CA Siddhesh Valimbe

Module 3 Test
Time Allotted: 1 Hr 15 Min
Marks: 40 M

Part I: MCQs
Question 1: Merchant exporter has to export the goods within __ days of issue of tax invoice in order to claim
the rate of 0.1%.
a) 90 days
b) 60 days
c) 30 days
d) As the PO may direct

Ans: a) 90 Days
Question 2: In case of provisional assessment, the value of security can’t exceed __ of the amount covered
under the Bond.
a) 25%
b) 35%
c) As prescribed by Rules
d) As the PO may determine

Ans: a) 25%
Question 3: Calculate the penalty under CGST that may be imposed u/s 129(3)- for release of goods seized in
transit, if the owner of the goods comes forward to pay:
CGST = 5,000
Value of Goods = 1,35,000
a) 10,000
b) 20,000
c) 67,500
d) 2,700

Ans: a) 10,000
Question 4: Calculate how much shall be the turnover w.r.t services shall be taken while calculating
the refund under Rule 89(4) w.r.t a Tax Period:
 Non Zero Rated Turnover of Services = 10,000
 Turnover in a state w.r.t Services = 50,000
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 Payment received w.r.t which work of services is completed = 5,000

 Work completed in current tax period w.r.t advance was received in prior period = 12,000
 Advance received w.r.t work is yet to be completed = 8,000

a) 60,000
b) 25,000
c) 35,000
d) None of above

Ans: d) [ans = 27,000 (10,000 + 5,000 + 12,000)

Question 5: If section 74 proceeding is converted into 73, adjudication order shall be issued within:
a) 5 years from due date of Annual Return of the relevant FY
b) 3 years from due date of Annual Return of the relevant FY
c) 2 years of communication of direction by Appellate Authority/ Court/ Tribunal
d) 1 year from the SCN

Ans: c)

Question 6: Installment facility u/s 80 can be sought if the amount due is 25,000
a) True
b) False

Ans: a) True [not available if amount less than 25,000]

Question 7: Shankari Gupta, fails to appear before PO when summoned for appearance to give
evidence. Penalty amount under CGST?
a) No penalty possible
b) 25,000
c) Up to 25,000
d) As PO may determine as per his wish

Ans: c) [122(3)]

Question 8: ITC involved in issue = 50,000. Can the GST Tribunal refuse to admit an appeal?
a) Yes
b) No
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Ans: a)

Part II: Descriptive

Question 1: A Ltd. is making zero rated supplies which are also specifically exempt from GST. The company
has paid input tax off Rs. 2,00,000 on inputs and input services which have been used exclusively in effecting
such zero rated supplies.

Examine if A Ltd. can avail ITC of input tax of Rs. 2,00,000 paid on inputs and input services used exclusively
in effecting such zero- rated supplies. [2 M]

Answer

As per section 16(2), ITC may be availed for making zero rated supplies, notwithstanding that such supplies are
exempt supplies. However, the same is subject to provisions u/s 17(5) of the CGST Act, i.e. blocked credit.

Hence, A Ltd. can take credit of Rs. 2,00,000 even if the outward zero rated supply is exempt from GST. However,
the credit would not be available in respect of the inputs and input services, the credit on which is blocked under
section 17(5) of the CGST Act.

Question 2: Kailash Global (P) Ltd. supplies various goods in domestic and international markets. It is engaged
in both manufacturing and trading of goods. The company is registered under GST in the State of Karnataka.
The company exports goods without payment of tax under letter of undertaking in accordance with the provisions
of section 16(3) of the IGST Act, 2017.

