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PAPER – 3: TAXATION

SECTION A: INCOME TAX LAW

The Income-tax law, as amended by the Finance Act, 2023, including
significant notifications/ circulars issued upto 30th June, 2024, is applicable for
January, 2025 examination. The relevant assessment year for January, 2025
examination is A.Y.2024-25. The June, 2023 edition of the Study Material is
based on the provisions of Income-tax law as amended by the Finance Act,
2023 and significant notifications/circulars issued upto 30.04.2023, and hence,
the same is relevant for January, 2025 examination. The Statutory Update
containing significant notifications/circulars issued between 1.5.2023 and
30.6.2024 which are relevant for January, 2025 is webhosted at
https://resource.cdn.icai.org/81242bos65468.pdf

QUESTIONS

Case scenario
Sagar LLP is an LLP unit set up in Special Economic Zone (SEZ) in the financial year
2018-19 for manufacture of textiles. The unit fulfils all the conditions under section
10AA of the Income-tax Act, 1961. The details of this unit for the financial year
2023-24 are given:

Particulars `
Profits of unit located in SEZ 58,00,000
Export sales of above unit received in India in convertible 1,00,00,000
foreign exchange on or before 30.9.2024
Domestic sales of above unit 60,00,000

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Sagar LLP has three partners, Mr. Ram, Mr. Shyam and Mr. Ganesh. Mr. Ram
and Mr. Shyam are working partners while Mr. Ganesh is a non-working
partner. All the three partners are receiving remuneration of ` 1 lakh per
month from the LLP which is already debited to the profits and loss account of
the LLP.
Apart from this, Mr. Ganesh was employed in XYZ Ltd. till 30.9.2023 and
having a salary of ` 80,000 per month. He resigned then and decided to start
his own business. He set up a warehousing facility in Pune for storage of
agricultural produce, fulfilling the conditions for claim of deduction under
section 35AD. Capital expenditure in respect of warehouse amounted to
` 90 lakhs (including cost of land ` 30 lakhs) was incurred during the
P.Y. 2023-24. The warehouse became operational with effect from 1st
December 2023. The profit from operation of warehousing facility (before
considering deduction under section 35AD) during the F.Y. 2023-24 is
` 1,10,00,000.
He pays lumpsum premium of ` 90,000 towards health insurance for self and
his wife (age 43 years) for 36 months on 01.10.2023 by account payee cheque.
He also contributes ` 1,50,000 towards PPF.
From the information given above, choose the most appropriate answer to
the following questions –
1. What is the amount of remuneration allowable as deduction to the LLP
for A.Y.2024-25 under the head “Profits and gains of business or
profession”?
(a) ` 36.00 lakhs
(b) ` 57.30 lakhs
(c) ` 35.70 lakhs
(d) ` 24.00 lakhs
2. What is the amount of deduction available under section 10AA to Sagar
LLP and under section 35AD to Mr. Ganesh while computing income
under the regular provisions of the Income-tax Act, 1961 for
A.Y.2024-25?
(a) ` 36.25 lakhs and ` 60 lakhs, respectively

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(b) ` 21.875 lakhs and ` 60 lakhs, respectively

(c) ` 18.125 lakhs and ` 60 lakhs, respectively
(d) ` 21.875 lakhs and ` 90 lakhs, respectively
3. What is the total income of Mr. Ganesh under the regular provisions of the
Income-tax Act, 1961 for A.Y.2024-25?
(a) ` 52,57,500
(b) ` 52,55,000
(c) ` 53,05,000
(d) ` 64,55,000
4. What is the tax liability (rounded off) of Mr. Ganesh under default tax
regime under section 115BAC for A.Y.2024-25?
(a) ` 37,42,280
(b) ` 40,18,560
(c) ` 36,34,640
(d) ` 40,65,200
5. What is the tax liability (rounded off) of Mr. Ganesh if he has opted out
of the default tax regime for A.Y.2024-25?
(a) ` 15,89,870
(b) ` 24,24,460
(c) ` 15,89,020
(d) ` 24,90,280
6. Mr. Akshay (aged 59 years), an Indian citizen, travelled frequently out of
India for his business trip as well as for his outings. He left India from
Delhi airport on 20th April 2023 and returned on 15th October 2023. He
has been in India for less than 700 days during the 7 years immediately
preceding the previous year. Determine his residential status and his
total income for the assessment year 2024-25 from the following
information:

