Ca Final: Paper 8: Indirect Tax Laws

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CA FINAL
Paper 8 : INDIRECT TAX LAWS
QUESTION
BANK
[FULLY AMENDED]
(Relevant for DEC 2021

examination)
It covers:
 All ICAI Study Material Illustration
& Exercise Questions
 All RTP Questions (upto May 21)
 All MTP Questions (upto May 21)
 All Past Exam (Old & New Course)
Questions (upto Jan 21)
 Corrigendum is attached at the
end of QB
This Question Bank has been prepared by CA ATUL AGARWAL (AIR-1). It contains
around 700 Questions (Approx. 500 Questions in GST and 200 Questions in Customs & FTP)
which are divided in 2 Sections in each chapter.
SECTION-A contains ICAI Study Material Questions and SECTION-B contains Additional
Questions (covering Past RTPs, MTPs, and Exam Papers).
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CONTENTS
PART I: Goods & Services Tax (75 Marks)

Chapter No. Chapter Name Page No.
1 GST in India – An Introduction 1.1 – 1.10
2 Supply Under GST 2.1 – 2.29
3 Charge of GST 3.1 – 3.19
4 Exemptions from GST 4.1 – 4.24
5 Place of Supply 5.1 – 5.18
6 Time of Supply 6.1 – 6.17
7 Value of Supply 7.1 – 7.31
8 Input Tax Credit 8.1 – 8.82
9 Registration 9.1 – 9.15
10 Tax Invoice, Credit and Debit Notes 10.1 – 10.8
11 Account and Records; E-Way Bill 11.1 – 11.6
12 Payment of Tax 12.1 – 12.16
13 Returns 13.1 – 13.5
14 Import and Export under GST 14.1 – 14.5
15 Refunds 15.1 – 15.12
16 Job Work 16.1 – 16.5
17 Assessment and Audit 17.1 – 17.5
18 Inspection, Search, Seizure and Arrest 18.1 – 18.3
19 Demands and Recovery 19.1 – 19.12
20 Liability to Pay in Certain Cases 20.1 – 20.5
21 Offences and Penalties 21.1 – 21.11
22 Appeals and Revision 22.1 – 22.10
23 Advance Ruling 23.1 – 23.4
24 Miscellaneous Provisions 24.1 – 24.4
PART II: Customs & FTP (25 Marks)

1 Levy of and Exemptions from Customs Duty 1.1 – 1.12
2 Types of Duty 2.1 – 2.9
3 Classification of Imported and Export Goods 3.1 – 3.5
4 Valuation under the Customs Act, 1962 4.1 – 4.46
5 Importation, Exportation and Transportation of Goods 5.1 – 5.22
6 Duty Drawback 6.1 – 6.9
7 Refund 7.1 – 7.7
8 Foreign Trade Policy 8.1 – 8.20
BY CA ATUL AGARWAL (AIR-1)

AIR1CA Career Institute (ACI)
PART - I
Goods & Services
Tax (GST)
(75 Marks)

CHAPTER – 1
GST in India – An Introduction
Section A – ICAI Study Material Questions
Question 1
List some of the benefits that GST to accrues to the economy.
Answer
GST accrues following benefits to the economy:
(a) Creation of unified national market: GST has made India a common market with common tax
rates and procedures. Further, it has removed the economic barriers resulting in an integrated
economy at the national level.
(b) Boost to ‘Make in India' initiative: GST has given a major boost to the ‘Make in India' initiative
of the Government of India by making goods and services produced in India competitive in the
national as well as international market. This will make India a manufacturing hub.
(c) Enhanced investment and employment: The subsuming of major Central and State taxes in
GST, complete and comprehensive set-off of input tax on goods and services and phasing out of
Central Sales Tax (CST) has reduced the cost of locally manufactured goods and services.
Resultantly, the competitiveness of Indian goods and services in the international market has
increased which has given boost to investments and Indian exports. With a boost in exports and
manufacturing activity, more employment is likely to be generated and GDP is likely to b e
increased.
Question 2
Explain with the help of examples how a particular transaction of goods and services is taxed
simultaneously under Central GST (CGST) and State GST (SGST)?
Answer
The Central GST and the State GST is levied simultaneously on every intra-State supply of goods or
services or both made by registered persons except the exempted goods and services as well as goods
and services which are outside the purview of GST. Further, both are levied on the same price or value.
The same can be better understood with the help of following examples:
Example I: Suppose that the rate of CGST is 10% and that of SGST is 10%. When a wholesale dealer of
steel in Uttar Pradesh supplies steel bars and rods to a construction company which is also located
within the same State for, say 100, the dealer would charge CGST of ₹ 10 and SGST of ₹ 10 in addition
to the basic price of the goods. He would be required to deposit the CGST component into a Central
Government account while the SGST portion into the account of the concerned State Government (viz.
U.P.). It is important to note that he might not actually pay ₹ 20 (₹ 10 + ₹ 10) in cash as he would be
entitled to set-off this liability against the CGST or SGST paid on his eligible purchases (inputs, input
services and capital goods) assuming that all his purchases are intra-State. However, for paying CGST,
he would be allowed to use only the credit of CGST paid on his purchases while for U.P. GST he can
utilize the credit of U.P. GST alone. In other words, CGST credit cannot, in general, be used for payment
of SGST. Nor can SGST credit be used for payment of CGST.
Example II: Suppose, again the rate of CGST is 10% and that of SGST is 10%. When an advertising
company located in Mumbai supplies advertising services to a company manufacturing soap also
located within the State of Maharashtra for, let us say ₹ 100, the ad company would charge CGST of ₹

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10 as well as Maharashtra GST of ₹ 10 at the basic value of the service. He would be required to deposit
the CGST component into a Central Government account while the Maharashtra GST portion into the
account of the Maharashtra Government. He might not actually pay ₹ 20 (₹ 10+₹ 10) in cash as it would
be entitled to set-off this liability against the CGST or SGST paid on his eligible purchases (say, of inputs
such as stationery, office equipment, services of an artist etc.) assuming that all his purchases are intra-
State. However, for paying CGST, he would be allowed to use only the credit of CGST paid on its
purchase while for Maharashtra GST, he can utilise the credit of Maharashtra GST alone. In other words,
CGST credit cannot, in general, be used for payment of SGST. Nor can SGST credit be used for payment
of CGST.
Question 3
Why was the need to amend the Constitution of India before introducing the GST?
Answer
Earlier, the fiscal powers between the Centre and the States were clearly demarcated in the
Constitution with almost no overlap between the respective domains. The Centre had the powers to
levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics
etc.) while the States had the powers to levy tax on the sale of goods. In the case of inter- State sales,
the Centre had the power to levy the Central Sales Tax but the tax was collected and retained entirely
by the States. As for services, it was the Centre alone that was empowered to levy service tax.
Introduction of the GST necessitated the amendments in the Constitution so as to simultaneously
empower the Centre and the States to levy and collect this tax. The Constitution of India was amended
by the Constitution (101st Amendment) Act, 2016 for this purpose. Article 246A of the Constitution
introduced thereby empowered the Centre and the States to simultaneously levy and collect the GST.
Question 4
GST is a destination-based tax on consumption of goods or services or both. Discuss the validity of the
statement.
Answer
The given statement is valid. GST is a destination-based tax on consumption of goods or services or
both. GST is known as destination-based tax since the tax would accrue to the taxing authority which
has jurisdiction over the place of consumption which is also termed as place of supply.
For example, if A in Delhi produces the goods and sells the goods to B in Haryana. In this case, the tax
would accrue to the State of Haryana and not to the State of Delhi. On the other hand, under pre-GST
regime, origin-based taxation was prevailing in such cases. Under origin-based taxation, the tax used
to accrue to the State from where the transaction originated. In the given case, under origin-based
taxation, the central sales tax would have been levied by Centre and collected by the State of Delhi and
not by the State of Haryana.
Question 5
Discuss the leviability of GST or otherwise on the following:
(a) Alcoholic liquor for human consumption

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(b) Petroleum crude, diesel, petrol, ATF and natural gas

(c) Tobacco
(d) Opium, Indian hemp and other narcotic drugs and narcotics
Answer
(a) Alcoholic liquor for human consumption: is outside the realm of GST. The
manufacture/production of alcoholic liquor continues to be subjected to State excise duty and
inter-State/intra-State sale of thesame is subject to CST/VAT respectively.
(b) Petroleum crude, diesel, petrol, ATF and natural gas: As regards petroleum crude, diesel,
petrol, ATF and natural gas are concerned, they are not presently leviable to GST. GST will be
levied on these products from a date to be notified on the recommendations of the GST Council.
Till such date, central excise duty continues to be levied on manufacture/production of petroleum
crude, diesel, petrol, ATF and natural gas and inter-State/intra-State sale of the same is subject to
CST/ VAT respectively.
(c) Tobacco: Tobacco is within the purview of GST, i.e. GST is leviable on tobacco. However, Union
Government has also retained the power to levy excise duties on tobacco and tobacco products
manufactured in India. Resultantly, tobacco is subject to GST as well as central excise duty.
(d) Opium, Indian hemp and other narcotic drugs and narcotics: Opium, Indian hemp and other
narcotic drugs and narcotics are within the purview of GST, i.e. GST is leviable on them. However,
State Governments have also retained the power to levy excise duties on such products
manufactured in India. Resultantly, Opium, Indian hemp and other narcotic drugs and narcotics
are subject to GST as well as State excise duties.
Question 6
Under Goods and Services Tax (GST), only value addition is taxed and burden of tax is to be borne by
the final consumer. Examine the statement
Answer
The statement is correct. Goods and Services Tax is a destination-based tax on consumption of goods
and services. It is levied at all stages right from manufacture up to final consumption with credit of
taxes paid at previous stages available as setoff. Resultantly, only value addition is taxed and burden
of tax is to be borne by the final consumer.
Question 7
Which are the commodities which have been kept outside the purview of GST? Examine the status of
taxation of such commodities after introduction of GST?
Answer
Article 366(12A) of the Constitution as amended by 101st Constitutional Amendment Act, 2016 defines
the Goods and Services tax (GST) as a tax on supply of goods or services or both, except supply of
alcoholic liquor for human consumption. Therefore, alcohol for human consumption is kept out of GST
by way of definition of GST in the Constitution. Five petroleum products viz. petroleum crude, motor
spirit (petrol), high speed diesel, natural gas and aviation turbine fuel have temp orarily been kept out
of the purview of GST; GST Council shall decide the date from which they shall be included in GST. The

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erstwhile taxation system (CST/VAT & central excise) still continues in respect of the said
commodities.
Question 8
A dual GST has been implemented in India. Elaborate.
Answer
A dual GST has been implemented in India with the Centre and States simultaneously levying it on a
common tax base. The GST levied by the Centre on intra-State supply of goods and / or services is called
the Central GST (CGST) and that levied by the States/ Union territory is called the State GST (SGST)/
Union GST (UTGST). Similarly, Integrated GST (IGST) is levied and administered by Centre on every
inter-State supply of goods and/or services.
India is a federal country where both the Centre and the States have been assigned the powers to levy
and collect taxes through appropriate legislation. Both the levels of Government have distinct
responsibilities to perform according to the division of powers prescribed in the Constitution for which
they need to raise resources. A dual GST, therefore, keeps with the Constitutional requirement of fiscal
federalism.
Question 9
Discuss Article 269A pertaining to levy and collection of GST on inter-State supply.
Answer
Article 269A of the Constitution stipulates that Goods and Services Tax on supplies in the course of
inter-State trade or commerce shall be levied and collected by the Government of India and such tax
shall be apportioned between the Union and the States in the manner as may be provided by Parliament
by law on the recommendations of the Goods and Services Tax Council.
Here, supply of goods, or of services, or both in the course of import into the territory of India shall be
deemed to be supply of goods, or of services, or both in the course of inter-State trade or commerce.
The amount so apportioned to a State shall not form part of the Consolidated Fund of India. Where an
amount collected as IGST has been used for payment of SGST or vice versa, such amount shall not form
part of the Consolidated Fund of India/State respectively. This is to facilitate transfer of funds between
the Centre and the States.
Parliament is empowered to formulate the principles for determining the place of supply, and when a
supply of goods, or of services, or both takes place in the course of inter-State trade or commerce.
Question 10
Discuss Article 246A which grants the power to make laws with respect to Goods and Services Tax.
Answer
Article 246A stipulates that Parliament, and, the Legislature of every State, have power to make laws
with respect to goods and services tax imposed by the Union or by such State.
Parliament has exclusive power to make laws with respect to goods and services tax where the supply
of goods, or of services, or both takes place in the course of inter-State trade or commerce.

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However, in respect to petroleum crude, high speed diesel, motor spirit (commonly known as petrol),
natural gas and aviation turbine fuel, the aforesaid provisions shall apply from the date to be notified
by the Government on the recommendations by the GST Council.

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Section B – Additional Questions

Question 11
"State Government has exclusive power to notify a transaction to be supply of goods or services." Discuss
the correctness of the statement.
Answer
The said statement is not correct. State Government can notify a transaction to be supply of goods or
services but only on the recommendations of the GST Council. Further, Central Government, on the
recommendations of the GST Council, can also notify an activity to be the supply of goods and not supply
of services or supply of services and not supply of goods or neither a supply of goods nor a supply of
services.
Question 12
Enumerate any five matters on which the GST Council may make recommendations under Article 279A
of the Constitution of India.
Answer
The matters on which the GST Council may make recommendations under Article 279A of the
Constitution of India are as under:
(i) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may
be subsumed in GST;
(ii) the goods and services that may be subjected to, or exempted from GST;
(iii) model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of
inter-State trade or commerce and the principles governing the place of supply;
(iv) the threshold limit of turnover below which goods and services may be exempted from GST;
(v) the rates including floor rates with bands of GST;
(vi) any special rate or rates for a specified period, to raise additional resources during any natural
calamity or disaster;
(vii) special provision with respect to Special Category States
(viii) the date on which the GST be levied on petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel.
(ix) any other matter relating to the GST, as the Council may decide.
Question 13
Who are the members of the GST Council? Enumerate any two recommendations that can be made by
the GST Council.
Answer
The GST Council shall consist of the following members, namely: —
(a) the Union Finance Minister is the Chairperson;