The company has made the following supplies during a tax period:

S. No Particulars Amount (Rs.)

Export of product ‘A’ to UK for $ 10,000. Assessable value under customs in
1 Indian rupees. 7,00,000
[Export duty is payable on product ‘A’ at the time of exports. Further, value
of like goods domestically supplied by the similarly placed supplier is Rs.
6,00,000]
Domestic supplies of taxable product ‘B’* during the period [excluding
2 tax @ 5%] 10,00,000
[Inputs used in manufacturing of such goods are taxable @18%]
*not notified as a product, in respect of which refund of unutilised ITC shall
not be allowed under section 54(3)(ii)
Supply of goods to Export Oriented Unit [excluding tax@ 18%]
3 5,00,000
[ITC has been claimed by the recipient]
Export of exempt supplies of goods (Value of like goods domestically supplied
4 by the similarly placed supplier is Rs. 5,00,000) 6,00,000
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The ITC available for the above tax period is as follows:

S. No. Particulars Rs.

1 On inputs 3,50,000

2 On input service 1,50,000

3 On capital goods 1,20,000

Determine the maximum amount of refund admissible to Kailash Global (P) Ltd. [8 M]

Answer

Computation of Maximum Amount of Refund Admissible to Kailash Global (P) Ltd.

Particulars Amount (Rs.)

Exports of product ‘A’ to UK [Note (i)] Nil

Domestic supplies of taxable product ‘B’ during the period [Note (ii)] 90,000

Supply of goods to Export Oriented Unit [Note (iii)] Nil

Export of exempt supplies [Note (iv)] 1,07,143

Total Refund Claim Admissible 1,97,143

Notes
(i) Export of goods is a zero-rated supply in terms of section 16(1)(a) of the IGST Act, 2017. Further, Kailash
Global (P) Ltd. exports goods without payment of tax under letter of undertaking in accordance with the
provisions of section 16(3) of the IGST Act, 2017.
Therefore, as per clause (i) of first proviso to section 54(3), a registered person may claim refund, of any unutilised
ITC in the case of zero rated supply made without payment of tax at the end of any tax period.However, second
proviso to section 54(3) lays down that refund of unutilized ITC is not allowed if the goods exported out of India
are subjected to export duty.
(ii) Refund of unutilised ITC is allowed in case of inverted duty structure, i.e. where the credit has accumulated
on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or
fully exempt supplies) except supplies of goods or services or both as may be notified by the Government on
the recommendations of the GST Council [Clause (ii) of the first proviso to section 54(3)].

 “Relevant period” means the period for which the claim has been filed. Tax payable on inverted rated supply
of goods = 10,00,000 × 5% = 50,000
 Here, Net ITC = 3,50,000,
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 Adjusted Total Turnover = 28,00,000 [7,00,000 + 10,00,000 + 5,00,000 + 6,00,000] and Turnover of
inverted rated supply of goods = 10,00,000
 Thus, maximum refund amount under rule 89(5) = 3,50,000 x 10,00,000/ 28,00,000 – (50,000 ×
{3,50,000/(3,50,000 + 1,50,000)} = 90,000

(iii) As per section 2(39), deemed exports means such supplies of goods as may be notified under section 147. Supplies
to EOU is notified as deemed export under section 147. In respect of supplies regarded as deemed exports, the
application of refund can be filed by the supplier of deemed export supplies only in cases where the recipient
does not avail of ITC on such supplies and furnishes an undertaking to the effect that the supplier may claim
the refund [Third proviso to rule 89(1)]. Therefore, since inthe given case, the recipient is claiming ITC, Kailash
Global (P) Ltd. (supplier of deemed exports) cannot claim refund of ITC.
(iv) Section 16(2) of the IGST Act, 2017 stipulates that subject to the provisions of section 17(5) of the CGST Act,
ITC may be availed for making zero-rated supplies, notwithstanding that such supply may been exempt
supply.
Section 54(3) of the CGST Act, 2017 allows refund of ITC in the case of zero rated supply made without
payment of tax.
Here, Turnover of zero rated supply of goods = 6,00,000 (Lower of 6,00,000 or 1.5 times of 5,00,000 i.e.
7,50,000), Net ITC = 5,00,000 and Adjusted Total Turnover = 28,00,000 (as computed in point ii above)

Conclusion: Maximum refund amount under rule 89(4) = 5,00,000 x 6,00,000/ 28,00,000 = 1,07,143.

