,571 36,429
SGST @ 9% @ 9% of (c) (e) 5,40,000 5,03,571 36,429
Total [(a) + (d) + (e)] 1,00,80,000 94,00,000 6,80,000
[4 MARKS]

ANSWER FOR QUESTION NO. 4(A):

ITC to be claimed by Sunshine Pvt. Ltd. in its GSTR -3B for the month of October to be filed by
20th November will be computed as under –
Amount of input tax
Amount of ITC that
Invoices involved in the invoices
can be availed (`)
(`)
Balance in GSTR-2B on 13th November 6,00,000 4,80,000 [Note 2]
[Note 1]
(Invoices at S. Nos. 1, 2, 3 and 4 uploaded by
the respective suppliers in their GSTR-1s)
Invoices at S. Nos. 5, 6, 7 and 8 not 4,00,000 Nil [Note 3]
uploaded in GSTR-1
Invoice at S. No. 9 50,000 50,000 [Note 4]
Total 10,50,000 5,30,000

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Notes:
1) Eligible Input tax credit available to the recipient in respect of invoices or debit notes the
details of which have been uploaded by the suppliers under Sec. 37(1) of CGST Act, 2017 as
on the due date of filing of the returns in GSTR – 1 of the supplies for the said tax period.
The taxpayer can ascertain the same from his auto-populated FORM GSTR 2B as available
on the due date if filing of FORM GSTR 1 under Sec. 37(1) i.e., by 13th November.
2) 100% ITC can be availed on invoices uploaded by the suppliers in their Form GSTR-1.
However, section 17(5) of the CGST Act, 2017 blocks ITC on motor vehicles for transportation
of persons having approved seating capacity of not more than 13 persons if they are not
used for making the following taxable supplies, namely: — (A) further supply of such motor
vehicles; or (B) transportation of passengers; or (C) imparting training on driving such motor
vehicles Since Sunshine Pvt. Ltd. is not using the car for any of the aforesaid mentioned
purpose, ITC thereon will not be available as per Sec. 16(2)(ba) of CGST Act, 2017 Thus, 100%
ITC will be available in respect of invoices at S.Nos . 1, 2 & 3.
3) In respect of invoices at S.Nos. 5, 6 7 and 8 not uploaded in Form GSTR-1s by the due date,
ITC cannot be availed as per Sec. 16(2)(aa) of CGST Act, 2017.
4) The restriction of availment of ITC is imposed only in respect of those invoices, details of
which are required to be uploaded by the suppliers under section 37(1) of the CGST Act, 2017
and which have not been uploaded. Therefore, full ITC can be availed in respect of IGST paid
on imports which are outside the ambit of section 37(1) [Circular No. 123/42/2019 GST dated
11.11.2019]
As per Rule 88D of CGST Rules, If ITC availed in GSTR-3B exceeds ITC in GSTR-2B by prescribed
amount or %, an intimation in Part A of FORM GST DRC 01C shall be issued on the common
portal or email address of such person. In the present case, as Sunshine P. Ltd. availed ITC w.r.to
Invoice No. 9, even though not reflected in GSTR-2B, they shall get such intimation and based
on such intimation a reply can be furnished within 7 days in part B of Form GST DRC 01C stating
that such ITC is w.r.to GST paid under RCM. Based on the reply furnished, tax officer will review
and validate the claim of ITC
[5 MARKS]

ANSWER FOR QUESTION NO. 4(B);

Taxpayer is not engaged in making inter-State supply. He does not supply through e-commerce
operator. From the information given in the problem it appears that the taxpayer is not a casual
taxable person/ non-resident taxable person.
Apart from satisfying these conditions, a taxpayer can opt for Alternative Composition Scheme,
if he satisfies the following criteria -
Criteria 1 - The aggregate turnover of the preceding financial year does not exceed ` 50 lakh.
Aggregate turnover, for this purpose, includes all taxable and exempt supplies but does not
include the value of exempt supply by way of extending loan/ advance/ deposit (if consideration
is payable by way of interest or discount).
Criteria 2 - The taxpayer is not eligible for normal Composition Scheme under section 10(1) (as
he is engaged in supply of services or quantum of supply of services is more than 10% of total
turnover or ` 5 lakh, whichever is higher).
To find out whether X satisfies these criteria, one has to redraft the table given in the problem
(after ignoring interest on deposit/loan/ advance, which is not included in turnover for this
purpose). After excluding interest on deposits, the data given in the above table
will be as follows –

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 (` in Lakhs)
Financial year Financial year
2022- 23 2023 - 2024
Taxable Exempt Total Taxable Exempt Total
Supply of goods (stationary
10 5 15 11 6 17
items/books)
Supply of other services 22 8 30 20 10 30
Total 32 13 45 31 16 47

On April 1, 2023, X wants to opt for alternative Composition Scheme. His turnover for the
preceding financial year 2022-2023 does not exceeds ` 50 lakhs. He satisfies Criteria 1.
Moreover, turnover of supply of services of the preceding year is ` 30 lakh out of the total
turnover of ` 45 Lakh. Turnover of supply of service is more than 10% of total turnover.
Consequently, he satisfies Criteria 2 [i.e., he is not eligible for normal composition scheme under
section 10(1)].
X can opt for alternative Composition Scheme with effect from April 1, 2023. His tax liability for
the financial year 2023-2024 will be as follows –
`
Turnover of the financial year 2023-24 47,00,000
CGST (3% of ` 47,00,000) 1,41,000
SGST (3% of ` 47,00,000) 1,41,000
GST 2,82,000
Note: X is required to pay GST of Rs. 2,82,000 out of his pocket. He cannot collect any GST
from the recipients of supply made by him.
[4 MARKS]

ANSWER FOR QUESTION NO. 4(C)

As per Sec. 29(5) of CGST Act, 2017 registered person whose registration is cancelled shall pay an
amount by way of debit to Electronic Cash Ledger (or) Credit Ledger, equivalent to ITC w.r.to inputs
in WIP, Inputs held in stock, Inputs in WIP, Inputs in FG, on the day immediately preceding the date
of such cancellation (or) output tax payable on such goods, which is Higher
Accordingly in the present case, ITC on such inputs is (` 8,00,000 x 18%) + (` 5,00,000 x 12%) + (`
4,50,000 x 18%) = ` 2,85,000 (or) GST Payable on such goods i.e., (` 10,00,000 x 18%) + (` 3,00,000
x 12%) + (` 4,00,000 x 18%) = ` 2,88,000, whichever is Higher i.e., ` 2,88,000 is payable.
Also, in case of capital goods, such person shall pay an amount equal to ITC taken on such capital
goods as reduced by such percentage points (or) GST on transaction value of such capital goods
whichever is Higher.
In the present Case,
20,00,000 x 28%
a) ITC reversal on capital Goods = x 42 Months = ` 3,92,000 (or)
60 Months

b) GST Payable on such capital Goods = 15,00,000 x 28% = ` 4,20,000, whichever is Higher i.e.,
` 4,20,000

[5 MARKS]

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