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(b) the Union Minister of State in charge of Revenue or Finance is the Member;
(c) the Minister in charge of Finance or Taxation or any other Minister nominated by each State
Government are the Members.
The recommendations that can be made by GST Council are as under: -
(i) the taxes, cesses and surcharges levied by the Union, the States and the local bodies which may
be subsumed in GST;
(ii) the goods and services that may be subjected to, or exempted from GST;
(iii) model GST Laws, principles of levy, apportionment of GST levied on supplies in the course of
inter-State trade or commerce and the principles governing the place of supply;
(iv) the threshold limit of turnover below which goods and services may be exempted from GST;
(v) the rates including floor rates with bands of GST;
(vi) any special rate(s) for a specified period, to raise additional resources during any natural
calamity/disaster;
(vii) special provision with respect to Special Category States;
(viii) the date on which the GST be levied on petroleum crude, high speed diesel, motor spirit
(commonly known as petrol), natural gas and aviation turbine fuel;
(ix) any other matter relating to the GST, as the Council may decide.
Question 14
Why was there a need for making a constitutional amendment for introduction of GST? Discuss
significant provisions of Constitution (101st Amendment) Act, 2016.
Answer
There was a need for making constitutional amendment for introduction of GST so as to enable
integration of the central excise duty, additional duties of customs, State VAT and certain State specific
taxes and service tax into a comprehensive Goods and Services Tax and to empower both Centre and the
States to simultaneously levy and collect it.
The significant provisions of Constitution (101st Amendment) Act, 2016 are as under: -
(i) Concurrent powers on Parliament and State Legislatures to make laws governing taxes on goods
and services.
(ii) Levy of IGST on inter-State transactions of goods and/or services to be levied and collected by the
Central Government and apportioned between the Union and States in the manner provided by
Parliament by law as per the recommendation of the GST Council.
(iii) Principles for determining the place of supply and when a supply takes place in the course of inter-
State trade/commerce shall be formulated by the Parliament, by law.
(iv) GST will be levied on all supply of goods and services except alcoholic liquor for human
consumption.
(v) On the following products, GST shall not be levied till a date to be notified on the recommendations
of the GST Council:
• Petroleum Crude
• High Speed Diesel
• Motor Spirit (commonly known as Petrol)

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• Natural Gas
• Aviation Turbine Fuel
(vi) The Union Government shall retain the power to levy duties of excise on the aforesaid products
besides tobacco and tobacco products manufactured or produced in India.
(vii) President is empowered to constitute a joint forum of the Centre and States namely, Goods &
Services Tax Council (GST Council).
(viii) The Union Finance Minister is the Chairman of GST Council and Ministers in charge of
Finance/Taxation or any other Minister nominated by each of the States & UTs with Legislatures
are its members. Besides, the Union Minister of State in charge of Revenue or Finance is also its
member.
(ix) The function of the GST Council is to make recommendations to the Union and the States on
important issues like tax rates, exemptions, threshold limits, dispute resolution etc.
(x) The provisions relating to GST Council came into force on 12th September, 2016. President
constituted the GST Council on 15th September, 2016.
(xi) The concept of ‘declared goods of special importance’ under the Constitution is done away with.
Earlier, certain restrictions were placed on the powers of States in regard to tax on such goods.
(xii) Transitional provisions to take care of any inconsistency with respect to any law relating to tax on
goods or services or both, in force in any State. Such tax to continue to be in force until amended or
repealed or until expiration of one year from commencement of GST, whichever is earlier.
Question 15
Write a short note on various Lists provided under Seventh Schedule to the Constitution of India.
Answer
The constitutional provisions in India on the subject of distribution of legislative powers between the
Union and the States are defined under several articles; the most important in this regard being
specifically under articles 245 & 246 of the Constitution of India. The Seventh Schedule to the
Constitution of India defines and specifies allocation of powers and functions between Union & States. It
contains three lists; i.e. 1) Union List, 2) State List and 3) Concurrent List.
Union List
The Union List is a list of 98 (Originally 97) numbered items as provided in the Seventh Schedule to the
Constitution of India. The Union Government or Parliament of India has exclusive power to legislate on
matters relating to these items.
State List
The State List is a list of 61 (Originally 66) items in the Schedule Seven to the Constitution of India. The
respective state governments have exclusive power to legislate on matters relating to these items.
Concurrent List
There are 52 (Originally 47) items currently in the list: This includes items which are under joint domain
of the Union as well as the respective States.
Question 16
Discuss how GST resolved the double taxation dichotomy under previous indirect tax laws.

Page 1.8
Answer
Before implementation of GST we have Excise Duty, Service Tax and Customs as Indirect Taxes in India
at Central Level.
Coming to States every state had its own VAT Laws (Value Added Tax).
In pre-GST regime you will not get credit of Interstate purchases in any State because Inter State
purchases will be dealt by CST (Central State Tax).
As there are many laws governing a single transaction and we could not get credit of Tax paid in One law
in other law.
But after GST Implementation all these laws were subsumed in to GST Except Customs duty, we will be
getting credit of all the taxes paid from the stage of Purchase of Raw Material to Stage of Finished Goods.
Question 17
Discuss the dual GST model as introduced in India.
Answer
Many countries in the world have a single unified GST system i.e. a single tax applicable throughout the
country. However, in federal countries like Brazil and Canada, a dual GST system is prevalent whereby
GST is levied by both the federal and state or provincial governments. In India, a dual GST is proposed
whereby a Central Goods and Services Tax (CGST) and a State Goods and Services Tax (SGST) will be
levied on the taxable value of every transaction of supply of goods and services.
Question 18
List the Central and State levies which have been subsumed in GST in India.
Answer
Central Indirect Taxes:
Following Central Indirect Taxes and Levies would be subsumed in GST:
• Central Excise Duty
• Additional Excise Duties
• Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955
• Service Tax
• Additional Customs Duty commonly known as Countervailing Duty
• Special Additional Duty of Customs
• Central Surcharges and Cess, so far as they relate to the supply of goods and services.
State Indirect Taxes:
Following State Indirect Taxes and Levies would be subsumed in GST:
• State Value Added Tax/Sales Tax
• Entertainment Tax (other than the tax levied by the local bodies)
• Central Sales Tax (levied by the Centre and collected by the States)

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• Octroi and Entry Tax

• Purchase Tax
• Luxury Tax
• Taxes on lottery
• Betting and gambling
• State cess and surcharges insofar as they relate to supply of goods and services.
The above taxes are directly relatable to the supply of goods and services and fall in the supply chain
from the point of procurement of the raw material to the consumption of the goods and services by the
end customer.

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CHAPTER - 2
Supply Under GST
Question 1
Satyamev Printers is a printing house registered under GST. It receives an order for printing 5000 copies
of a book on yoga and meditation authored by a well-known yoga guru. The content of the book is to be
provided by the yoga guru to Satyamev Printers. It is agreed that Satyamev Printers will use its own paper
to print the said books.
You are required to determine the rate of GST applicable on supply of printed books by Satyamev Printers
assuming that rate of GST applicable on printing services is 18% whereas the rate of GST applicable on
supply of paper used in printing the books is 12%.
Answer
Section 2(30) provides that a composite supply means a supply made by a taxable person to a recipient
consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which
are naturally bundled and supplied in conjunction with each other in the ordinary courseof business,
one of which is a principal supply
Circular No. 11/11/2017 GST dated 20.10.2017 has clarified that supply ofbooks, pamphlets, brochures,
envelopes, annual reports, leaflets, cartons, boxes etc. printed with logo, design, name, address or other
contents supplied by the recipient of such printed goods, are composite supplies.
Further, section 8(a) stipulates that a composite supply comprising two or more supplies, one of which
is a principal supply, is treated as a supply ofsuch principal supply. Hence, one needs to ascertain
what constitutes the principal supply in this supply. As per section 2(90), principal supply is the supply
of goods or services which constitutes the predominant element of a composite supply and to which any
other supply forming part of that composite supply is ancillary.
The above circular further clarifies that in the composite supply of printing of books, pamphlets,
brochures, annual reports, and the like, where only content is supplied by the publisher or the person
who owns the usage rights to the intangible inputs while the physical inputs including paper used
for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply]
is the principal supply and therefore such supplies would constitute supply of service.
Accordingly, in the given case, the supply of printed books by Satyamev Printers is a composite supply
wherein the principal supply is supply of printing services. Thus, the rate of GST applicable thereon is
the rate applicable on supply of printing services, i.e. 18%.
Question 2
Answer the following questions:
(a) Sudama Associates, a registered supplier, disposes the computers owned by the business without
consideration and it has not claimed input tax credit on such computers.
Examine whether the disposal of computers by Sudama Associates qualifies as deemed supply
under Schedule I of the CGST Act.
(b) Prithvi Enterprises appoints Champak to procure certain goods from the market. Champak
identifies various suppliers who can provide the goods as desired by Prithvi Enterprises, and asks
a supplier – Satya Manufacturers to send the goods and issue the invoice directly to Prithvi
Enterprises.

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Supply Under GST
You are required to determine whether Champak can be considered as an agent of Prithvi
Enterprises in terms of Schedule I of the CGST Act.
Answer
(a) As per section 7(1)(c) read with Schedule I of the CGST Act, permanent transfer or disposal of
business assets is treated as supply even though the same is made without consideration. However,
this provision would apply only if input tax credit has been availed on such assets. Therefore, the
disposal of computers by Sudama Associates is not a supply as the input tax credit has not been
availed on the same.
(b) As per section 7(1)(c) read with Schedule I of the CGST Act, supply of goods by an agent to his
principal where the agent undertakes to receive such goods on behalf of the principal qualifies as
supply even if the same is made without consideration. Further, Circular No. 57/31/2018 GST
dated 04.09.2018 clarifies that principal-agent relationship falls within the ambit of the Schedule I
only where the goods being procured by the agent on behalf of the principal are invoiced in the
name of the agent. In that case, further provision of the said goods by the agent to the principal
without consideration, would be covered in Schedule I and thus would qualify as supply.
In the given case, Champak is only acting as the procurement agent, and has in no way involved
himself in the supply or receipt of the goods. The invoice is being issued in the name of Prithvi
Enterprises and not Champak. Hence, Champak is not an agent of Prithvi Enterprises for the supply
of goods in terms of Schedule I of the CGST Act.
Question 3
Ajatasatru Industries enters into a contract with an actor – Chandragupta - to act as a brand ambassador
of products manufactured by Ajatasatru Industries. The duration of the contract is 5 years and the
contract fee payable to Chandragupta for being a brand ambassador is ₹ 50 lakh per annum. As per the
terms of the contract, in case the contract is terminated by Chandragupta before the end of the contract
period, Chandragupta will have to repay to Ajatasatru Industries, 50% of the contract fee received by him
till the time of termination of contract.
At the end of 3rd year, Chandragupta terminates the contract with Ajatasatru Industries. He has received
the contract fee for 3 years at the time of termination of contract.
You are required to determine whether the given transaction(s) qualifies(y) as supply(ies).
Answer
As per section 7(1)(a), supply includes all forms of supply of goods or services or both made or agreed
to be made for a consideration by a person in the course or furtherance of business. In the given case,
Chandragupta has agreed to provide his services as a brand ambassador of the products manufactured
by Ajatasatru Industries at an agreed annual consideration. Thus, his services fall within the purview of
the term “supply” under GST where the consideration charged for such supply is ₹ 50 lakh per annum.
Further, section 7(1A) provides that when certain activities or transactions constitute a supply in
accordance with the provisions of section 7(1), they shall be treated either as a supply of goods or supply
of services as referred to in Schedule II of the CGST Act. Tolerating non-performance of a contract is an
activity or transaction which is treated as a supply of service as per Schedule II and the person is deemed
to have received the consideration in the form of fines or penalty and is, accordingly, required to pay tax
on such amount.
In the given case, since Ajatasatru Industries is tolerating the act of Chandragupta of terminating the
contract before the expiry of its contract period, 50% of contract fee for 3 years amounting to ₹ 75 lakh

Page 2.2
Supply Under GST
is being received by it as a penalty for the same. The act of tolerating the non- performance of a contract
by Chandragupta by Ajatasatru Industries is a supply of service where the consideration charged for such
supply is ₹ 75 lakh [50% of (₹ 50 Lakh × 3 years)].
Question 4
Shivaji Pvt. Ltd., a registered supplier, supplies the following goods and services for construction of
buildings and complexes -
- excavators for required period at a per hour rate
- manpower for operation of the excavators at a per day rate
- soil-testing and seismic evaluation at a per sample rate.
The excavators are invariably hired out along with operators. Similarly, excavator operators are
supplied only when the excavator is hired out.
For a given month, the receipts (exclusive of GST) of Shivaji Pvt. Ltd. are as follows:
- Hire charges for excavators - ₹ 18,00,000
- Service charges for supply of manpower for operation of the excavator - 20,000
- Service charges for soil testing and seismic evaluation at three sites - 2,50,000
Compute the GST payable by Shivaji Pvt. Ltd. for the given month. Assume the rates of GST to be as under:
Hiring out of excavators – 12%
Supply of manpower services and soil-testing and seismic evaluation services – 18%
Answer
Computation of GST payable by Shivaji Pvt. Ltd.
Particulars Value received (₹) Rate of GST GST payable (₹)

Hiring charges for excavators 18,00,000 12% 2,16,000
Service charges for supply of manpower 20,000 12% 2,400
for operation ofexcavators [Refer Note 1]
Service charges for soil testing and 2,50,000 18% 45,000
seismic evaluation [ReferNote 2]
GST liability 2,63,400
Notes:
1. Since the excavators are invariably hired out along with operators and excavator operators are
supplied only when the excavator is hired out, it is a case of composite supply under section 2(30)
wherein the principal supply is the hiring out of the excavator.
As per section 8(a), the composite supply is treated as the supply of the principal supply. Therefore,
the supply of manpower for operation of the excavators will also be taxed at the rate applicable for
hiring out of the excavator (principal supply), which is 12%.
2. Soil testing and seismic evaluation services being independent of the hiring out of excavator will be
taxed at the rate applicable to them, which is 18%.
Question 5
Vikramaditya is a salaried employee and is planning to invest in stocks. He has opened a trading account

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with Vaydaa Brokers. During the month, Vikramaditya undertook future contracts (without a physical
delivery option, but are cash settled on the expiry of the contract date), amounting to 35,00,000.
Vikramaditya needs your advice whether such future contracts undertaken by him amount to supply and
are liable to GST.
Answer
For a transaction to fall within the purview of supply, it must be a supply of either goods or services or
both. The definitions of the terms “goods” and “services” specifically exclude “securities” from their
purview. Further, ‘derivatives’ are included in the definition of ‘securities’. As ‘derivatives’ fall in the
definition of securities, they are neither goods nor services and hence, are not liable to GST.
Future contracts are in the nature of financial derivatives, the price of which is dependent on the value
of underlying stocks or index of stocks or certain approved currencies and the settlement happens
normally by way of net settlement with no actual delivery.
Since future contracts are in the nature of derivatives, these qualify as ‘securities’ and thus, are not
subject to GST.
In view of the above discussion, it can be inferred that since the future contracts undertaken by
Vikramaditya are in the nature of derivatives, these qualify as ‘securities’ and do not qualify as supply
and thus, are not subject to GST.
Question 6
Angad Private Ltd. is engaged in the business of distribution of construction material. As an incentive,
Angad Private Ltd. pays an amount of ₹ 75,000 to its employees upon achieving a specified sales target.
The incentive is part of the salary of the employees and applicable tax is deducted at source as per
relevant income tax provisions. Angad Private Ltd. is of the view that GST is not leviable on such incentive
paid to the employees. Whether the view taken by Angad Private Ltd. is correct?
Answer
Yes, Angad Private Ltd.’s view is correct. In terms of section 7(2) read with Schedule III of the CGST Act,
services by an employee to employer in the course of or in relation to his employment shall not be treated
as supply under GST. Further, the amount paid as incentive by Angad Private Ltd. is not in the nature of
gift, and thus, is not covered under Schedule I of the CGST Act. In fact, in the given case, the incentive is
part of the salary and is directly linked to the sales target. Therefore, the services provided by the
employees in return of the incentive given to them shall not be treated as a “supply”.
In the light of above discussion, GST is not leviable on the incentive paid by Angad Private Ltd. to
employees.
Question 7
Nandeeshwar Manufacturers sends certain category of yarn for processing to the job worker. The job
worker undertakes the processing work on the yarn as per the requirement of Nandeeshwar
Manufacturers. During the process, the job worker uses his own material also. The processed yarn is sold
by Nandeeshwar Manufacturers directly from the job worker premises. Balance quantity of yarn and
waste material is sent back by the job worker to Nandeeshwar Manufacturers. The job worker is of the
opinion that he is using his own material also in the processing and hence the supply to Nandeeshwar
Manufacturers is in the nature of supply of goods as well as services. Do you agree with the opinion of
job worker?