Question 3: Explain in what cases, assessment order passed by proper officer may be withdrawn under CGST
Act, 2017? [6 M]

Answer: Assessment order passed by the proper officer may be withdrawn in following cases:-

(i) Assessment of non-filers of returns: The best judgement order passed by the proper officer under section 62 of
the CGST Act shall automatically stand withdrawn where a registered person files a valid return within 60 days
of the service of the best judgment assessment order. However, the liability for payment of interest under section
50(1) of the CGST Act, 2017 or for payment of late fee under section 47 of the CGST Act, 2017 shall continue.
However, where the registered person fails to furnish a valid return within 60 days of the service of the assessment
order, he may furnish the same within a further period of 60 days on payment of an additional late fee of Rs.
100 for each day of delay beyond 60 days of the service of the said assessment order and in case he furnishes
valid return within such extended period, the said assessment order shall be deemed to have been withdrawn, but
the liability to pay interest under section 50(1) or to pay late fee under section 47 shall continue.

(ii) Summary assessment: As per section 64(2) of the CGST Act, 2017, a taxable person against whom a summary
assessment order has been passed can apply for its withdrawal to the jurisdictional Additional/ Joint Commissioner
within 30 days of the date of receipt of the order.
If the said officer finds the order erroneous, he can withdraw it and direct the proper officer to carry out
determination of tax liability in terms of section 73 or 74 of the CGST Act. The Additional/ Joint Commissioner
can follow a similar course of action on his own motion if he finds the summary assessment order to be
erroneous.
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Question 4: M/s. Square & Co. received a notice under section 74(1) of the CGST Act, 2017 demanding tax,
interest and penalty on the allegation of suppression of facts for the financial year 2018-19. Notice was issued on
24-11-2022. Square & Co. filed an appeal denying any suppression and on which Appellate Authority concluded
that the notice is not sustainable under section 74(1), for the reason that the charges have not been established by
the Department. Proper officer deemed the said notice to have been issued under section 73(1) and re-determined
the demand.
Square & Co. is of the opinion that the action of proper officer is not in line with GST law. Square & Co. filed its
annual return for the financial year 2018-19 on 30-11-2019. Assume the due date of such return as 31-12-2019.
Square & Co. seeks your advice with reason on the following issues:
(i) Whether the proper officer can proceed to re-determine the demand under section 73(1), in respect of notice issued
under section 74(1)?
(ii) If yes, whether the fresh demand is valid?
(iii) If the above notice issued under section 74(1) is assumed to have been issued on 24-09-2022, what would be your
answer for the validity of demand? [6 M]

Answer

i. Since the appellate authority concluded that the notice under section 74(1) is not sustainable for reason that the
charges of fraud etc. have not been established by Department against M/s Square & Co., the proper officer can
re-determine the demand, deeming as if the notice was issued under section 73(1) of the CGST Act, 2017.
ii. Fresh demand will not be valid since show cause notice under section 74(1) of the CGST Act, 2017 was issued
on 24.11.2022, i.e. beyond 2 years and 9 months from the due date of furnishing of annual return for financial
year 2018-19, i.e. 30.09.2022.
iii. If show cause notice under section 74(1) of the CGST Act, 2017was issued on 24.09.2022, i.e. within 2 years and
9 months from the due date of furnishing of annual return for financial year 2018-19, demand would be valid.

Question 5: Examine the implications as regards the bailability and quantum of punishment on prosecution, in
respect of the following cases pertaining to the month of December under CGST Act, 2017-

(i) 'X' collects 245 lakh as tax from its clients and deposits 241 lakh with the Central Government. It is found that he
has falsified financial records and has not maintained proper records.

(ii) 'Y' collects 550 lakh as tax from its clients but deposits only 30 lakh with the Central Government.
What will be the implications with regard to punishment on prosecution of 'X' and 'Y' for the offences? What
would be the position, if 'X' and 'Y' repeat the offences?