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(1) Long term capital gain on sale of shares of Shama India Ltd., a
listed Indian company, amounting to ` 1,12,000. The sale proceeds
were credited to his bank account in UK.
(2) Dividend amounting to ` 40,000 received from RIL Ltd., an Indian
company. He had borrowed money from Mr. Abhay, a non-
resident Indian, for the above-mentioned investment on 2nd April,
2023. Interest on the borrowed money for the P.Y. 2023-24
amounted to ` 10,000.
(3) Interest on post office saving bank account amounting to ` 9,500.
Mr. Akshay has shifted out of the default tax regime and wants to pay
tax under normal provisions of the Act.
7. Mr. Rohan, an employee of ABC Ltd. is posted at Mumbai. He was
appointed on 1st March 2023 on the scale of ` 60,000 - ` 2,000 -
` 80,000. Details of his other income for the previous year 2023-24 are
as follows:
(i) Dearness allowance: 40% of basic salary (60% forms part of pay for
retirement benefits)
(ii) Telephone allowance @`500 per month
(iii) Both Mr. Rohan and the company contribute 15% of basic salary to
RPF. Interest accrued in this Fund@12% p.a. amounted to
` 25,800.
(iv) The company has provided him with the rent free unfurnished
accommodation in Mumbai owned by the company.
(v) The salary of ` 2,500 p.m. of domestic servant is reimbursed by the
company.
(vi) Rohan has used his own motor car of 1.8 ltr engine capacity for
both official and personal purposes. The running and maintenance
costs of ` 50,000 are borne by the company.
(vii) Professional tax paid ` 2,500 of which ` 1,500 was paid by the
employer.
(viii) During the year 2022-23, Mr. Rohan gifted a sum of ` 6,00,000 to
Mrs. Rohan. She started a business by introducing such amount as

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her capital. On 1st April, 2023, her total investment in business was
` 10,00,000. During the previous year 2023-24, she has suffered a
loss of ` 1,20,000 from such business
Determine the gross total income of Mr. Rohan for the A.Y. 2024-25
under normal provisions of the Act.
8. Mr. Mayank, a resident individual, furnished the following information in
respect of income earned and losses incurred by him for the
F.Y. 2023-24

Particulars Amount (`)

Income from Salary (Computed) 27,40,000
Long term capital loss on sale of shares of Reliance Ltd. (1,25,000)
STT has been paid both at the time of acquisition and
sale
Income from let out property in Kanpur 5,50,000
Loss from let out property in Delhi (3,75,000)
Interest on self-acquired property in Mumbai (1,50,000)
Net winnings from online games (Net of TDS) 35,000
Profit and gains from manufacturing business (after 36,86,000
deducting normal depreciation of ` 2,00,000 and
additional depreciation of ` 50,000)

The other details of losses and unabsorbed depreciation pertaining to

A.Y. 2023-24 are as follows:
Particulars Amount
Business loss from manufacturing business (5,35,000)
Unabsorbed normal depreciation (2,10,000)
Loss from the activity of owning and maintaining the (1,50,000)
race horses
Loss from let out property in Delhi (2,10,000)

Mr. Mayank filed his return of income for A.Y. 2023-24 on 28.7.2023 and
opted for section 115BAC. Compute the Gross total income of

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Mr. Mayank for the A.Y. 2024-25 and the amount of loss, if any, that can
be carried forward if he wants to continue with the provisions under
section 115BAC.
9. Examine the applicability of Tax deduction at source (TDS) or Tax
collection at source (TCS) as per the Income-tax Act, 1961 for the
A.Y 2024-25 in the following situations
(i) Mr. Arjun, a resident Indian, is in retail business in Delhi and his
turnover for F.Y.2022-23 was ` 9.90 crores. He regularly purchases
goods from another resident, Mr. Saurabh, a wholesaler in Noida.
GST rate on such goods is 5%. The aggregate amount of sales
made by Mr. Saurabh to Mr. Arjun during the F.Y.2023-24 was ` 49
lakhs (without GST). Mr Arjun made the payment for consideration
of goods (` 21 lakhs on 8.7.2023, ` 26.25 lakhs on 27.8.2023 and
` 4.2 lakhs on 11.3.2024). Mr. Saurabh’s turnover for F.Y.2022-23
was ` 10.10 crores.
(ii) Mr. Raja paid ` 12 lakhs on 1.11.2023 to M/s. Thomas Cook for a
holiday package to Singapore for a week with his family,
comprising of his wife and two children, being twins aged 22 years,
in the last week of November. Mr. Raja also remitted ` 10 lakhs on
28.3.2024, out of his personal savings, under LRS through Bank of
India, as gift to his sister residing in London, on the occasion of
her 50th birthday.
10. Mr. Ramesh is an authorized wholesale distributor of fertilizers and other
agricultural products. An analysis of his trading and profit & loss
account for the previous year 31.3.2024 revealed the following
information:
(1) Net Profit ` 75,43,000.
(2) The following incomes were credited in the profit and loss account
(a) Rent received ` 5,40,000
(b) Income-tax refund ` 15,000
(c) Dividend from Indian companies ` 2,50,000 (Gross)