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Answer
No, the opinion of the job worker is not fully correct. Section 7(1A) provides that when certain activities
or transactions constitute a supply in accordance with the provisions of section 7(1), they shall be treated
either as a supply of goods or supply of services as referred to in Schedule II of the CGST Act. Any
processing activity carried on any other person’s goods is treated as supply of service in terms of
Schedule II. The job worker, in addition to the goods received from the principal, can use his own goods
for providing the services of job work. These goods are not supply per se, but being used in the processing
activity carried out by it.
Thus, the activity undertaken by the job worker, in the given case, squarely falls within the purview of
Schedule II and shall be considered as supply of service by the job worker to Nandeeshwar
Manufacturers.
Question 8
Mokshabhumi Industries has its manufacturing unit in the State of Maharashtra. It stores the finished
goods manufactured by it at a depot located in the State of Gujarat. The depot is owned by Punyabhumi
Ltd. – a related person of Mokshabhumi Industries. Punyabhumi Ltd. has not charged any consideration
from Mokshabhumi Industries for usage of depot for storage purpose. Whether the storage of goods
permitted by Punyabhumi Ltd. to Mokshabhumi Industries qualifies as supply under GST?
Answer
As per section 7(1)(c) read with Schedule I of the CGST Act, supply of goods or services or both between
related persons without consideration when made in the course or furtherance of business qualifies as
supply. Thus, the storage services provided by Punyabhumi Ltd. to Mokshabhumi Industries in course or
furtherance of business qualifies as supply under GST even though no consideration has been charged
for the same.
Question 9
Rob Shareholding Ltd., an approved intermediary, has entered into a transaction wherein certain
securities were to be lent to Dhandhan Bank, under Securities Lending Scheme, 1997. Dhandhan Bank
shall pay specified lending fee against such lending of securities to it. Explain the taxability of transactions
involved in the Securities Lending Scheme, 1997.
Answer
Securities Lending Scheme, 1997 (hereafter referred to as SLS) facilitates the lending and borrowing of
securities. Securities are neither covered in the definition of goods nor covered in the definition of
services. Therefore, a transaction in securities which involves disposal of securities is not a supply in GST
and hence not taxable.
However, SLS doesn’t treat lending of securities as disposal of securities and therefore is not excluded
from the definition of services. The lending fee charged from the borrowers of securities has the
character of consideration and is taxable under GST. Apart from above, the activities of the intermediaries
facilitating lending and borrowing of securities for commission or fee are also taxable separately
[Circular No. 119/38/2019 GST dated 11.10.2019].
Question 10

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Krishnadev is a trader based in India. Ramakrishna, brother of Krishnadev, is located in China and is also
engaged in business of trading of goods. Krishnadev places an order with Ramakrishna for procurement
of certain goods from local market in China. Before the shipment of goods from China to India, Krishnadev
sold such goods to Christiano, a trader located in Brazil. The goods were subsequently shipped from
China to Brazil. Comment on the taxability of transaction between Krishnadev and Christiano under GST
in India.
Answer
The transaction between Krishnadev and Christiano is in the nature of merchant trading. As per Schedule
III of the CGST Act, transactions involving sale of goods from a place in non-taxable territory to another
place in non- taxable territory, without such goods entering into India, shall not be treated as supply
under GST. Therefore, the transaction between Krishnadev and Christiano shall not be treated as supply
and is thus not leviable to GST.
Question 11
Mohandas International entered into a transaction for import of goods from a vendor located in Italy.
Due to financial issues, Mohandas International was not in a situation to clear the goods upon payment
of import duty. Mohandas International sold the goods to Radhakrishnan Export House by endorsement
of title to the goods, while the goods were in high seas. The agreement further provided that Mohandas
International shall purchase back the goods in future from Radhakrishnan Export House. Discuss the
taxability of transaction(s) involved, under the GST law.
Answer
As per Schedule III of the CGST Act, high seas sale transactions i.e. supply of goods by the consignee to
any other person, by endorsement of documents of title to the goods, after the goods have been
dispatched from the port of origin located outside India but before clearance for home consumption shall
not be considered as supply under GST. Thus, the sale of goods by Mohandas International to
Radhakrishnan Export House in high seas shall not be liable to GST.
Further, the import duty including IGST shall be payable by Radhakrishnan Export House at the time of
clearance of goods at port of import. In case the goods are sold back by Radhakrishnan Export House to
Mohandas International at a subsequent point of time, the same shall be treated as normal domestic sale
transaction and GST shall be applicable on the same subject to other conditions prescribed under GST
Law.
Question 12
Mr. Happy has a huge residential property located at a prime location in Mumbai, Maharashtra. He has
let out the 1st and 2nd floor to Mr. Peace for residential purposes in April. Mr. Peace surrenders his
tenancy rights to Mr. Serene for a tenancy premium of ₹ 10,00,000 on 1st June. Mr. Serene has also paid
the applicable stamp duty and registration charges on transfer of tenancy rights. Moreover, Mr. Serene
has agreed to pay a monthly rent of 1,00,000 to Mr. Happy from June.
Determine the taxability of the transaction(s) involved in the given case, for the month of June.
Answer
Circular No. 44/2018 CT dated 02.05.2018 clarifies that the activity of transfer of tenancy right against
consideration [i.e. tenancy premium] is squarely covered under supply of service liable to GST. It is a
form of lease or renting of property and such activity is specifically declared to be a service in Schedule

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II i.e. any lease, tenancy, easement, licence to occupy land is a supply of services.
Although stamp duty and registration charges have been levied on such transfer of tenancy rights, it shall
be still subject to GST. Merely because a transaction/supply involves execution of documents which may
require registration and payment of registration fee and stamp duty, would not preclude them from the
‘scope of supply’ and from payment of GST.
The transfer of tenancy rights cannot be treated as sale of land/ building in Schedule III. Thus, it is not a
non-supply under GST and consequently, a consideration for the said activity shall attract levy of GST.
Services provided by outgoing tenant by way of surrendering the tenancy rights against consideration in
the form of a portion of tenancy premium is liable to GST. Hence, in the given case, the tenancy premium
of ₹ 10,00,000 received by Mr. Peace for surrendering his tenancy rights to Mr. Serene is liable to GST.
The circular further clarifies that since renting of residential dwelling for use as a residence is exempt
[Entry 12 of Notification No. 12/2017 CT (R) dated 28.06.201732], grant of tenancy rights in a residential
dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt.
Consequently, monthly rent ₹ 1,00,000 received by Mr. Happy from Mr. Serene is exempt.
Question 13
(a) Rudraksh Kapoor, owner of Rudraksh Publishing House, Ghaziabad, U.P., donated some money to a
Divyaprakash Charitable Trust in the memory of his late father. The Divyaprakash Charitable Trust
constructed a room in the school run by it from such donation and wrote “Donated by Rudraksh
Kapoor in the memory of his father” on the door of the room so constructed. Examine whether the
money donated by Rudraksh Kapoor is leviable to GST.
(b) In the above question, if the Divyaprakash Charitable Trust had written on the door of the room
constructed in the school run by it from the money donated by Rudraksh Kapoor “Donated by
Rudraksh Publishing House, Ghaziabad, U.P.”, would the given transaction/activity qualifies as
supply.
Answer
Circular No. 116/35/2019 GST dated 11.10.2019 has clarified that in case of donations received by a
charitable institution, when the name of the donor is displayed in recipient institution’s premises, in such
a manner, which can be said to be an expression of gratitude and public recognition of donor’s act of
philanthropy and is not aimed at giving publicity to the donor in such manner that it would be an
advertising or promotion of his business, then it can be said that there is no supply of service for a
consideration (in the form of donation). Donations received by the charitable organisations are treated
as consideration only if there exists, quid pro quo, i.e., there is an obligation on part of recipient of the
donation or gift to do anything (supply a service).
Thus, GST is not leviable where all the following three conditions are satisfied namely:
 Gift or donation is made to a charitable organization
 Payment has the character of gift or donation
 Purpose is philanthropic (i.e., it leads to no commercial gain) and not advertisement.
(a) In the backdrop of the above discussion, since in the given case, the way the name of Rudraksh
Kapoor is displayed on the door of the room constructed in the school run by Divyaprakash
Charitable Trust, it is only an expression of gratitude and public recognition of Rudraksh’s act of
philanthropy and is not aimed at advertising or promoting his business. There is no
reference/mention of his publishing house which otherwise would have got advertised.
Thus, the money donated by Rudraksh Kapoor is not a leviable to GST.

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(b) In the given case, since the name of Rudraksh Publishing House has been displayed on the door of
the room constructed in the school run by Divyaprakash Charitable Trust, it might be aimed at
advertising or promoting his business. There is a direct mention of his publishing house which is
being advertised. In such a case, it is a supply of service by Divyaprakash Charitable Trust for a
consideration received in the form of donation.
Question 14
Mrs. Kajal, a registered supplier of Jaipur (Rajasthan), has made the following supplies in the month of
January:
(i) Supply of a laptop along with the laptop bag to a customer of Mumbai for ₹ 55,000 (exclusive of
GST).
(ii) Supply of 10,000 kits (at ₹ 50 each) amounting to ₹ 5,00,000 (exclusive of GST) to Ram Fancy Store
in Kota (Rajasthan). Each kit consists of 1 hair oil, 1 beauty soap and 1 hair comb.
(iii) 100 kits are given as free gift to Jaipur customers (all unrelated) on the occasion of Mrs. Kajal's
birthday. Each kit consists of 1 hair oil and 1 beauty soap. Cost of each kit is ₹ 35. Input tax credit
has not been taken on the goods contained in the kit.
(iv) Event management services provided free of cost to her brother (wholly dependent on her) for his
son’s marriage function in Indore (Madhya Pradesh). Cost of providing said services is ₹ 80,000.
(v) 1,400 chairs and 100 coolers hired out to Function Garden, Ajmer (Rajasthan) for ₹ 3,30,000
(exclusive of GST) including cost of transporting the chairs and coolers from Mrs. Kajal's godown
at Jaipur to Function Garden, Ajmer. Since Mrs. Kajal is not a GTA, transportation services provided
by her are exempt vide Notification No. 12/2017 CT (R) dated 28.06.201731.
Assume rates of GST to be as under:-
S. No Particulars Rate of GST

1. Laptop 18%
2. Laptop bag 28%
3. Hair oil 18%
4. Beauty soap 28%
5. Hair comb 12%
6. Event management service 5%
Service
7. of r Service of renting of chairs andcoolers 12%
8. Transportation service 5%
From the above information, examine each of the above supplies made by Mrs. Kajal for the month of
January and determine the rate of GST applicable on the same.
Answer
S.No Particulars Rate of GST
(i) Supply of laptop bag along with laptop to Mumbaicustomer 18%
[Being naturally bundled, supply of laptop bag along with the laptop is a
composite supply which is treatedas the supply of the principal supply [viz.
laptop] in terms of section 8(a). Accordingly, rate of principal supply, i.e.
laptop will be charged.]
(ii) Supply of kits to Ram Fancy Store 28%

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[It is a mixed supply and is treated as supply of that particular supply which
attracts highest tax rate [viz. beauty soap] in terms of section 8(b).]
(iii) Free gifts to customers Nil
[Cannot be considered as supply under section 7 read with Schedule I as the
gifts are given to unrelated customers without consideration.]
(iv) Event management services provided free of cost to her brother for his 5%
son’s marriage shall be considered as supply as the services are being
provided to a related person. Since it is an individual supply, it will be
taxed at the rate applicable on said service.
(v) Chairs and coolers hired out to Function Garden 12%
[Transportation services provided by Mrs. Kajal are exempt. However, since
chairs and coolers are hired out along with their transportation, it is a case
of composite supply wherein the principal supply is hiring out of chairs
and coolers. Accordingly, transportation service will also be taxed at the rate
applicable for renting of chairs and coolers*]
*Note: As per section 2(30) of the CGST Act, 2017, composite supply means a supply made by a taxable
person to a recipient consisting of two or more taxable supplies. Since in point (v), service of hiring out
of chairs & coolers is taxable while transportation service is exempt, it is possible to take a view that this
is not a case of composite supply. In that case, the two services will be treated as independent services
and taxed accordingly.

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Question 15
Diligent Force, a professional training institute, gets its training material of ‘Aptitute Quotient’ printed
from ‘Durga Printing House’ - a printing press. The content of the material is provided by the Diligent
Force who owns the usage rights of the same while the physical inputs including paper used for printing
belong to the Durga Printing House.
Ascertain whether supply of training material by the Durga Printing House constitutes supply of goods
or supply of services.
Answer
Circular No. 11/11/2017 GST dated 20.10.2017 has clarified that supply of books printed with contents
supplied by the recipient of such printed goods, is composite supply and the question, whether such
supplies constitute supply of goods or services would be determined on the basis of what constitutes the
principal supply.
Principal supply has been defined in section 2(90) of the CGST Act, 2017 as supply of goods or services
which constitutes the predominant element of a composite supply and to which any other supply forming
part of that composite supply is ancillary.
In the case of printing of books where content is supplied by the publisher or the person who owns the
usage rights to the intangible inputs while the physical inputs including paper used for printing belong
to the printer, supply of printing [of the content supplied by the recipient of supply] is the principal
supply and therefore, such supplies would constitute supply of service.
Thus, in view of the above-mentioned provisions, the supply of training material by the Durga Printing
House would constitute supply of services.
Question 16
Mrs. Kajal, a registered supplier of Jaipur (Rajasthan), has made the following supplies in the month of
January, 20XX:
(i) Supply of a laptop bag along with the laptop to a customer of Mumbai for ₹ 55,000 (exclusive of
GST).
(ii) Supply of 10,000 kits (at ₹ 50 each) amounting to ₹ 5,00,000 (exclusive of GST) to Ram Fancy Store
in Kota (Rajasthan). Each kit consists of 1 hair oil, 1 beauty soap and 1 hair comb.
(iii) 100 kits are given as free gift to Jaipur customers on the occasion of Mrs. Kajal's birthday. Each kit
consists of 1 hair oil and 1 beauty soap. Cost of each kit is ₹ 35, but the open market value of such
kit of goods and of goods of like kind and quality is not available. Input tax credit has not been taken
on the goods contained in the kit.
(iv) Event management services provided free of cost to her brother for his son’s marriage function in
Indore (Madhya Pradesh). Cost of providing said services is ₹ 80,000, but the open market value of
such services and of services of like kind and quality is not available.
(v) 1,400 chairs and 100 coolers hired out to Function Garden, Ajmer (Rajasthan) for ₹ 3,30,000
(exclusive of GST) including cost of transporting the chairs and coolers from Mrs. Kajal's godown
at Jaipur to the Function Garden, Ajmer.
Mrs. Kajal has paid the cost of transportation of chairs and coolers to an unregistered Goods
Transport Agency (GTA) [located in the State of Rajasthan] @ ₹ 20 (exclusive of GST) for each chair
and each cooler and in turn, has charged ₹ 20 only for each chair and each cooler from Function

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Garden for transportation of the same.