It may be assumed that offences are proved in the Court. [6 M]

Answer

i. Failure to pay any amount collected as tax beyond 3 months from due date of payment is a specified offence as
per clause (d) of Section 132(1).
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In the present case, failure to deposit the tax is of Rs. 4 lakh (245 lakh – 241 lakh). As the amount of
failure does not exceed 200 lakh therefore, failure to deposit 4 lakh collected as tax by ‘X’ will not be punishable
with imprisonment as per section 132(1).

Further, falsification of financial records by ‘X’ is a specified offence asper section 132(1)(d) and punishable
with imprisonment up to 6 months or with fine or both as per clause (iv) of section 132(1) assuming that
falsification of records is with an intention to evade payment of tax due under the CGST Act, 2017 and the said
offence is bailable in terms of section 132(4).

ii. Failure to pay any amount collected as tax beyond 3 months from due date is punishable with imprisonment upto
5 years and with fine, if the amount of tax evaded exceeds 500 lakh in terms of section 132(1)(d) read with clause
(i) of section 132(1).

Since the amount of tax evaded by ‘Y’ exceeds Rs. 500 lakh (550 lakh - 30 lakh), ‘Y’ is punishable with an
imprisonment for a term which may extend to 5 years and with fine. It has been assumed that amount of `
520 lakh collected as tax is not paid to the Government beyond 3months from the due date of payment of tax.

Such offence is non-bailable in terms of section 132(5).

If ‘X ’and ‘Y’ repeat the offence, they shall be punishable for second and for every subsequent offence with
imprisonment up to 5 years and with fine in terms of section 132(2) of the CGST Act, 2017.

Such imprisonment shall also be of at least 6 months in the absence of special and adequate reasons to the
contrary to be recorded in the judgment of the Court.

Question 6: In an order dated 20th August issued to GH (P) Ltd., the Joint Commissioner of CGST has confirmed
IGST demand of 280 crore. The company is disputing the entire demand of IGST and wants to know the
amount of pre-deposit it has to make under the IGST Act for filing an appeal before the Appellate Authority
against the order of the Joint Commissioner.
Assuming that the Appellate Authority also confirms the order of the Joint Commissioner and the company wants
to file an appeal before the Appellate Tribunal against the order of the Appellate Authority, determine the amount
of pre-deposit to be made by the company for filing the said appeal. [4 M]

Answer

Section 107(6) read with section 20 of the IGST Act provides that no appeal shall be filed with the Appellate
Authority unless the applicant has paid in full, such part of the amount of tax, interest, fine, fee and penalty arising
from the impugned order, as is admitted by him and a sum equal to 10% of the remaining amount of tax in
dispute arising from the said order subject to a maximum of 50 crore. Thus, the amount of pre-deposit for filing
an appeal with Appellate Authority cannot exceed ` 50 crore (for tax in dispute) where IGST demand is involved.
In the given case, the amount of pre-deposit for filing an appeal with the Appellate Authority against the order
of Joint Commissioner, where entire amount of tax is in dispute, is:

(i) 28 crore [10% of the amount of tax in dispute, viz. 280 crore] or
(ii) 50 crore, whichever is less.
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= 28 crore.

Further, section 112(8) provides that no appeal shall be filed with the Appellate Tribunal unless the applicant
has paid in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order,
as is admitted by him and a sum equal to 20% of the remaining amount oftax in dispute, in addition to the
amount paid as pre-deposit while filing appeal to the Appellate Authority, arising from the said order subject to
a maximum of 100 crores.

Thus, in the given case, the amount of pre-deposit for filing an appeal withthe Appellate Tribunal against the
order of the Appellate Authority, where entire amount of tax is in dispute, is:
(i) 56 crores [20% of the amount of tax in dispute, viz. 280 crores]; or
(ii) 100 crores,
whichever is less.
= 56 crores.