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(3) Rates and taxes debited to profit and loss account include ` 1,000
paid towards late filing of his IT return for A.Y. 2023-24 under
section 234F of Income-tax Act.
(4) Salaries debited to profit and loss account include ` 35,000 paid
on single day by way of cash to his accountant.
(5) Interest of ` 1,20,000 paid on loan of ` 10,00,000 taken from NBFC.
Out of the loan, amount of ` 2 lakhs was used for personal
purposes and the balance was used for business purposes. No TDS
was deducted while paying interest. Interest of ` 1,20,000 is
debited to profit and loss account.
(6) Municipal Taxes of ` 10,000 paid for the building was debited to
profit and loss account.
Additional Information
(1) Closing stock was undervalued by ` 40,000
(2) Income-tax refund includes ` 2,000 towards interest.
(3) An amount of ` 45,000 was paid by cheque during the year
towards health insurance policy covering himself, his spouse and
his children.
(4) Advance Tax paid during the year is ` 15 lakhs.
(5) Half of the building is used for business purpose and remaining
half let out to Mr. Anshul for residential purpose.
(6) He also sold his vacant land on 10.11.2023 for ` 10 lakhs. The
stamp duty value of land at the time of transfer was ` 14 lakhs. The
FMV and stamp duty value of the land as on 1st April, 2001 was ` 4
lakhs and ` 3 lakhs, respectively. This land was acquired by him on
05.08.1995 for ` 1.80 lakhs. He had incurred registration expenses
of ` 10,000 at that time. The cost of inflation index for the years
2023-24 and 2001-02 are 348 and 100, respectively.
(7) Mr. Ramesh’s turnover for the P.Y. 2022-23 was ` 3 crores
You are required to compute the total income and tax payable by
Mr. Ramesh for the A.Y. 2024-25 under regular provisions of the Act.

7 JANUARY 2025 EXAMINATION

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SUGGESTED ANSWERS/HINTS

Answer Key

Question Answer
No.
1. (d) ` 24.00 lakhs
2. (b) ` 21.875 lakhs and ` 60 lakhs, respectively
3. (a) ` 52,57,500
4. (c) ` 36,34,640
5. (b) ` 24,24,460

6. Determination of residential status

An individual is said to be resident in India in any previous year, if he
satisfies any one of the following conditions:
(i) He has been in India during the previous year for a total period of
182 days or more, or
(ii) He has been in India for at least 60 days in the previous year and
has been in India during the 4 years immediately preceding the
relevant previous year for a total period of 365 days or more.
If the individual satisfies any one of the conditions mentioned above, he
is a resident. If both the above conditions are not satisfied, the
individual is a non-resident.
Mr. Akshay, an Indian citizen, has satisfied the first basic conditions for
being a resident, since he was in India for 189 days
(20+17+30+31+31+29+31) during the previous year 2023-24. Hence, he
is a resident in India for A.Y.2024-25.
An individual would be resident but not ordinarily resident if he satisfies
either one of the following conditions:
(i) He has been non-resident in India in any 9 out of 10 previous
years preceding the relevant previous year, or

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(ii) He has, during the 7 years immediately preceding the relevant

previous year, been in India for a period of 729 days or less.
Since Mr. Akshay has been in India for less than 700 days during the 7
years immediately preceding the previous year, he would be a resident
but not ordinarily resident for A.Y. 2024-25
Computation of total income of Mr. Akshay for A.Y.2024-25

Particulars Amount
(`)
(1) Long-term capital gain on sale of shares of an 1,12,000
Indian listed company is chargeable to tax in the
hands of Mr. Akshay, since it has accrued and
arisen in India even though the sale proceeds
were credited to bank account in UK.
(2) Dividend received from an Indian 40,000
company taxable in the hands of the
Akshay as Income from other sources
since the income has accrued or arisen
in India
Less: Interest expenditure restricted to 8,000 32,000
20% of dividend
(3) Interest on post office saving bank 9,500
account is taxable in the hands of
Mr. Akshay as Income from other
sources, since it has accrued and arisen
in India and is also received in India.
Less: Exemption under section 10(15) 3,500 6,000
Gross Total Income 1,50,000
Less: Deduction under section 80TTA 6,000
Total Income 1,44,000