Interest of ₹ 6,400 (inclusive of GST) was collected by Mrs. Kajal in January from Ram Fancy Store, Kota
for the payment received with a delay of 30 days.
Assume rates of GST to be as under:-
S. No. Particulars Rate of CGST (%) Rate of SGST(%) Rate of IGST (%)
1. Laptop 9 9 18
2. Laptop bag 14 14 28
3. Hair oil 9 9 18
4. Beauty soap 14 14 28
5. Hair comb 6 6 12
6. Event management service 2.5 2.5 5
7. Service of renting of chairs 6 6 12
and coolers
8. Transportation service 2.5 2.5 5
From the above information, compute the GST liability (CGST and SGST and/ or IGST, as the case may be)
of Mrs. Kajal for the month of January, 20XX.
Answer
Computation of GST liability of Mrs. Kajal for the month of January, 20XX
S. Amount CGST SGST IGST

Particulars
No. (₹) (₹) (₹) (₹)
(i) Supply of laptop bagalong with laptop to Mumbai
customer
[Being naturally bundled, supply of laptop bag
along with the laptop is a composite supply
55,000 9,900
which is treated as the supply of the principal
supply [viz. laptop] in terms of section 8(a) of the
CGST Act, 2017 and is an inter- State supply.
Accordingly,IGST @ 18% will be charged]
(ii) Supply of kits to Ram Fancy Store
[It is a mixed supply andis treated as supply of
that particular supply which attracts highest tax
rate [viz. beauty soap] interms of section 8(b) of
the CGST Act, 2017. Also, it’s an intra-State supply.
Accordingly, CGST and SGST @ 14% each will be
5,05,000 70,700 70,700
charged.] Further, interest of ₹ 6,400 charged for
delayed payment as collected from Ram Fancy
Store will be included in the value of supply in
terms of section 15(2) of the CGST Act, 2017.
Therefore, total value of supply = ₹ 5,05,000 [₹
5,00,000 + (₹ 6,400 × 100/128)]
(iii) Free gifts to customers
[Cannot be considered assupply under section 7
Nil Nil Nil
read with Schedule I of the CGST Act as the gifts
are given to unrelated customers without

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consideration]
(iv) Event managementservices provided free of cost to
brother for hisson’s marriage
[Cannot be considered as supply under section 7
Nil Nil Nil
read with Schedule I of the CGST Act as the
service is provided to unrelated person without
consideration.] [Note-1]
(v) Chairs and coolers hiredout to Function Garden
[Since Mrs. Kajal is not a GTA, transportation
services provided by herare exempt [Notification
No. 12/2017 CT(R) dated 28.06.2017]. However,
since chairs and coolersare hired out along with
their transportation, it is a case of composite
3,30,000 19,800 19,800
supply wherein the principal supply is hiring out of
chairs and coolers. Also, it’s an intra-State supply.
Accordingly, transportation service will also be
taxed at the rate applicable for renting of chairs
and coolers, viz.CGST and SGST @ 6% each.] [Note-
2]
(vi) Transportation of chairs and coolers by GTA [GST
on GTA services availed is payable under reverse 30,000
charge mechanism since GST is payable @ 5%. (₹ 20 x 750 750
Being an intra-State supply, CGST and SGST will 1,500)
be chargeable @ 2.5% each.]
Total GST liability 91,250 91,250 9,900
Note: As per section 2(30) of the CGST Act, 2017, composite supply means a supply made by a taxable
person to a recipient consisting of two or more taxable supplies. Since in point (v), service of hiring out
of chairs & coolers is taxable while transportation service is exempt (being provided by a person other
than a GTA), it is possible to take a view that this is not a case of composite supply. In that case, the two
services will be treated as independent services and taxed accordingly.
Question 17
Mr. Zombi, a supplier registered in Hyderabad (Telangana), procures goods from China and directly
supplies the same to a customer in US. With reference to the provisions of GST law, examine whether the
said activity of supply of goods by Mr. Zombi to customer in US is taxable under GST. If yes, determine
the place of supply of the same.
Answer
Schedule III to the CGST Act specifies transactions/ activities which shall be neither treated as supply of
goods nor supply of services. One of such activity/transaction is supply of goods from a place in the non-
taxable territory to another place in the non-taxable territory without such goods entering into India.
Thus, it seeks to exclude from the tax net such transactions which involve movement of goods, caused by
a registered person, from one non-taxable territory to another non-taxable territory.
Therefore, in view of the above-mentioned provisions, the said activity is not a supply. Hence, it is not
leviable to GST since “supply” is the taxable event for chargeability of GST. Therefore, since the
transaction is not leviable to GST, the question of place of supply does not arise in the given case.

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Question 18
Allfit Laboratories Ltd. is a registered supplier of bulk drugs in Delhi paying tax under regular scheme. It
manufactures bulk drugs and supplies the same in the domestic and overseas market. The bulk drugs are
supplied within Delhi and in the overseas market directly from the company’s warehouse located in
South Delhi. For supplies in other States of India, the company has appointed consignment agents in each
such State. However, supplies in Gurgaon (Haryana) and Noida (U.P.) are effected directly from South
Delhi warehouse. The drugs are supplied to the consignment agents from the South Delhi warehouse.
Allfit Laboratories Ltd. also provides drug development services to drug manufacturers located in India,
including testing of their new drugs in its laboratory located in Delhi.
The company has furnished the following information for the month of January, 20XX:
Particulars ₹
Advance received towards drug development services to be provided to Orochem 5,00,000
Ltd., a drug manufacturer, located in Delhi [Drug development services have been
provided in February, 20XX and invoice is issued on 28.02.20XX]
Advance received for bulk drugs to be supplied to Novick Pharmaceuticals, a 6,00,000
wholesale dealer of drugs in Gurgaon, Haryana [Invoice for the goods is issued at
the time of delivery of the drugs in March, 20XX]
Supply of bulk drugs to wholesale dealers of drugs in Delhi 60,00,000
Bulk drugs supplied to Anchor Pharmaceuticals Inc., USA under LUT [Consideration 90,00,000
received in convertible foreign exchange]
Drug development services provided to Unipharma Ltd., a drug manufacturer, 6,00,000
located in Delhi
You are required to determine the GST liability [CGST & SGST or IGST, as the case may be] of Allfit
Laboratories Ltd. for the month of January, 20XX with the help of the following additional information
furnished by it for the said period:
1. Consignments of bulk drugs were sent to Cardinal Pharma Pvt. Ltd. and Rochester Medicos – agents
of Allfit Laboratories Ltd. in Punjab and Haryana respectively. Cardinal Pharma Pvt. Ltd. and
Rochester Medicos supplied these drugs under their invoices to the Medical Stores located in their
respective States for Rs. 60,00,000 and Rs. 50,00,000 respectively.
2. Bulk drugs have been supplied to Ronn Medicos - a wholesale dealer of bulk drugs in Gurgaon,
Haryana for consideration of Rs. 15,00,000. Allfit Laboratories Ltd. owns 72% shares of Ronn
Medicos Pvt. Ltd. Open market value of the bulk drugs supplied to Ronn Medicos Pvt. Ltd. is Rs.
30,00,000. Further, Ronn Medicos Pvt. Ltd. is not eligible for full input tax credit.
Note:
(i) All the given amounts are exclusive of GST, wherever applicable.
(ii) Assume the rates of GST to be as under:
Goods/services supplied CGST SGST IGST

Bulk drugs 2.5% 2.5% 5%
Drug development services 9% 9% 18%
You are required to make suitable assumptions, wherever necessary.
Answer

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Computation of GST Liability of Allfit Laboratories Ltd. for the month of January, 20XX
Particulars CGST (₹) SGST (₹) IGST (₹)

Advance received for drug development 45,000 45,000
services supplied to Orochem Ltd., a drug [5,00,000 × 9%] [5,00,000 × 9%]
manufacturer, located in Delhi [Note - 1]
Advance received for bulk drugs to be Nil
supplied to Novick Pharmaceuticals, a
wholesale dealer of drugs in Gurgaon,
Haryana [Note - 2]
Supply of bulk drugs to wholesale dealers 1,50,000 1,50,000
of drugs in Delhi [Note - 3] [60,00,000 × 2.5%] [60,00,000 × 2.5%]
Bulk drugs supplied to Anchor Nil
Pharmaceutical Inc., USA under LUT
[Note - 4]
Supply of drug development services to 54,000 54,000
Uni pharma Ltd., a drug manufacturer, [6,00,000 × 9%] [6,00,000× 9%]
located in Delhi [Note - 5]
Supply of bulk drugs to consignment 4,95,000
agents - Cardinal Pharma Pvt. Ltd. and [99,00,000 × 5%]
Rochester Medicos of Punjab and
Haryana [Note - 6]
Supply of bulk drugs to Ronn Medicos of 1,50,000
Gurgaon, Haryana [Note - 7] [30,00,000 × 5%]
Total GST liability 2,49,000 2,49,000 6,45,000
Notes:
1. Being an intra-State supply of services, supply of drug development services to Orochem Ltd. of
Delhi is subject to CGST and SGST @ 9% each. Further, in terms of section 13(2) of the CGST Act,
the time of supply of services is the earlier of the date of invoice or date of receipt of payment, if
the invoice is issued within 30 days of the supply of service. In the given case, invoice is issued
within 30 days of the supply of service. Therefore, time of supply of services will be date of receipt
of advance and hence, GST is payable on the advance received in January, 20XX.
2. Being an inter-State supply of goods, supply of bulk drugs to Novick Pharmaceuticals of Gurgaon,
Haryana is subject to IGST @ 5%. Further, in terms of section 12(2) of the CGST Act, the time of
supply of goods is the earlier of the date of issue of invoice/last date on which the invoice is
required to be issued or date of receipt of payment.
However, Notification No. 66/2017 CT dated 15.11.2017 specifies that time of supply of goods for
the purpose of payment of tax is the date of issue of invoice/last date of issue of invoice.
Thus, GST is not payable at the time of receipt of advance against supply of goods. The time of
supply of the advance received for bulk drugs to be supplied to Novick Pharmaceuticals is the time
of issue of invoice, which is in March, 20XX. Thus, said advance will be taxed in March, 20XX and
not in January, 20XX.
3. Being an intra-State supply of goods, supply of bulk drugs to wholesale dealers of drugs in Delhi is
subject to CGST and SGST @ 2.5 % each.
4. Section 2(5) of the IGST Act defines export of goods as taking goods out of India to a place outside
India. In view of the said definition, supply of the bulk drugs to Anchor Pharmaceuticals Inc. of USA
under LUT is export of goods.
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Export of goods is a zero-rated supply [Section 16(1) of the IGST Act]. A zero-rated supply under
LUT is made without payment of integrated tax [Section 16(3)(a) of IGST Act].
5. Being an intra-State supply of services, supply of drug development services to Unipharma Ltd. of
Delhi is subject to CGST and SGST @ 9% each.
6. Value of supply of goods made through an agent is determined as per rule 29 of the CGST Rules.
Accordingly, the value of supply of goods between the principal and his agent is the open market
value of the goods being supplied, or at the option of the supplier, is 90% of the price charged for
the supply of goods of like kind and quality by the recipient to his unrelated customer, where the
goods are intended for further supply by the said recipient.
7. In the given case, since open market value is not available, value of bulk drugs supplied to
consignment agents - Cardinal Pharma Pvt. Ltd. and Rochester Medicos – will be 99,00,000 [90%
of (60,00,000 + 50,00,000)]. Further, being an inter-State supply of goods, supply of bulk drugs to
the consignment agents is subject to IGST @ 5%.
8. If any person directly or indirectly controls another person, such persons are deemed as related
persons. [Clause (a)(v) of explanation to section 15 of the CGST Act]. In the given case, since Allfit
Laboratories Ltd. owns 72% shares of Ronn Medicos, both are related persons.
9. Value of supply of goods between related persons (other than through an agent) is determined as
per rule 28 of the CGST Rules. Accordingly, the value of supply of goods between related persons
is the open market value of such goods and not the invoice value. Furthermore, since Ronn Medicos
is not eligible for full input tax credit, value declared in the invoice cannot be deemed to be the
open market value of the goods. Thus, open market value of the bulk drugs supplied to Ronn
Medicos, i.e. 30,00,000 is the value of supply of such goods. Further, being an inter-State supply of
goods, supply of bulk drugs to Ronn Medicos is subject to IGST @ 5%.
Question 19
Power Engineering Pvt. Ltd., a registered supplier, is engaged in providing expert maintenance and repair
services for large power plants that are in the nature of immovable property, situated all over India. The
company has its Head Office at Bangalore, Karnataka and branch offices in other States. The work is done
in the following manner.
- The company has self-contained mobile workshops, which are container trucks fitted out for
carrying out the repairs. The trucks are equipped with items like repair equipments, consumables,
tools, parts etc. to handle a wide variety of repair work.
- The truck is sent to the client location for carrying out the repair work. Depending upon the repairs
to be done, the equipment, consumables, tools, parts etc. are used from the stock of such items
carried in the truck.
- In some cases, a stand-alone machine is also sent to the client’s premises in such truck for carrying
out the repair work.
- The customer is billed after the completion of the repair work depending upon the nature of the
work and the actual quantity of consumables, parts etc. used in the repair work.
- Sometimes the truck is sent to the company’s own location in other State(s) from where it is further
sent to client locations for repairs.
Work out the GST liability [CGST & SGST or IGST, as the case may be] of Power Engineering Pvt. Ltd.,
Bangalore on the basis of the facts as described, read with the following data for the month of November
20XX.
S. No. Particulars ₹

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A. Truck sent to own location in Tamil Nadu

(i) Value of items contained in the truck - ₹ 3,00,000
(ii) Value of truck - ₹ 25,00,000
B. Truck sent to a client location in Tamil Nadu for carrying out repairs. Stand-
alone machine is also sent in the truck to client location for repairs
(i) Value of items contained in the truck – ₹ 2,85,000
(ii) Value of stand-alone machine - ₹ 4,00,000
(iii) Value of truck - ₹ 20,00,000
(Billing for repairs to be done afterwards depending upon the actual items used)
C. Truck sent to a client location in Karnataka for carrying out repairs
(i) Value of items contained in the truck - ₹ 1,06,000
(ii) Value of truck - ₹ 20,00,000
(Billing for repairs to be done afterwards depending upon the actual items used)
D. Invoices raised for repair work carried out in Tamil Nadu [including the invoice 70,00,000
for repair work done in ‘B’] -
E. Invoices raised for repair work carried out in Karnataka [including the invoice 12,00,000
for repair work done in ‘C’]
Also, specify the document(s), if any, which need to be issued by Power Engineering Pvt. Ltd., Bangalore
for the above transactions.
All the given amounts are exclusive of GST, wherever applicable. Assume the rates of taxes to be as under:
Items used for repairs

CGST – 6% SGST – 6% IGST – 12%
Container truck, Stand-alone machines
CGST – 2.5% SGST – 2.5% IGST – 5%
Works contract for repairs and maintenance of immovable property
You are required to make suitable assumptions, wherever necessary.
Answer
Computation of GST Liability of Power Engineering Pvt. Ltd., Bangalore for the month of
November 20XX
S. No. Particulars ₹
A. Items sent in container truck to own location in Tamil Nadu - IGST @ 12% [Note 36,000
1]
Container truck sent to own location in Tamil Nadu [Note 2] -
B. Stand-alone machine sent in container truck to client location in Tamil Nadu, for -
carrying out repairs [Note 3]
Container truck sent to client location in Tamil Nadu [Note 3] -
Items sent in container truck to client location in Tamil Nadu, for carrying out -
repairs [Note 4]
C. Container truck sent to client location in Karnataka [Note 3] -
Items sent in container truck to client location in Karnataka, for carrying out -
repairs [Note 4]
D. Invoices raised for repair work carried out in Tamil Nadu: IGST @ 18% [Note 5 12,60,000

Page 2.16
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and Note 6]
E. Invoices raised for repair work carried out in Karnataka: CGST 9% + SGST 9% 2,16,000
[Note 5 and Note 7]
Total GST liability 15,12,000
Notes:
(1) Movement of goods without any consideration to a ‘distinct person’ as specified in section 25(4) of
the CGST Act, 2017 is deemed to be a supply in terms of section 7 read with Schedule I of the said
Act. The purchase value is taken as taxable value, being the open market value in terms of rule
28(a) of the CGST Rules 2017. (However, if the regional office is eligible to take full input tax credit,
any value may be declared in the tax invoice and that will be taken to be the open market value in
terms of the second proviso to the same rule.)
In the given case-
• the location of the supplier is in Bangalore (Karnataka); and
• the place of supply of items contained in the truck is the location of such goods at the time at
which the movement of goods terminates for delivery to the recipient i.e., Tamil Nadu in terms
of section 10(1)(a) of the IGST Act, 2017.
Therefore, the given supply of items is an inter-State supply as the location of the supplier and the
place of supply are in two different States [Section 7(1)(a) of IGST Act, 2017]. Thus, the supply is
leviable to IGST in terms of section 5(1) of the IGST Act, 2017.
Since the activity is a supply, a tax invoice is to be issued by Power Engineering Pvt. Ltd. in terms
of section 31(1)(a) of the CGST Act, 2017 for sending the items to its own location in Tamil Nadu.
(2) As per section 25(4) of the CGST Act, 2017, a person who has obtained more than one registration,
whether in one State or Union territory or more than one State or Union territory shall, in respect
of each such registration, be treated as ‘distinct persons’.
Schedule I to the CGST Act, 2017 specifies situations where activities are to be treated as supply
even if made without consideration. Supply of goods and/or services between ‘distinct persons’ as
specified in section 25 of the CGST Act, 2017, when made in the course or furtherance of business
is one such activity included in Schedule I under para 2.
However, in view of the GST Council’s recommendation, it has been clarified that the inter-State
movement of various modes of conveyance between ‘distinct persons’ as specified in section 25(4),
not involving further supply of such conveyance, including trucks carrying goods or passengers or
both; or for repairs and maintenance, may be treated ‘neither as a supply of goods nor supply of
service’ and therefore, will not be leviable to IGST. Applicable CGST/SGST/IGST, however, shall be
leviable on repairs and maintenance done for such conveyance [Circular No. 1/1/2017 IGST dated
07.07.2017].
Since the activity is not a supply, tax invoice is not required to be issued by Power Engineering Pvt.
Ltd. However, a delivery challan is to be issued by the company in terms of rule 55(1)(c) of CGST
Rules, 2017 for sending the truck to its own location in Tamil Nadu.
(3) Supply of goods without consideration is deemed to be a supply inter alia when the goods are
supplied to a ‘distinct person’. However, in this case, stand-alone machine and container truck are
moved to client location and not between ‘distinct persons’. Hence, the same will fall outside the
scope of definition of supply and will not be leviable to GST.
Here again, a delivery challan is to be issued in terms of rule 55(1)(c) of CGST Rules, 2017 for
sending the stand-alone machines and container truck to client location.
(4) As per section 2(119) of the CGST Act, 2017, ‘works contract’ means a contract for, inter alia, repair,
maintenance of any immovable property wherein transfer of property in goods (whether as goods
Page 2.17
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or in some other form) is involved in the execution of such contract.

In this case, the supplier provides maintenance and repair services for power plants that are in the
nature of immovable property and uses consumables and parts, wherever necessary, for the
repairs. Hence, the contract is that of a works contract.
Further, as per section 2(30) of the CGST Act, 2017, a works contract is a ‘composite supply’ as it
consists of taxable supplies of both goods and services which are naturally bundled and supplied
in conjunction with each other. The composite supply of works contract is treated as supply of
service in terms of para 6(a) of Schedule II to the CGST Act, 2017.
The items used in relation to the repair and maintenance work could be consumables or could be
identifiable items/parts. In either case, the transfer of property in goods is incidental to a
composite supply of works contract service. Thus, the value of the items actually used in the repairs
will be included in the invoice raised for the service and will be charged to tax at that point of time.
Here again, a delivery challan is to be issued in terms of rule 55(1)(c) of CGST Rules, 2017 for
sending the items for carrying out the repairs.
(5) The activity is a composite supply of works contract, which is treated as supply of service. As per
section 8(a) of the CGST Act, 2017, a composite supply is treated as a supply of the principal supply
involved therein and charged to tax accordingly.
Since the activity is a supply of service, a tax invoice is to be issued by Power Engineering Pvt. Ltd.
in terms of section 31(2) of the CGST Act, 2017.
(6) In the given case-
• the location of the supplier is in Bangalore (Karnataka); and
• the place of supply of works contract services relating to the power plant (immovable property)
is the location at which the immovable property is located i.e., Tamil Nadu in terms of section
12(3)(a) of the IGST Act, 2017.
Therefore, the given supply is an inter-State supply as the location of the supplier and the place of
supply of services are in two different States [Section 7(3)(a) of IGST Act, 2017]. Thus, the supply
will be leviable to IGST in terms of section 5(1) of the IGST Act, 2017.
(7) In the given case, the location of the supplier and the place of supply of works contract services are
within the same State. Therefore, the given supply is an intra-State supply in terms of section 8(2)
of IGST Act, 2017 and thus, chargeable to CGST and SGST.
Question 20
Mr. NY, a supplier of goods pays GST under regular scheme. Mr. NY is not eligible for any threshold
exemption. He has made the following outward taxable supplies during September 20XX:
Particulars Rate of Tax

Amount (₹)
CGST SGST IGST
Intra State Supply of goods
Product A 6% 6% - 8,00,000
Product B 9% 9% - 2,00,000
Inter State Supply of goods
Product A - - 12% 3,00,000
Product B - - 18% 1,50,000
He has also furnished the following information in respect of supplies received by him during September

Page 2.18
Supply Under GST
20XX:
Particulars Rate of Tax

Amount (₹)
CGST SGST IGST
Intra State Supply of goods
Product A 6% 6% - 2,00,000
Product B 9% 9% - 1,00,000
Inter State Supply of goods
Product A - - 12% 1,50,000
Product B - - 18% 80,000
Mr. NY has following ITCs with him at the beginning of September 20XX:
Particulars ₹
CGST 40,000
SGST 28,000
IGST 44,600
Note:
(i) Both inward and outward supplies are exclusive of taxes, wherever applicable.
(ii) All the conditions necessary for availing the ITC have been fulfilled.
Compute net GST payable by Mr. NY for the month of September 201XX.
Make suitable assumptions wherever required.
Answer
Computation of GST payable by Mr. NY for the month of September, 20XX:
S. No. Particulars CGST (₹) SGST (₹) IGST (₹)

(i) Intra-State supply of goods
Product A 48,000 48,000
Product B 18,000 18,000
(ii) Inter-State supply of goods
Product A 36,000
Product B 27,000
Total 66,000 66,000 63,000
Computation of total ITC available

S. No. Particulars CGST (₹) SGST (₹) IGST (₹)
(i) Opening balance 40,000 28,000 44,600
(ii) Inter-State supply of goods
Product A 12,000 12,000
Product B 9,000 9,000
(iii) Inter-State supply of goods
Product A 18,000
Product B 14,400
Total 61,000 49,000 77,000
Computation of net GST payable (from cash ledger)

Page 2.19
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GST payable 66,000 66,000 63,000
Less: ITC (61,000)-CGST (14,000)-IGST (63,000)-IGST
(49,000)-SGST
Net GST payable 5,000 3,000 Nil
Note 1. ITC of IGST shall be first utilize fully to pay IGST, CGST and SGST in that order.
Note 2. IGST credit after setting it against IGST liability of Rs. 63,000/- i.e. Rs. 14,000/- to be adjusted
first with SGST liability since CGST credit is almost sufficient to set off CGST liability.
Question 21
Jaskaran, a registered supplier of Delhi, has made the following supplies in the month of January, 20XX:
S. Particulars Amount*
No. (₹)
(i) Supply of 20,000 packages at ₹ 30 each to Sukhija Gift Shop in Punjab 6,00,000
[Each package consists of 2 chocolates, 2 fruit juice bottles and a packet of toy
balloons]
(ii) 10 generators hired out to Morarji Banquet Halls, Chandigarh [including cost 2,50,000
of transporting the generators (₹ 1,000 for each generator) from Jaskaran’s
warehouse to the Morarji Banquet Halls]
(iii) 500 packages each consisting of 1 chocolate and 1 fruit juice bottle given as
free gift to Delhi customers on the occasion of Diwali
[Cost of each package is ₹ 12, but the open market value of such package of
goods and of goods of like kind and quality is not available. Input tax credit
has not been taken on the items contained in the package]
(iv) Catering services provided free of cost for elder brother’s business inaugural
function in Delhi
[Cost of providing said services is ₹ 55,000, but the open market value of such
services and of services of like kind and quality is not available.]
*excluding GST
You are required to determine the GST liability [CGST & SGST and/or IGST, as the case may be] of
Jaskaran for the month of January, 20XX with the help of the following additional information furnished
by him for the said period:
1. Penalty of ₹ 10,000 was collected from Sukhija Gift Shop for the payment received with a delay of 10
days.
2. The transportation of the generators from Jaskaran’s warehouse to the customer’s premises is
arranged by Jaskaran through a Goods Transport Agency (GTA) who pays tax @ 12%.
3. Assume the rates of GST to be as under:
Goods/services supplied CGST SGST IGST

Chocolates 9% 9% 18%
Fruit juice bottles 6% 6% 12%
Toy balloons 2.5% 2.5% 5%
Service of renting of generators 9% 9% 18%
Catering service 9% 9% 18%

Page 2.20
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Answer
Computation of GST liability of Jaskaran for the month of January, 20XX

Supply of 20,000 packages to Sukhija Gift Shop, 1,09,526
Punjab [Note-1] [6,08,475 x 18%]
Renting of 10 generators to Morarji Banquet Halls, 45,000
Chandigarh [Note-2] [2,50,000 x 18%]
500 packages given as free gift to the customers
Nil Nil Nil
[Note-3]
Catering services provided free of cost for elder
5,445 5,445
brother’s business inaugural function in Delhi
[60,500 x 9%] [60,500 x 9%]
[Note-3]
Total GST liability (rounded off) 5,445 5,445 1,54,526
Notes:
1. As per section 2(74) of the CGST Act, 2017, mixed supply means two or more individual supplies
of goods or services, or any combination thereof, made in conjunction with each other by a taxable
person for a single price where such supply does not constitute a composite supply.
Supply of a package containing chocolates, fruit juice bottles and a packet of toy balloons is a mixed
supply as each of these items can be supplied separately and is not dependent on any other.
Further, as per section 8(b) of the CGST Act, 2017, the mixed supply is treated as a supply of that
particular supply which attracts the highest rate of tax. Thus, in the given case, supply of packages
is treated as supply of chocolates [since it attracts the highest rate of tax]. Consequently, being an
inter-State supply of goods, supply of packages to Sukhija Gift Shop of Punjab is subject to IGST @
18% each.
Further, value of supply includes interest or late fee or penalty charged for delayed payment of any
consideration for any supply in terms of section 15(2)(d) of the CGST Act, 2017. Thus, penalty of ₹
10,000 [considered as inclusive of GST] collected from Sukhija Gift Shop for the delayed payment
will be included in the value of supply. The total value of supply is ₹ 6,08,475 [₹ 6,00,000 + (₹
10,000 × 100/118)]
2. Services by way of transportation of goods by road except the services of a Goods Transportation
Agency (GTA) are exempt vide Notification No. 9/2017 IT (R) dated 28.06.2017. Since Jaskaran is
not a GTA, transportation services provided by him are exempt from GST. However, since the
generators are invariably hired out along with their transportation till customer’s premises, it is a
case of composite supply under section 2(30) of the CGST Act, 2017 wherein the principal supply
is the renting of generator.
As per section 8(a) of the CGST Act, 2017, the composite supply is treated as the supply of the
principal supply. Therefore, the service of transportation of generators will also be taxed at the
rate applicable for renting of the generator (principal supply).
Consequently, being an inter-State supply of service, service of hiring out the generators to Morarji
Banquet Halls of Chandigarh is subject to IGST @ 18% each.
3. As per section 7(1)(c) of the CGST Act, 2017, an activity made without consideration can be treated
as supply only when it is specified in Schedule I of the CGST Act, 2017. Para 2. of Schedule I provides
that supply of goods or services or both between related persons or between distinct persons as
specified in section 25, when made in the course or furtherance of business, are to be treated as

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supply even if made without consideration.