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7. Computation of gross total income of Mr. Rohan

for the A.Y.2024-25

Particulars Amount Amount

(`) (`)
I Salaries
Basic Salary (` 60,000 x 11 + ` 62,000 x 1) 7,22,000
Dearness Allowance (40% of ` 7,22,000) 2,88,800
Telephone allowance (` 500 x 12) 6,000
Employer’s contribution to RPF (15% of 1,08,300
` 7,22,000)
Less: Exempt [12% of salary i.e., 12% x 1,07,434 866
8,95,280 (7,22,000 + 60% of 2,88,800)
Interest accrued in the RPF@12% 25,800
Less: Exempt @9.5% p.a. 20,425 5,375
Value of Rent Free accommodation
From April 2023 to August 2023 56,175
[15% of ` 3,74,500 i.e., ` 3,00,000 (60,000 x
5) + 72,000 (` 3,00,000 x 40% x 60%) +
` 2,500 (` 500 x 5)]
From September 2023 to March 2024
[10% of ` 5,26,780 i.e., ` 4,22,000 (60,000 x
6 + 62,000 x 1) + 1,01,280 (` 4,22,000 x 52,678 1,08,853
40% x 60%) + ` 3,500 (` 500 x 7)]
Reimbursement of salary of domestic 30,000
servant [` 2,500 x 12]
Perquisite value of motor car
Running and maintenance costs incurred 50,000
by employer
Less: Specified as per Rule 3 [` 2,400 x 12] 28,800 21,200
Professional tax paid by employer 1,500
Gross Salary 11,84,594

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Less: Deduction under section 16

Standard deduction 50,000
Professional tax paid 2,500 52,500
Taxable Salary 11,32,094

II Profit and gains from business or

profession
Where the amount of Mr. Rohan (` 6 lakh,
in this case) is invested by Mrs. Rohan in a
business as her capital, proportionate share
of profit or loss, as the case may be,
computing taking into account the value of
the investment as on 1.4.2023 to the total (72,000) -
investment in the business (` 10 lakhs)
would be included in the income of
Mr. Rohan [loss of ` 1,20,000 x 6/10]
[Business loss of ` 72,000 cannot be set off
against salary income. It has to be carried
forward to next year]
Gross Total Income 11,32,094

8. Computation of gross total income of Mr. Mayank for A.Y. 2024-25

Particulars Amount Amount

(`) (`)
Income from Salary (Computed) 27,40,000
Income from house property
Income from let out property in Kanpur 5,50,000
Less: Set off of loss from let out property in (3,75,000)
Delhi
Less: Interest u/s 24(b) is not allowed in case of -
self-occupied property since Mr. Mayank is
paying tax under section 115BAC]

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Less: Loss from let out property in Delhi of -

A.Y. 2023-24 cannot be set off against income
from house property of A.Y. 2024-25 since
Mr. Mayank has paid tax under section 115BAC
during the A.Y. 2023-24 and no deduction in
respect of loss of house property of that year
will be allowed in any subsequent year.
1,75,000
Profits and gains from business or
profession
Profits from manufacturing business 36,86,000
Add: Additional depreciation not allowable in 50,000
case of section 115BAC
37,36,000
Less: Brought forward business loss of (5,35,000)
A.Y. 2023-24
Less: Unabsorbed normal depreciation (2,10,000) 29,91,000
Capital Gains
Long term capital loss on sale of shares of (1,25,000) -
Reliance Ltd. on which STT has been paid can
be set off only against long term capital gains.
Hence, it has to be carried forward
Income from Other Sources
Net winnings from online games 50,000
[` 35,000/70%]
Gross Total Income 59,56,000

Losses to be carried forward to A.Y. 2025-26

Particulars Amount
(`)
Brought forward loss from the activity of owning and 1,50,000
maintaining the race horses of A.Y. 2023-24 can be set off
only against the income from the activity of owning and

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maintaining race horses. Hence, it has to be carried forward.

Long term capital loss on sale of shares of Reliance Ltd. on 1,25,000
which STT has been paid

9. (i) Since Mr. Arjun’s turnover for the F.Y. 2022-23 does not exceed
` 10 crores, TDS provisions under section 194Q would not be
attracted. However, TCS provisions under section 206C(1H) would
be attracted in the hands of Mr. Saurabh since his turnover for the
P.Y. 2022-23 exceeds ` 10 crores and his sales consideration
(including GST) from Mr. Arjun exceeds ` 50 lakhs.
No tax is to be collected under section 206C(1H) on 8.7.2023 and
27.8.2023 since the aggregate receipts till that date i.e., ` 47.25
lakhs, has not exceeded the threshold limit of ` 50 lakhs.
Tax of ` 145 i.e., 0.1% of ` 1.45 lakhs has to be collected under
section 206C(1H) on 11.3.2024 (` 4.20 lakhs - ` 2.75 lakhs, being
the balance threshold limit)
(ii) M/s. Thomas Cook, being a seller of an overseas tour programme
package has to collect tax at source under section 206C(1G) from
Mr. Raja on receiving amount for purchase of package. For the
amount received on or after 1.10.2023, tax has to be collected
@5% on upto ` 7 lakhs received and @20% on amount received
above ` 7 lakhs.
M/s Thomas Cook has to collect tax of ` 1,35,000, being ` 35,000
(5% of ` 7 lakhs) and ` 1 lakh (20% of ` 5 lakhs).
Bank of India, being an authorized dealer has to collect tax at
source under section 206C(1G) @20% on amount in excess of ` 7
lakhs remitted under the LRS on or after 1.10.2023 since the
remittance of ` 10 lakhs is not for the purpose of education and
medical treatment.
Bank of India has to collect tax of ` 60,000 i.e., 20% of ` 3 lakhs,
being the amount remitted in excess of ` 7 lakhs.