However, since the question does not provide that customers are related to Jaskaran, free gifts
given to the customers cannot be considered as a supply under section 7. Consequently, no tax is
leviable on the same.
Further, the catering services provided by Jaskaran to his elder brother without consideration will
be treated as supply as Jaskaran and his elder brother, being members of same family, are related
persons in terms of explanation (a)(viii) to section 15 of the CGST Act, 2017 and said services have
been provided in course/furtherance of business. Value of supply of services between related
persons, other than through an agent is determined as per rule 28 of the CGST Rules, 2017.
Accordingly, the value of supply is the open market value of such supply; if open market value is
not available, the value of supply of goods or services of like kind and quality. However, if value
cannot be determined under said methods, it must be worked out based on the cost of the supply
plus 10% mark-up. Thus, in the given case, value of catering services provided to the elder brother
of Jaskaran is ₹ 60,500 [₹ 55,000 × 110%]. Further, being an intra-State supply of services, catering
services are subject to CGST and SGST @ 2.5% each.
4. As per Notification No. 13/2017 CT(R) dated 28.06.2017, GST is payable by the recipient on reverse
charge basis on the receipt of services of transportation of goods by road from a goods transport
agency (GTA) provided such GTA has not paid GST @ 12%. Since in the given case, Jaskaran has
received services from a GTA who has paid GST @ 12%, reverse charge provisions will not be
applicable.
Question 22
Skylark Pvt. Ltd., Noida (Uttar Pradesh) is engaged in various kinds of commercial activities. It
manufactures taxable goods as also provides certain services. The company has branch office in New
Delhi. The Head office at Noida and the branch office in New Delhi are registered under GST. The branch
office at New Delhi is eligible for full input tax credit.
The company has reported a total turnover of ₹ 256 crore (exclusive of GST) for the month of August
20XX. The following information is provided by the company in relation to such turnover:
(i) The turnover includes ₹ 45 crore from sale of securities which were purchased for ₹ 30 crore in the
month of January last year.
(ii) The company supplied goods worth ₹ 50 crore to ABC Ltd. in UK under a letter of undertaking (LUT).
The total export proceeds are received in the month of August 20XX itself; ₹ 30 crore in foreign
currency and balance ₹ 20 crore in Indian rupees.
(iii) The company provided consulting services to Sherpa & Sons in Nepal for ₹ 30 crore under a LUT.
The entire consideration is received in Indian rupees in the month of August 20XX itself, with the
permission of RBI.
(iv) The turnover includes supply of goods worth ₹ 10 crore to Shanghai Jianguo Trading Company Ltd.,
a company based in China. As per the sale contract, the goods were to be assembled at Shanghai
Jianguo Trading Company Ltd.’s office in Gurugram, Haryana. The payment of the goods is received
in convertible foreign exchange in the month of August 20XX itself.
(v) Goods worth ₹ 20 crore are supplied under a LUT to DEF Pvt. Ltd. located in a SEZ in the State of
Uttar Pradesh.
(vi) Goods worth ₹ 40 lakh were being procured from a vendor in Japan. While the goods were in transit,
the company secured an order for the said goods for ₹ 50 lakh from a buyer in Thailand. Thus, the
goods were directly sent to Thailand without entering India.

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(vii) The company owns three immovable properties in Noida. The first building is let out for running a
printing press at ₹ 10 lakh per month. The second building is let out for residential purpose at ₹ 5
lakh per month. The third building is let out to a Cold Storage operator at ₹ 5 lakh per month. The
cold storage operator sub-lets the building as a warehouse to store potatoes.
(viii) The remaining turnover comprised of taxable goods sold within the State and outside the State in
the ratio of 3:2.
Total turnover of ₹ 256 crore includes the turnover referred to in points (i) to (vii) above. In addition to
above –
(i) the company transferred its stock (taxable goods) from Noida to Delhi branch without any
consideration; the value declared in the invoice is ₹ 4.5 crore (exclusive of GST). The cost of
production of such goods is ₹ 10 crore. Such stock is sold to independent buyers at ₹ 15 crore
(exclusive of GST).
(ii) the company had sent goods worth ₹ 12 crore (exclusive of GST) to M/s Sharma Traders in Haryana
on approval basis on 15th January, 20XX, 15th February 20XX & 15th March 20XX (₹ 4 crore each
month). Goods sent during all the three months are approved in the month of September 20XX.
Compute the GST liability [CGST & SGST or IGST, as the case may be] of Skylark Pvt. Ltd., Noida for the
month of August 20XX. Make suitable assumptions wherever required.
Assume the rates of taxes to be as under:
CGST SGST IGST

Goods 6% 6% 12%
Services 9% 9% 18%
Answer
Computation of GST liability of Skylark Pvt. Ltd. for the month of August 20XX
S. Particulars Value CGST @ SGST @ IGST@

No. (₹ in 6% (₹ in 6% (₹ in 12% (₹ in
crores) crores) crores) crores)
Goods
(i) Export of goods to ABC Ltd. in UK under a letter 50 Nil
of undertaking (LUT) [Note 1]
(ii) Supply of goods to Shanghai Jianguo Trading 10 1.20
Company Ltd. [Note 2]
(iii) Goods supplied to DEF Pvt. Ltd. located in a SEZ 20 Nil
[Note 3]
(iv) Sale within the State [Note 4] 60. 18 3.6108 3.6108 -
(v) Sale outside the State [Note 4] 40.12 4.8144
(vi) Stock transfer from Noida to Delhi [Note 5] 4.5 0.54
(vii) Goods sent for sale on approval basis on 15th 4.00 0.48
February, 20XX [Note 6]
Total tax liability on goods [A] 3.6108 3.6108 7.0344
Services CGST @ SGST @ IGST@
9% (₹ in 9% (₹ in 18% (₹ in
crores) crores) crores)
(i) Export of services to Nepal under LUT [Note 7] 30 Nil

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(ii) Receipts from renting of buildings [Note 8] 0.15 0.0135 0.0135

Total tax liability on services [B] 0.0135 0.0135
Neither goods nor services
(i) Sale of securities [Note 9] 45 Nil Nil Nil
(ii) Goods procured from vendor in Japan and 0.50 Nil
supplied to buyer in Thailand [Note 10]
Total tax liability on goods and services [(A) + 3.6243 3.6243 7.0344
(B)]
Notes:
(1) As per section 2(5) of the IGST Act, 2017, export of goods means taking goods out of India to a place
outside India. Receipt of consideration in foreign exchange is not a pre-requisite for export of goods.
Export of goods is a zero rated supply in terms of section 16(1)(a) of the IGST Act, 2017. A zero rated
supply is supplied without payment of tax under a LUT in terms of section 16(3)(a) of that Act.
(2) As per section 2(5) of the IGST Act, 2017, export of goods means taking goods out of India to a place
outside India. Since, in the given case, the goods are being assembled in India (Gurugram, Haryana),
the same are not exported.
Hence, the place of supply thereof will be governed by section 10 of the IGST Act, 2017 which
prescribes the provisions for determining the place of supply of goods other than supply of goods
imported into or exported from India. As per section 10(1)(d) of the IGST Act, 2017, where the goods
are assembled or installed at site, the place of supply shall be the place of such installation or
assembly. Therefore, in the given case, the place of supply will be Gurugram, Haryana.
Since the location of the supplier (Uttar Pradesh) and the place of supply (Haryana) are in two
different States, the same is an inter-State supply liable to IGST [Section 7(1)(a) of the IGST Act, 2017
read with section 5(1) of that Act].
(3) As per section 7(5)(b) of the IGST Act, 2017, supply of goods and/or services to a special economic
zone (SEZ) unit is treated to be a supply of goods and/or services in the course of inter-State trade
or commerce. Therefore, supply of goods to a SEZ unit located within the same State shall be liable
to IGST [Section 5(1) of the IGST Act, 2017].
Supply of goods and/or services to a SEZ unit is a zero rated supply in terms of section 16(1)(b) of
the IGST Act, 2017. A zero rated supply is supplied without payment of tax under a LUT in terms of
section 16(3)(a) of that Act.
(4) Remaining turnover will be calculated as under
₹ 256 crore – (₹ 45 crore + ₹ 50 crore + ₹ 30 crore + ₹ 10 crore + ₹ 20 crore + ₹ 0.50 crore + ₹ 0.10
crore + ₹ 0.05 crore + ₹ 0.05 crore)
= ₹ 100.30 crore
Supply within the State - ₹ 100.30 crore x 3/5 = ₹ 60.18
Supply outside the State - ₹ 100.30 crore x 2/5 = ₹ 40.12
Supply within the State is intra-State supply in terms of section 8(1) of IGST Act, 2017 and thus,
chargeable to CGST and SGST. Supply outside the State is inter- State supply chargeable to IGST
[Section 7(1) of IGST Act, 2017 read with section 5(1) of the said Act].
(5) As per section 25(4) of the CGST Act, 2017, a person who has obtained more than one registration,
whether in one State or Union territory or more than one State or
Union territory shall, in respect of each such registration, be treated as ‘distinct persons’.
Schedule I to the CGST Act, 2017 specifies situations where activities are to be treated as supply even

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if made without consideration. Supply of goods and/or services between ‘distinct persons’ as
specified in section 25 of the CGST Act, 2017, when made in the course or furtherance of business is
one such activity included in Schedule I under para 2.
In the given case-
 the location of the supplier is in Noida (Uttar Pradesh); and
 the place of supply is the location of such goods at the time at which the movement thereof
terminates for delivery to the recipient i.e., Delhi, in terms of section 10(1)(a) of the IGST Act,
2017.
Therefore, the stock transfer by Noida office to Delhi branch is an inter-State supply as the location
of the supplier and the place of supply are in two different States [Section 7(1)(a) of IGST Act, 2017].
Thus, the supply is leviable to IGST in terms of section 5(1) of the IGST Act, 2017.
Rule 28 of the CGST Rules, 2017 prescribes the provisions to determine the value of supply of goods
or services or both between distinct or related persons, other than through an agent. Second proviso
to the said rule lays down that where the recipient is eligible for full input tax credit, the value
declared in the invoice shall be deemed to be the open market value of the goods or services.
Therefore, the value of supply in this case will be ₹ 4.5 crore and open market value and cost of
production of the goods will be irrelevant.
(6) As per section 31(7) of the CGST Act, 2017, where the goods being sent or taken on approval for sale
or return are removed before the supply takes place, the invoice shall be issued before or at the time
of supply or six months from the date of removal, whichever is earlier.
In the given case, the time period of six months for goods sent on 15th February, 20XX expires on
15.08.20XX. Therefore, the invoice for the said goods shall be issued on 15.08.20XX and in terms of
section 12(2)(a) of the CGST Act, 2017 read with Notification No. 66/2017 CT dated 15.11.2017, this
date would also be the time of supply of such goods. Thus, such goods will be liable to tax in the
month of August 20XX. Goods sent in the month of January would have been taxed in the month of
July and goods sent in the month of March would be taxed in the month of September.
Here,
 the place of supply is the location of the goods at the time at which the movement thereof
terminates for delivery to the recipient i.e., Haryana in terms of section 10(1)(a) of the IGST Act,
2017.
Since the location of the supplier (Uttar Pradesh) and the place of supply (Haryana) are in two
different States, the same is an inter-State supply liable to IGST [Section 7(1)(a) of the IGST Act, 2017
read with section 5(1) of that Act].
(7) The given case is an export of service as per section 2(6) of the IGST Act, 2017, as-
(i) the supplier of service is located in India (Noida);
(ii) the recipient of service is located outside India (Nepal);
(iii) the place of supply of service is outside India (Place of supply of consulting service will be the
location of recipient, i.e. Nepal);
(iv) the payment for such service has been received by the supplier of service in convertible foreign
exchange or in Indian rupees wherever permitted by the Reserve Bank of India (Receipt of
export consideration in Indian rupees is permitted by RBI in the given case); and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct
person in accordance with Explanation 1 in section 8.
Export of services is a zero rated supply in terms of section 16(1)(a) of the IGST Act, 2017. A
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Supply Under GST
zero rated supply is supplied without payment of tax under a LUT in terms of section 16(3)(a)
of that Act.
(8) Letting out of the building including a commercial, industrial or residential complex for business or
commerce, either wholly or partly, is a supply of service in terms of para 2(b) of the Schedule II to
the CGST Act, 2017. Services by way of renting of residential dwelling for use as residence is exempt
from tax [Notification No. 12/2017 CT (R) dated 28.06.2017]. Therefore, rent of ₹ 10 lakh received
from letting out of building for printing press will be liable to tax and rent of ₹ 5 lakh received from
letting out of building for residential purposes will be exempt from tax.
Further, services by way of loading, unloading, packing, storage or warehousing of agricultural
produce is exempt from tax [Notification No. 12/2017 CT (R) dated 28.06.2017]. However, in the
given case, the Cold Storage Operator and not Skylark Pvt. Ltd. is engaged in warehousing of
agricultural produce. Therefore, the Cold Storage Operator providing warehousing services for
potatoes, being an agricultural produce, will be eligible for such exemption and services provided by
Skylark Pvt. Ltd., being services of renting of immovable property (₹ 5 lakh), will be liable to tax.
In case of letting out of first and third buildings,
 the place of supply is the location of the immovable property, i.e. Noida in terms of section
12(3)(a) of the IGST Act, 2017.
Since the location of the supplier (Uttar Pradesh) and the place of supply (Noida) are in the same
State, the same is an intra-State supply in terms of section 8(1) of the IGST Act, 2017 and is thus,
liable to CGST and SGST.
(9) GST is leviable on supply of goods and/or services [Section 9(1) of the CGST Act, 2017]. Securities
are specifically excluded from the definition of goods and services as provided under clause (52) and
clause (102) respectively of section 2 of the CGST Act, 2017. Therefore, sale of securities will not be
liable to GST.
(10) Paragraph 7 of the Schedule III to CGST Act, 2017 provides that supply of goods from a place in the
non-taxable territory to another place in the non-taxable territory without such goods entering into
India (third country shipments) is treated neither as a supply of goods nor a supply of services. Thus,
there is no GST liability on such sales. Further, since such goods do not enter India at any point of
time, customs duty and IGST leviable on imported goods will also not be leviable on such goods.
Question 23
Mr. Rajesh Surana has a proprietorship firm in the name of Surana & Sons in Jaipur. The firm, registered
under GST in the State of Rajasthan, manufactures taxable products. The firm also provides taxable
consultancy services.
Mr. Rajesh Surana has provided the consultancy service to his brother - Mr. Akhilesh Surana (located in
USA) without any consideration. The products manufactured by Mr. Akhilesh are similar to the ones
manufactured by Mr. Rajesh Surana. Mr. Surana charges Rs. 3,00,000 for providing similar consultancy
services to other independent customers located in USA.
Compute the GST liability, if any, in the given case assuming the rate of CGST, SGST and IGST to be 9%,
9% and 18% respectively.
Answer
Consultancy service to Mr. Akhilesh Surana (located in USA) has been provided without any
consideration. Activity without consideration is not a supply in terms of section 7(1)(a) of the CGST Act,