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10. Computation of total income of Mr. Ramesh for A.Y. 2024-25 under
normal provisions of the Act

Particulars Amount Amount

(`) (`)
Income from house property
Rent received (Rent received has been taken as 5,40,000
gross annual value, due to absence of
information relating to expected rent)
Less: Municipal tax paid by Ramesh 5,000
(` 10,000 x ½)
Net Annual Value 5,35,000
Less: Deduction u/s 24(a) – 30% of NAV 1,60,500 3,74,500
Profits and gains from business or
profession
Net profit as per profit and loss account 75,43,000
Add: Expenses/Payments debited to profit
and loss account but not allowed
- Fee for late filing of income-tax return 1,000
for A.Y. 2023-24 – disallowed
- Salary paid to an accountant in cash 35,000
exceeding ` 10,000 – disallowed under
section 40A(3)
- Interest paid to NBFC on loan which is 24,000
used for personal purposes (` 1,20,000 x
2,00,000/10,00,000) – not allowed as per
section 37
- Interest paid to NBFC on which tax is 28,800
not deducted attracts disallowance
@30% of ` 96,000 under section
40(a)(ia) [Since Mr. Ramesh’s turnover
for the immediately preceding previous
year i.e., P.Y. 2022-23 exceeds ` 1 crore,
he is required to deduct tax at source.

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Disallowance @30% of interest is

attracted for non-deduction of tax at
source]
- Municipal taxes paid for let out portion
[` 10,000 x ½] 5,000
76,36,800
Add: Undervaluation of Closing stock 40,000
76,76,800
Less: Income chargeable under other heads
and income not chargeable to tax but
credited to profit and loss account
- Rent received (Taxable under the head 5,40,000
“Income from house property”)
- Income-tax refund 15,000
- Dividend received from Indian 2,50,000
companies (Taxable under the head
“Income from other sources”)
68,71,800
Capital Gains
Long-term capital gains on sale of land
(since held for more than 24 months)
Full Value of Consideration [Higher of stamp 14,00,000
duty value of ` 14 lakhs and Actual
consideration of ` 10 lakhs, since stamp duty
value exceeds actual consideration by more
than 10%]
Less: Indexed Cost of acquisition [` 3,00,000 x 10,44,000 3,56,000
348/100]
Cost of acquisition
Higher of –
- Actual cost ` 1.80 lakhs + ` 0.10 lakhs
= ` 1.90 lakhs and
- Fair Market Value (FMV) ` 4 lakhs as on

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1.4.2001 restricted to stamp duty value of

` 3 lakhs as on 1.4.2001 = ` 3 lakhs
Income from Other Sources
Interest on income-tax refund 2,000
Dividend from Indian companies 2,50,000 2,52,000
Gross Total Income 78,54,300
Less: Deduction under Chapter VI-A
Section 80D - Health insurance premium paid
for self, spouse and his children allowable as 25,000
deduction to the extent ` 25000
Total Income 78,29,300

Computation of tax payable by Mr. Ramesh for the A.Y.2024-25

Particulars Amount
(`)
Tax on ` 3,56,000@20% under section 112 71,200
Tax on balance income of ` 74,73,300
Upto ` 2,50,000 Nil
` 2,50,001 - ` 5,00,000 [i.e., ` 2,50,000 @5%] 12,500
` 5,00,001 - ` 10,00,000 [i.e., ` 5,00,000 @20%] 1,00,000
Above ` 10,00,000 [i.e., ` 64,73,300 @30%] 19,41,990 20,54,490
21,25,690
Add: Surcharge @10%, since total income
exceeds ` 50,00,000 but does not exceed ` 1 2,12,569
crore
23,38,259
Add: Health and Education cess@4% 93,530
Tax liability 24,31,789
Less: Advance Tax 15,00,000
Tax Payable 9,31,789
Tax Payable (Rounded off) 9,31,790

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SECTION B: GOODS AND SERVICES TAX

(1) All questions should be answered on the basis of the position of

GST law as amended up to 30.06.2024.
(2) The GST rates for goods and services mentioned in various
questions are hypothetical and may not necessarily be the actual
rates leviable on those goods and services. Further, GST
compensation cess should be ignored in all the questions, wherever
applicable.

QUESTIONS

Case Scenario
Vintage Cinemas Pvt. Ltd. (VCPL) is a leading chain of multiplexes operating in
several States across India. The company has its corporate office in Mumbai,
Maharashtra and is registered under GST in multiple States including
Maharashtra. The company offers movie tickets, food and beverages and
other entertainment-related services.
The turnover of the company in the preceding financial year as per the
audited financial statements was ` 175 crore. The company crossed the
aggregate turnover of ` 35 crore till June in the current year.
In July, VCPL opened a new multiplex in Gujarat wherein the commercial
operations will commence from August 1.
Due to operations in multiple States, the finance and accounts operations are
handled by a centralized team at the corporate office. The same team is also
responsible for filing the GST returns for all the GST registrations of the
company.
The company is also engaged in leasing of space to independent vendors in
its food court against rental charges for the purpose of increasing the source
of revenue.

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The company obtained a new office building in Mumbai under a rental

agreement and paid an amount of ` 5 crore as refundable security deposit to
the owner of the premises. The term of the rental agreement is 5 years.
The company also dispatched advertisement material worth ` 35 lakh from
Maharashtra to Gujarat Multiplex for the upcoming movies by way of
transport through road in September. The company claimed input tax credit
on such advertisement material at the time of receipt in Maharashtra.
The rate of tax applicable on all inward and outward supplies is 18% IGST, 9%
CGST and 9% SGST unless otherwise specified.
On the basis of the facts given above, choose the most appropriate answer to
Q.1 to Q.5 below -
1. Which of the following statements is correct under GST law in relation to
the registration requirements of the company (VCPL) in relation to its
operations to be commenced in the State of Gujarat?
(a) VCPL is not required to take GST registration for Gujarat multiplex
till turnover of Gujarat multiplex does not cross ` 20 lakh.
(b) VCPL is required to take GST registration in Gujarat while
commencing business in Gujarat as aggregate turnover of VCPL
has already exceeded ` 20 lakh in the current financial year.
(c) VCPL is allowed to add Gujarat multiplex as additional place of
business under the existing GST registration in Maharashtra.
(d) VCPL is required to take GST registration only from next financial
year subject to the condition that turnover of current financial year
for Gujarat multiplex exceeds ` 20 lakh.
2. Which of the following statements is true in relation to filing of return by
VCPL?
(a) VCPL is required to file a single consolidated GST return for all
States.
(b) VCPL is required to file separate GST return for each State where it
is registered.

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(c) VCPL is required to file returns only for the Maharashtra State
where its corporate office is located.
(d) VCPL has an option to file return in the State with the highest
turnover.
3. VCPL is required to levy GST on rental charges ________________.
(a) only if the turnover of tenant exceeds ` 20 lakh.
(b) only if the turnover of tenant exceeds ` 1.5 crore.
(c) only if the total rental charge collection in hands of VCPL exceeds
` 20 lakh.
(d) irrespective of the turnover of the tenant or the amount of rental
charge collection in the hands of VCPL.
4. In respect of the refundable security deposit given by VCPL,
____________________.
(a) GST is payable on the deposit amount by the owner of the
premises.
(b) GST is payable on the deposit amount by VCPL.
(c) there is no requirement to pay GST by the owner or VCPL.
(d) GST is payable in equal proportion over the term of rent
agreement by the owner of premises.
5. VCPL is ___________________for the advertisement material sent from
Maharashtra Office to Gujarat office in relation to the upcoming movies.
(a) not liable to issue any document as the transaction is between
entities having same PAN.
(b) liable to issue only a delivery challan.
(c) liable to issue only a bill of supply.
(d) liable to generate a tax invoice as well as an E-Way Bill.
6. M/s Consultease Services Private Limited, a company registered under
GST in Mumbai, Maharashtra, offers business consultancy, digital

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marketing and project management services across India. The company

recorded the following transactions in October:
1. Consultancy services for market analysis: Provided consultancy
services for market analysis to XYZ Ltd., a registered client in
Chennai, Tamil Nadu (Inter-State), for ` 4,50,000. Additionally, the
company paid an amount of ` 4,500 as professional tax applicable
in the State of Maharashtra as per requirement of local state
legislation. The amount of professional tax was recovered
separately from XYZ Ltd.
2. Digital Marketing Services for Launch Event: Conducted digital
marketing for an upcoming product launch for Mr. A based in
Rajasthan, who is an unregistered person under GST. The agreed
fee for the said services is ` 3,00,000. Out of the agreed fee, an
amount of ` 25,000 is incurred by Mr. A. The company was liable
to pay the same in relation to the supply and the net payment
received by the company was ` 2,75,000 (exclusive of any tax).
3. Travelling payment for the team: The employees incurred an
amount of ` 50,000 on travel to Kolkata for client project and
claimed a reimbursement of the same from the company. As a
policy, company charged such expenses from the clients on actual
basis.
4. Discount passed on to customer: Post supply discount was
offered to a customer amounting to ` 50,000 against a supply for
which invoice was issued in September. The customer has not
reversed the input tax credit relating to such discount.
5. Recovery of late payment charges: The company received an
amount of ` 1,00,000 as late payment charges for delay in
payment for consideration from a client whose service contract
was completed in June.
6. Purchase of car: A car was purchased in the name of company for
use by the director. The total cost of car was ` 10,50,000 (inclusive
of IGST amounting to ` 1,50,000).