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Supply Under GST
2017. However, Schedule I to the CGST Act, 2017 enlists the activities to be treated as supply even if made
without consideration. Accordingly, Para 2. of Schedule I treats supply of goods or services or both
between related persons or between distinct persons as specified in section 25, when made in the course
or furtherance of business as a supply even if made without consideration.
However, a brother who is not dependant on the person supplying the service, does not come within the
purview of term family as defined under section 2(49) of the CGST Act, 2017 and hence, is not a related
person. Therefore, the export of service to an independent brother without any consideration will not
fall under para 2. of the Schedule I to CGST Act, 2017. Hence, the activity is not a supply and is thus, not
liable to any tax.
Question 24
Sharma Carriers is a Good Transport Agency engaged in transportation of goods by road. As per the
general business practice, Sharma carriers also provides intermediary and ancillary services like loading
/unloading, packing/unpacking, transhipment and temporary warehousing in relation to transportation
of goods by road.
With reference to the provisions of GST law, analyse whether such services are to be treated as part of
the GTA services, being a composite supply or as mixed supply.
Answer
Composite supply means a supply made by a taxable person to a recipient consisting of two or more
taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled
and supplied in conjunction with each other in the ordinary course of business, one of which is a principal
supply [Section 2(30) of the CGST Act, 2017].
Mixed supply means two or more individual supplies of goods or services, or any combination thereof,
made in conjunction with each other by a taxable person for a single price where such supply does not
constitute a composite supply [Section 2(74) of the CGST Act, 2017].
The various intermediary and ancillary services provided by GTA are not provided as independent
services but as ancillary to the principal service, namely, transportation of goods by road. The invoice
issued by the GTA for providing the said service includes the value of intermediary and ancillary services.
In view of this, if any intermediary and ancillary service is provided in relation to transportation of goods
by road, and charges, if any, for such services are included in the invoice issued by Sharma Carriers, such
service would form part of the GTA service, and thus will be composite supply, and not a mixed supply
even though a single price is charged for the supply.
Further, if such incidental services are provided as separate services and are billed separately, whether
in the same invoice or separate invoices, they will be treated as separate supply and not composite supply
and there being no single price, the supply will also not be treated as mixed supply.
Question 25
Determine whether the following supplies amount to composite supplies
a. A hotel provides 4 days-3 nights package wherein the facility of breakfast and dinner is provided
along with the room accommodation.
b. A toothpaste company has offered the scheme of free toothbrush along with the toothpaste.
Answer
Under composite supply, two or more taxable supplies of goods or services or both, or any combination
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Supply Under GST
thereof, are naturally bundled and supplied in conjunction with each other, in the ordinary course of
business, one of which is a principal supply [Section 2(30) of the CGST Act]. In view of the same,
(a) since, supply of breakfast and dinner with the accommodation in the hotel are naturally bundled,
said supplies qualify as ‘composite supply’.
(b) since supply of toothbrush along with the toothpaste are not naturally bundled, said supplies do
not qualify as ‘composite supply’.
Question 26
State whether the following supplies would be treated as supply of goods or supply of services as per
Schedule II of the CGST Act
a) Renting of immovable property.
b) Goods forming part of business assets are transferred or disposed of by/under directions of person
carrying on the business, whether or not for consideration.
c) Transfer of right in goods without transfer of title in goods.
d) Transfer of title in goods under an agreement which stipulates that property shall pass at a future
date.
Answer
a) Supply of services
b) Supply of goods
c) Supply of services
d) Supply of goods
Question 27
Examine whether the following activities would amount to supply under section 7 read with Schedule I
of the CGST Act:
a. Sulekha Manufacturers have a factory in Delhi and a depot in Mumbai. Both these establishments
are registered in respective States. Finished goods are sent from factory in Delhi to the Mumbai
depot without consideration so that the same can be sold.
b. Raman is an architect in Chennai. His brother who is settled in London is a well-known lawyer.
Raman has taken legal advice from him free of cost with regard to his family dispute.
c. Would your answer be different if in the above case, Raman has taken advice in respect of his
business unit in Chennai?
Answer
a. Title as well as possession both have to be transferred for a transaction to be considered as a supply
of goods. In case title is not transferred, the transaction would be treated as supply of service in
terms of Schedule II (1)(b) of the CGST Act. In some cases, possession may be transferred
immediately but title may be transferred at a future date like in case of sale on approval basis or
hire purchase arrangement. Such transactions will also be termed as supply of goods.
b. Schedule I of CGST Act, inter alia, stipulates that import of services by a taxable person from a
related person located outside India, without consideration is treated as supply if it is provided in
the course or furtherance of business. Explanation to section 15, inter alia, provides that persons

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Supply Under GST
shall be deemed to be “related persons” if they are members of the same family. Further, as per
section 2(49) of the CGST Act, 2017, family means, —
i. the spouse and children of the person, and
ii. the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly
dependent on the said person.
In the given case, Raman has received free of cost legal services from his brother. However, in view
of section 2(49)(ii) above, Raman and his brother cannot be considered to be related as Raman’s
brother is a well-known lawyer and is not wholly/mainly dependent on Raman. Further, Raman
has taken legal advice from him in personal matter and not in course or furtherance of business.
Consequently, services provided by Raman’s brother to him would not be treated as supply under
section 7 of the CGST Act read with Schedule.
c. In the above case, if Raman has taken advice with regard to his business unit, services provided by
Raman’s brother to him would still not be treated as supply under section 7 of the CGST Act read
with Schedule I as although the same are provided in course or furtherance of business, such
services have not been received from a related person.

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Question 1
Panini Private Limited agrees to sponsor a sports event organized by Pink City Club in Jaipur. Panini
Private Limited has paid an amount of ₹ 50,00,000 for such sponsorship of the sports event.
Consequently, said event was named after the brand name of Panini Private Limited. Examine who is the
person liable to pay tax in the given case.
Answer
Notification no 13/2017 CT (R) dated 28.06.2017 as amended (hereinafter referred to as reverse charge
notification), provides that sponsorship services provided by any person to a body corporate or
partnership firm located in the taxable territory, shall be liable to GST under reverse charge in the hands
of recipient.
In the present case, Pink City Club is the supplier of sponsorship services which is receiving the
consideration in the form of sponsorship fee of
5,00,000 from Panini Private Limited, against the provision of sponsorship service. Since the recipient
of sponsorship services- Panini Private Limited is a body corporate, the tax on said services is payable by
the recipient - Panini Private Limited, under reverse charge.
Question 2
Arpan Singhania is a director in Narayan Limited. The company paid him the sitting fee amounting to ₹
25,000, for the month of January. Further, salary was paid to Arpan Singhania amounting to ₹ 1.5 lakh for
the month of January on which TDS was also deducted as per applicable provisions under Income-tax
law. Tapasya & Associates, in which Arpan Singhania is a partner, supplied certain professional services
to Narayan Limited in the month of January for an amount of ₹ 2 lakh. Discuss the person liable to pay
tax in each of the supplies involved in the given case.
Answer
Sitting fee paid to director – As per reverse charge notification, tax on services supplied by a director
of a company/ body corporate to the said company/ body corporate, located in the taxable territory, is
payable under reverse charge. Hence, in the present case, the sitting fee amounting to 25,000, payable to
Arpan Singhania by Narayan Limited, is liable to GST under reverse charge and thus, recipient of service
- Narayan Limited – is liable to pay GST on the same.
Salary paid to director - As per Circular No.140/10/2020 GST dated 10.06.2020, the part of director’s
remuneration which is declared as salary in the books of a company and subjected to TDS under section
192 of the Income-tax Act, are not taxable being consideration for services by an employee to the
employer in the course of or in relation to his employment in terms of Schedule III. Therefore, in the given
case, the salary received by Arpan Singhania of ₹ 1.5 lakh is not liable to GST.
Services provided by Tapasya & Associates – Tapasya & Associates have rendered certain professional
services to Narayan Limited. The fact that Arpan Singhania is a partner in Tapasya & Associates and a
director in Narayan Limited does not have any impact on the taxability of the professional services
supplied by Tapasya & Associates to Narayan Limited. The professional services provided by Tapasya &
Associates to Narayan Limited are liable to GST under forward charge and thus, supplier - Tapasya &
Associates – is liable to pay GST on the same.

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Question 3
Suvidha Technologies is in the business of development of e-commerce platforms for various customers.
Chennai Creations obtained the ownership rights of an e-commerce platform developed by Suvidha
Technologies by paying a specified amount against ownership rights of said portal. Chennai Creations
also entered into an annual maintenance contract with Suvidha Technologies for technical maintenance
of the said portal. Chennai Creations supplies its own goods and services through the said portal to
ultimate customers. Examine who is the e-commerce operator in the given case as per the provisions of
the GST law.
Answer
As per section 2(44), electronic commerce means the supply of goods or services or both, including
digital products over digital or electronic network. Further, as per section 2(45), electronic commerce
operator means any person who owns, operates or manages digital or electronic facility or platform for
electronic commerce.
In the given transaction, the e-commerce platform is developed by Suvidha Technologies. However, the
ownership of the electronic platform is sold by Suvidha Technologies to Chennai Creations. Thus, Chennai
Creations is the owner of the e-commerce platform and is also operating/managing the said platform for
supply of its own goods and services. In view of the definition of e-commerce operator, it is Chennai
Creations which owns, operates or manages digital or electronic facility or platform for electronic
commerce. Suvidha Technologies is merely providing the annual management services for the electronic
platform, but the ownership rights lie with Chennai Creations. Thus, Suvidha Technologies cannot be
termed as electronic commerce operator in the given case and Chennai Creations is the e- commerce
operator.
Question 4
Varun & Arun Associates started a partnership firm of architects in Bhopal (Madhya Pradesh) on 1st
April, The firm provides architecture services, in Madhya Pradesh. It provided the following details of its
turnover:
April - June ₹ 20 lakh

July - Sept ₹ 30 lakh
Oct - Dec ₹ 20 lakh
The firm has obtained the registration under section 22 and pays tax under composition scheme.
Determine the tax liability of Varun & Arun Associates for the quarters: Apr-Jun, Jul-Sept and Oct-Dec.
Note: The rates of tax on architectural services are CGST- 9% and SGST-9%.
Answer
The composition scheme under sub-sections (1) and (2) of section 10 is available in case of goods and
restaurant service. Further, marginal services upto specified limit can be provided along with the supply
of goods or restaurant service, as the case may be. Since, in the given case, Varun & Arun Associates is
supplying services other than restaurant services, it is not eligible to pay tax under sub-sections (1) and
(2) of section 10. However, section 10(2A) provides an option to a registered person, who is not eligible
to pay tax under sub-sections (1) and (2) of section 10, of paying tax @ 6% (CGST-3% and SGST/UTGST-
3%) provided his aggregate turnover in the preceding financial year is upto ₹ 50 lakh. Said person can

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Charge of GST
pay tax @ 6% of the turnover in State or turnover in Union territory up to an aggregate turnover of ₹ 50
lakh, subject to specified conditions.
In the given case, Varun & Arun Associates has started the supply of services in the current financial year.
Therefore, its aggregate turnover in the preceding financial year is Nil. Consequently, it is eligible to avail
the benefit of composition scheme under section 10(2A) of the CGST Act in the current financial year. It
becomes eligible for the registration when its aggregate turnover exceeds ₹ 20 lakh. While registering
under GST, it has to opt for composition scheme under section 10(2A).
For determining its turnover of the State for payment of tax under composition scheme under section
19(2A), turnover of April-June quarter [₹ 20 lakh] shall be excluded as the value of supplies from the first
day of April of a financial year up to the date when such person becomes liable for registration under this
Act are to be excluded for this purpose.
On next ₹ 30 lakh [turnover of July-Sept quarter], it shall pay tax @ 6% [3% CGST and 3% SGST], i.e. CGST
₹ 90,000 and SGST ₹ 90,000.
By the end of July-Sept quarter, its aggregate turnover reaches ₹ 50 lakh*.
Consequently, its option to avail composition scheme under section 10(2A) shall lapse by the end of July-
Sept quarter and thereafter, it is required to pay tax at the normal rate. Thus, the tax payable for Oct-Dec
quarter is ₹ 20 lakh × 9%, i.e. CGST - ₹ 1,80,000 and SGST - ₹ 1,80,000.
*Note - While computing aggregate turnover for determining Varun & Arun Associates’ eligibility to pay
tax under composition scheme, value of supplies from the first day of April of a financial year up to the
date when such person becomes liable for registration under this Act (i.e. turnover of April-June quarter),
are also included.
Question 5
Examine whether the suppliers are eligible for composition levy under section 10 in the following
independent cases in the beginning of the current financial year.
(a) Technology Enterprises, registered in Jalandhar, Punjab, is engaged in manufacturing computer
systems. Its aggregate turnover in the preceding financial year is ₹ 125 lakh. Technology
Enterprises supplies the computer systems manufactured by it within the State of Punjab only.
With a view to expand its business operations, it will also start providing the repairing services
of computer systems in the current financial year.
(b) M/s. Siddharth & Sons, registered in Delhi, owns a restaurant ‘Tasty Foods’ with a turnover of ₹
112 lakh in the preceding financial year. In view of the growing customer demand, it will also
start intra-State trading of juices in Delhi.
(c) Sitaram Associates, registered in Sikkim, is engaged in running a food chain ‘Veg Kitchen’ in the
State. It has a turnover of ₹ 73 lakh in the preceding financial year. In the current financial year,
it decides to shut down the food chain owing to huge losses being incurred in the said business.
Instead, it will start providing intra-State architect services.
(d) Deepti Services Ltd., registered in Uttarakhand, is exclusively providing hair styling services. It
has turnover of ₹ 34 lakh in the preceding financial year.
Will your answer be different, if Deepti Services Ltd. also start supplying beauty products alongwith
providing hair styling services in the current financial year?
Answer
As per section 10(1), the following registered persons, whose aggregate turnover in the preceding
financial year did not exceed ₹ 1.5 crore, may opt to pay tax under composition levy:

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Charge of GST
(i) Manufacturer,
(ii) Persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II
(restaurant services), and
(iii) Any other supplier eligible for composition levy.
The composition scheme under sub-sections (1) and (2) of section 10 can essentially be availed in respect
of goods and only one service namely, restaurant service. However, the scheme permits supply of other
marginal services for a specified value along with the supply of goods and restaurant service, as the case
may be. Such marginal services can be supplied for a value up to 10% of the turnover in the preceding
year or ₹ 5 lakh, whichever is higher. Further, the registered person should not be engaged in making
any inter-State outward supplies of goods.
Furthermore, newly inserted section 10(2A) provides an option to a registered person, who is not eligible
to pay tax under section 10(1) and 10(2), of paying tax @ 6% (CGST-3% and SGST/UTGST-3%) provided
his aggregate turnover in the preceding financial year is upto ₹ 50 lakh. Said person can pay tax @ 6% of
the turnover in State or turnover in Union territory up to an aggregate turnover of ₹ 50 lakh, subject to
specified conditions. One of such conditions is that the registered person should not be engaged in
making any inter-State outward supplies of goods or services.
In view of the above-mentioned provisions, the answer to the given independent cases is as under:-
(a) The turnover limit for being eligible for composition scheme under under sub-sections (1) and (2)
of section 10 for Jalandhar (Punjab) is ₹ 1.5 crore in the preceding financial year. Thus, Technology
Enterprises can opt for said composition scheme as its aggregate turnover is less than ₹ 1.5 crore in
the preceding financial year and it is making intra-State supplies. Further, since the registered
person opting for composition scheme can also supply services (other than restaurant services) for
a value up to 10% of the turnover in the preceding year or ₹ 5 lakh, whichever is higher.
Thus, Technology Enterprises can supply repair services up to a value of ₹ 12.5 lakh [10% of ₹125
lakh] in the current financial year.
(b) In the given case:-
(i) the turnover in the preceding year is less than the eligible turnover limit under composition
scheme under sub-sections (1) and (2) of section 10 for Delhi, i.e. ₹ 1.5 crore.
(ii) the supplier is engaged in providing restaurant service which is an eligible supply under said
composition scheme.
(iii) the supplier wants to engage in trading of goods which is also an eligible supply under said
composition scheme.
Thus, M/s. Siddharth & Sons is eligible for composition scheme under sub-sections (1) and (2) of
section 10.
(c) The turnover limit for being eligible for composition scheme under sub-sections (1) and (2) of
section 10 for Sikkim is ₹ 75 lakh in the preceding financial year. However, a registered person who
is exclusively engaged in supplying services other than restaurant services are not eligible for said
composition scheme. Thus, Sitaram Associates cannot opt for composition scheme under sub-
sections (1) and (2) of section 10.
However, the benefit of composition scheme under section 10(2A) is available in case of a registered
person who is not eligible to pay tax under sub-sections (1) and (2) of section 10 provided its
aggregate turnover in the preceding financial year does not exceed ₹ 50 lakh.
Thus, in view of the above-mentioned provisions, Sitaram Associates cannot avail the benefit of
composition scheme under section 10(2A) also as its aggregate turnover in the preceding financial
year is more than ₹ 50 lakh.