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7. Insurance services: The company paid for insurance of the above

new car amounting to ` 25,000 which includes IGST amounting to
` 2,300.
8. Procurement of services: The company received inter-State
supply of services used for business purpose on which GST paid
was Rs. 45,000. Said credit was not restricted under any provision
of GST laws.
9. Sponsorship: The company sponsored a sports event wherein it
paid an amount of ` 2,00,000 to the event organizers.
You are required to compute the following for the month of October:
(a) Total value of supply
(b) output tax payable by the Company.
(c) net GST payable in cash.
Note
(i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively.
(ii) All the amounts given above are exclusive of taxes.
(iii) There was no opening balance of input tax credit.
(iv) The turnover of the company was ` 10 crores in the previous
financial year.
(v) All the transactions are inter-State, unless otherwise specified.
7. Mr. Bholuram, a supplier located in Meerut, U.P. supplied the bedsheets,
pillow covers and blankets to a Governmental agency, registered in U.P.
under a contract. The total contract value is ` 4,61,000 excluding GST.
The value of supply is bifurcated as below:
400 Blankets for ` 600 each ` 2,40,000
850 Bed Sheets for ` 180 each ` 1,53,000
1700 Pillow Covers for ` 40 each ` 68,000

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Is Governmental agency required to deduct tax at source (while making

the payment to Mr. Bholuram) under section 51 of the CGST Act, 2017
and if yes, determine the amount of tax to be deducted source?
8. Blue Panda Pvt. Ltd. is a manufacturing company that supplies goods to
various registered dealers across India. The company had an aggregate
turnover of ₹ 6 crore in the financial year 2023-24. The finance team of
the company is not sure whether e-invoicing provisions are applicable to
the company and is of the view that under e-invoicing system, invoices
need to be generated directly on the e-invoicing portal instead of its
ERP system.
You are required to advise the finance team on the following questions:-
(a) What is e-invoicing, and whether it would apply to Blue Panda Pvt.
Ltd.?
(b) Does Blue Panda Pvt. Ltd. need to create its invoices directly on
the e-invoicing portal?
9. Briefly examine the place of supply in the following independent cases.
(a) Ms. Shanti (unregistered resident of Gujarat) went to meet her
parents at the native place Patna, Bihar and buys a medical
insurance policy for her parents from an insurance company –
MNT Insurers- of Patna (registered in Bihar). The location of the
recipient of services in the records of the MNT Insurers is Patna.
(b) Lakhan Singh Transports Pvt. Ltd., a Goods Transportation
Agency registered in Noida, Uttar Pradesh, is hired by Ram Trade
Links (registered supplier in New Delhi) to transport its
consignment of goods from its warehouse in Delhi to the house
of a buyer located in Roorkee, Uttar Pradesh.
(c) Mr. Karan (Mumbai) takes a post-paid mobile connection in
Mumbai from the service provider - Freesia Ltd. and gives his
residence address at Mumbai as the address for billing with the
said company.

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10. List the accounts and records which are not required to be maintained
by a supplier who has opted for composition scheme, as per the
provisions of the GST laws.

SUGGESTED ANSWERS

MCQ No. Most Appropriate

Answer
1. (b)
2. (b)
3. (d)
4. (c)
5. (d)

6. (a) Computation of total value of supply

Particulars IGST (`)

Consultancy services provided to XYZ Ltd. 4,54,500
(As per section 15 of the CGST Act, 2017, the value
of supply includes the amount of any tax paid under
any law other than GST. Accordingly, the amount of
professional tax is includible in the value of
services.)
Digital marketing services provided to Mr. A 3,00,000
(The amount incurred by the recipient on behalf of
the supplier is includible in the value of supply.)
Travelling expenses recovered from the client 50,000
(Incidental expenses like travelling expenses
incurred in course of supply is includible in value of
supply.)

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Post supply discount -

(No adjustment of post supply discount is allowed
as the customer has not reversed the input tax
credit.)
Late payment charges 1,00,000
(The late payment charges recovered are includible
in GST and liable to tax at the time of receipt of
amount.)
Total value of supply for October 9,04,500

(b) Computation of output tax payable

Particulars IGST (`)

Total value of outward supply 9,04,500
Total output tax payable @ 18% 1,62,810
(Company is liable to pay GST on sponsorship
services under reverse charge, but the tax payable
under reverse charge is not included in the value
of output tax.)
(c) Computation of net GST payable in cash

Particulars IGST (`)

Total output tax 1,62,810
Less: Input Tax Credit [Refer Working Note below] (81,000)
Net GST payable (A) 81,810
Add: GST payable under reverse charge for receipt 36,000
of sponsorship services (B)
[Tax on sponsorship services availed by a body
corporate from any person is payable under reverse
charge. Since the tax payable under reverse charge
is not an output tax, ITC cannot be utilized to pay
GST payable under reverse charge. Thus, it has to be
paid in cash.]
Total GST payable in cash (A) +(B) 1,17,810

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Working Note:
Computation of ITC available

Particulars IGST (`)

Purchase of car for use by director -
(ITC on motor vehicles for transportation of persons with
seating capacity ≤ 13 persons (including the driver) is
blocked except when the same are used for (i) making
further taxable supply of such motor vehicles (ii) making
taxable supply of transportation of passengers (iii)
making taxable supply of imparting training on driving
such motor vehicles. Purchase of car for use by director
is not a specified purpose.)
Insurance of car -
(ITC is not allowed on services of insurance relating to
the motor vehicles on which ITC is blocked.
Since, the car is not used for any of the eligible purposes,
ITC thereon is blocked and thus, ITC on insurance taken
on such car is also blocked)
ITC on receipt of services 45,000
(ITC is available on services used in the course or
furtherance of business.)
ITC on sponsorship services 36,000
(ITC is available on services used in the course or
furtherance of business.)
Total ITC available 81,000

7. As per section 51 of the CGST Act, 2017, it is mandatory for the

following persons to deduct tax at source from payments made to the
suppliers of taxable goods and/or services:-
(a) Central/State Government department or establishment;
(b) local authority; or
(c) Governmental agencies; or
(d) such notified persons

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The tax would be deducted @ 1% (each under CGST and SGST) of the
payment made to the supplier of taxable goods and/or services, where
the total value of such supply, under a contract, exceeds ` 2,50,000
(excluding the amount of Central tax, State tax, Union Territory tax,
Integrated tax and cess indicated in the invoice). Thus, individual
supplies may be less than ` 2,50,000/-, but if total value of supplies
under a contract is more than ` 2,50,000/-, TDS has to be deducted.
In the given case, Mr. Bholuram has made supplies to a Governmental
agency and total value of supply under a contract exceeds ` 2,50,000, it
is mandatory for Governmental agency to deduct TDS @1% each under
CGST and SGST on the net value of taxable supplies.
The amount of TDS required to be deducted each under CGST & SGST
each is ` 4,610.
8. (a) E-invoicing is a system for electronically reporting Business-to-
Business (B2B) invoices to the GST system for certain notified
taxpayers whose turnover exceeds ` 5 crore in any financial year from
2017-18 onwards. Since Blue Panda Pvt. Ltd. had an aggregate
turnover of ` 6 crore in FY 2023-2024, it is required to issue
e-invoices for its B2B transactions.
(b) No, Blue Panda Pvt. Ltd. does not need to create invoices directly
on the e-invoicing portal. The company will continue generating its
GST invoices using its own Accounting/Billing/ERP system. The
only requirement is that these invoices must be reported to the
Invoice Registration Portal (IRP) for validation and issuance of a
unique Invoice Reference Number (IRN).
9. (a) The place of supply of insurance services provided to a person other
than a registered person, be the location of the recipient of services
on the records of the supplier of services. Thus, in the given case, the
place of supply is the location of the recipient of services in the
records of the supplier, i.e. Patna.
(b) The place of supply of services by way of transportation of goods,
including by mail or courier to a registered person, is the location
of such person. Thus, in the given case, the recipient being

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registered, the place of supply is the location of recipient, i.e. New

Delhi.
(c) The place of supply of telecommunication services including data
transfer, broadcasting, cable and direct to home television services
to any person in case of mobile connection for telecommunication
and internet services provided on post-paid basis, be the location
of billing address of the recipient of services on the record of the
supplier of services. Thus, in the given case, the place of supply is
the location of billing address of the recipient, i.e. Mumbai.
10. A supplier who has opted for composition scheme is not required to
maintain following records:
(a) Stock of goods: Accounts of stock in respect of goods received
and supplied by him, and such accounts shall contain particulars of
the opening balance, receipt, supply, goods lost, stolen, destroyed,
written off or disposed of by way of gift or free sample and the
balance of stock including raw materials, finished goods, scrap and
wastage thereof.
(b) Details of tax: Account, containing the details of tax payable
(including tax payable under reverse charge), tax collected and
paid, input tax, input tax credit claimed, together with a register of
tax invoice, credit notes, debit notes, delivery challan issued or
received during any tax period.

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