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Charge of GST
(d) A service provider can opt for the composition scheme under sub- sections (1) and (2) of section 10
only if he is engaged in supply of restaurant services. Said scheme permits supply of marginal
services for a specified value, but only when the same are supplied along with goods and/ or
restaurant service.
Since Deepti Services Ltd.is exclusively engaged in supply of services other than restaurant services, it is
not eligible for composition scheme sub- sections (1) and (2) of section 10 even though its turnover in
the preceding year is less than ₹ 75 lakh, the eligible turnover limit for Uttarakhand.
However, since Deepti Services Ltd. is not eligible to opt for composition scheme under sub-sections (1)
and (2) of section 10 and its aggregate turnover in the preceding financial year does not exceed ₹ 50 lakh,
Deepti Services Ltd.is entitled to avail benefit of composition scheme under section 10(2A) in the current
financial year.
Further, the answer will remain the same even if Deepti Services Ltd. also start supplying beauty
products alongwith providing hair styling services in the current financial year since it fulfils the
conditions laid down for availing the benefit of composition scheme under section 10(2A) of the CGST
Act. It can avail the benefit of composition scheme under section 10(2A) till the time its aggregate
turnover in the current year doesn’t exceed ₹ 50 lakh.
Question 6
B & D Company, a partnership firm, in Nagpur, Maharashtra is a wholesaler of a taxable product ‘P’ and
product ‘Q’ exempt by way of a notification. The firm supplies these products only in the eastern part of
Maharashtra. All the procurements (both goods and services) of the firm are from the suppliers
registered under regular scheme in the State of Maharashtra. The firm pays tax under composition
scheme.
B & D Company has furnished the following details with respect to its turnover (exclusive of taxes) and
stock (exclusive of taxes):
Particulars Turnover for the quarter ended Turnover for the quarter ended 30th
30th June (₹) September (₹)
‘P’ 60,00,000 50,00,000
‘Q’ 17,65,000 17,00,000
The extract of the only bill book maintained by the firm showed the following details-
Bill No. Date Value of products (exclusive of taxes)

‘P’ (₹) ‘Q’ (₹) Total (₹)
2306 1st October 2,00,000 3,000 2,03,000
2307 1st October 1,36,000 2,250 1,38,250
2308 2nd October 67000 39,250 1,06,250
2309 3rd October 58,750 33,750 92,500
2310 5th October 1,00,000 - 1,00,000
2311 6th October 94,000 6,000 1,00,000
2312 6th October - 17,000 17,000
2313 8th October 50,000 6,000 56,000
2314 9th October 60,000 9,000 69,000
2315 …………….. …………….. …………….. ……………..
………. …………….. …………….. …………….. ……………..

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Further, B & D Company paid freight of ₹ 1,40,000 to Goods Transport Agency during the period April to
October. Assume equal amount of freight is paid each month on the 10th day of each month. Also, assume
that the goods for which the freight is paid on 10th day of the month are transported between 11th to
20th day of the month
All the above amounts are exclusive of taxes, wherever applicable.
Compute the GST liability (ignoring ITC provisions) of B & D Company for the period April to October
under composition scheme under sub-sections (1) and (2) of section 10 showing calculations for each
quarter separately.
Note: Make suitable assumptions wherever required. Rate of CGST and SGST on service of transportation
of goods by GTA is 2.5% each. Stock is valued at cost price.
Answer
As per section 10(3) read with Notification No.14/2019 CT dated 07.03.2019 as amended, the option
availed by a registered person to pay tax under composition scheme under sub-sections (1) and (2) of
section 10 shall lapse with effect from the day on which his aggregate turnover during a financial year
exceeds ₹ 1.5 crore [₹ 75 lakh in case of Special Category States except Assam, Himachal Pradesh and
Jammu and Kashmir].
As per section 2(6), aggregate turnover means the aggregate value of all taxable supplies (excluding the
value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies,
exports of goods or services or both and inter-State supplies of persons having the same PAN, to be
computed on all India basis but excludes CGST, SGST/UTGST, IGST and GST Compensation Cess.
In the given case, the firm is registered under the composition scheme in the State of Maharashtra. The
aggregate turnover of the firm exceeds ₹ 1.5 crore on 3rd October [aggregate of both taxable and exempt
turnover from 1st April to 3rd October, i.e. ₹ 1,50,05, 1,44,65,000 + ₹ 2,03,000 + ₹ 1,38,250 + ₹ 1,06,250
+ ₹92,500)]
The inward supplies of goods transportation services in respect of which the firm has to pay tax under
reverse charge have not been included in the aggregate turnover in terms of section 2(6). The tax is
payable under reverse charge on such services as the applicable rate of tax on such services is given as
5% and not 12%, in which case the GTA would have been liable to pay tax under forward charge
[Notification No. 13/2017 CT (R) dated 28.06.2017 as amended].
Thus, the firm will have to pay tax under regular scheme (Section 9) from 3rd October.
Output tax liability of B & D Company under composition scheme
During the period when the firm pays tax under composition scheme, i.e. from 1st April to 2nd October,
tax will be payable on quarterly basis and no ITC will be available [Section 10(4) read with sub-sections
(2) and (7) of section 39]. Further, since the firm is trading in goods, tax will be payable @ ½% [Effective
rate - 1% (½% CGST + ½% SGST)] of the turnover of taxable supplies of goods and services (i.e. ‘P’) in
the State [Section 10(1) read with rule 7].
The tax liability for the quarters ended June, September and December under composition scheme will
be computed as under
Particulars Quarter ended Quarter ended 30th Quarter ended 31st

30th June (₹) September (₹) December (₹)
Turnover of ‘P’ (Taxable 60,00,000 50,00,000 4,03,000 [2,00,000 +
supplies) 1,36,000 + 67,000]
CGST @ 0.5% [A1] 30,000 25,000 2,015
SGST @ 0.5%[B1] 30,000 25,000 2,015

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CGST @ 2.5% [A2] 1,500 1,500 -

SGST @ 2.5% [B2] 1,500 1,500
Total CGST [A1 + A2] 31,500 26,500 2,015
Total SGST [B1 + B2] 31,500 26,500 2,015
Total CGST liability for the period from 1st
60,015 [31,500 + 26,500 + 2015]
April to 2nd October
Total SGST liability for the period from 1st
60,015 [31,500 + 26,500 + 2015]
April to 2nd October
Question 7
Shubhlaxmi Foods is engaged in supplying restaurant service in Maharashtra. In the preceding financial
year, it had a turnover of 140 lakh from the restaurant service. Further, it had earned the bank interest
of ₹ 20 lakh from the fixed deposits. You are required to advise Shubhlaxmi Foods whether it is eligible
for the composition scheme under sub-sections (1) and (2) of section 10 in the current financial year.
Further, assuming that in the current financial year, its turnover is ₹ 130 lakh from the supply of
restaurant services and ₹ 10 lakh from the supply of farm labour in Maharashtra. It has also earned the
bank interest of ₹ 30 lakh from the fixed deposits. Compute the tax payable by Shubhlaxmi Foods in the
current FY.
Answer
As per section 10(1) read with Notification No. 14/2019 CT dated 7.03.2019, a registered person, whose
aggregate turnover in the preceding financial year did not exceed ₹ 1.5 crore, may opt to pay, in lieu of
the tax payable by him, an amount calculated at the specified rates if, inter alia, he is not engaged in the
supply of services other than restaurant services.
However, the scheme permits supply of other marginal services for a specified value along with the
supply of goods and restaurant service, as the case may be. Such marginal services can be supplied for a
value up to 10% of the turnover in the preceding year or ₹ 5 lakh, whichever is higher [Second proviso
to section 10(1)]. Although exempt services are included in determining the value of turnover in a State
or Union territory, explanation to section 10(1) clarifies that for the purposes of second proviso to section
10(1), the value of exempt supply of services provided by way of extending deposits, loans or advances
in so far as the consideration is represented by way of interest or discount shall not be taken into account
for determining the value of turnover in a State or Union territory.
Further, the exempt services are also included in the aggregate turnover [Section 2(6)]. However,
explanation 1 to section 10 excludes value of exempt supply of services provided by way of extending
deposits, loans or advances in so far as the consideration is represented by way of interest or discount
from aggregate turnover.
In this backdrop, in the given case, the aggregate turnover of Shubhlaxmi Foods in the preceding FY is ₹
140 lakh (since bank interest of ₹ 20 lakh from the fixed deposits will not be taken into account for
computing aggregate turnover). Resultantly, it is eligible to opt for composition scheme under sub-
sections (1) and (2) of section 10 in the current FY.
Further, apart from restaurant services, it can provide services upto ₹ 14 lakh [i.e. 10% of ₹ 140 lakh or
₹ 5 lakh, whichever is higher], in the current FY. As already seen, bank interest of ₹ 20 lakh from fixed
deposits will not be considered while determining this limit.
Further, tax payable @ 5% (2½% CGST+ 2½% SGST) of the turnover in the State by Shubhlaxmi Foods
in the current financial year is as follows:

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= 5% of ₹ 1,40,00,000 [₹ 1,30,00,000 + ₹ 10,00,000]

[(Bank interest of ₹ 30 lakh from the fixed deposits is not considered while computing turnover in the
State for determining the tax payable under composition scheme (In terms of explanation 2 to section
10)]
= ₹ 7,00,000 [CGST = ₹ 3,50,000 and SGST = ₹ 3,50,000]
Question 8
Bansal and Chandiok started a partnership firm of Chartered Accountants in Jaipur (Rajasthan) on 1st
April. The firm specializes in providing audit services to banks in Rajasthan. It provided the following
details of its turnover:
Quarter Amount (in ₹)

Apr-Jun 10 lakh
Jul-Sep 20 lakh
It crossed the threshold limit of ₹ 20 lakh on 1st August. Bansal and Chandiok wishes to opt to pay tax at
concessional rate under section 10(2A). Examine whether the firm is eligible for this scheme? If yes, then
determine the tax payable by it in quarters (i) Apr-Jun & (ii) Jul-Sep?
Answer
The composition scheme under sub-sections (1) and (2) of section 10 is available in case of goods and
restaurant service. Further, marginal services upto specified limit can be provided along with the supply
of goods or restaurant service, as the case may be. Since, in the given case, Bansal and Chandiok is
supplying services other than restaurant services, it is not eligible to pay tax under sub-sections (1) and
(2) of section 10. However, section 10(2A) provides an option to a registered person, who is not eligible
to pay tax under sub-sections (1) and (2) of section 10, of paying tax @ 6% (CGST-3% and SGST/UTGST-
3%) provided his aggregate turnover in the preceding financial year is upto ₹ 50 lakh. Said person can
pay tax @ 6% of the turnover in State or turnover in Union territory up to an aggregate turnover of ₹ 50
lakh, subject to specified conditions.
In the given case, Bansal and Chandiok has started the supply of services in the current financial year.
Therefore, its aggregate turnover in the preceding financial year is Nil. Consequently, it is eligible to avail
the benefit of composition scheme under section 10(2A) of the CGST Act in the current financial year. It
becomes eligible for the registration when its aggregate turnover exceeds ₹ 20 lakh. While registering
under GST, it has to opt for composition scheme under section 10(2A).
Tax payable by the firm is as follows:
(i) Apr-Jun quarter: Tax payable by the firm in first quarter is nil since the firm’s turnover [₹ 10 lakh]
has not yet exceeded the threshold limit of ₹20 lakh (viz. the threshold limit applicable for
registration in the State of Rajasthan).
(ii) July-Sep quarter: While computing the tax payable by the firm in second quarter, the turnover
from 1st April to the date from which he becomes liable for registration under the Act is to be
excluded. Tax payable will be computed as under-
Total Turnover ₹ 30,00,000/-
Less: Threshold limit for registration ₹ 20,00,000/-
Taxable Turnover ₹ 10,00,000/-
Tax @ 6% ₹ 60,000/-*
*CGST = ₹ 30,000 and SGST = ₹ 30,000

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Question 9
Mr. Prem is running a restaurant in New Delhi. In the preceding financial year, it has an aggregate
turnover of ₹ 120 lakh from the restaurant services. In the current financial year, apart from restaurant
service, he also wants to provide food delivery services to other small restaurants. He estimated the
turnover of such services is upto ₹ 5 lakh.
Mr. Prem wishes to opt for composition scheme under sub-sections (1) and (2) of section 10 in the
current financial year. You are required to advise him for same.
Answer
As per section 10(1) read with Notification No.14/2019 CT dated 07.03.2019, a registered person, whose
aggregate turnover in the preceding financial year did not exceed ₹ 1.5 crore, may opt to pay, in lieu of
the tax payable by him, an amount calculated at the specified rates if, inter alia, he is not engaged in the
supply of services other than restaurant services.
However, the scheme permits supply of other marginal services for a specified value along with the
supply of goods and restaurant service, as the case may be. Such marginal services can be supplied for a
value up to 10% of the turnover in the preceding year or ₹ 5 lakh, whichever is higher.
In the present case, since the aggregate turnover of Mr. Prem was ₹ 120 lakh in preceding financial year
(i.e. it did not exceed ₹ 1.5 crore), he is eligible for composition scheme in the current financial year.
Further, in the current financial year, he can also supply services other than restaurant services for a
value upto ₹ 12 lakh (10% of ₹ 120 lakh) or ₹ 5 lakh, whichever is higher. Thus, till the time his turnover
from food delivery services does not exceed ₹ 12 lakh, he is eligible for the scheme.
Question 10
M/s Heeralal and Sons, registered in Karnataka, has opted to avail the benefit of composition scheme
under sub-sections (1) and (2) of section 10. It has furnished the following details for the quarter ended
on 30th June
S. No. Items ₹
(i) Taxable turnover of goods within the State 15,00,000
(ii) Exempted turnover of goods within the State 17,00,000
Total Turnover 32,00,000
Using the above information, calculate tax to be paid by the firm for quarter ended on 30th June in
following independent situations:
(i) M/s Heeralal and Sons is a manufacturer
(ii) M/s Heeralal and Sons is a trader
Answer
Computation of amount payable under composition scheme
(i) If M/s Heeralal and Sons is a manufacturer:
Tax is to be paid @ 1% (½% CGST+ ½% SGST) of the turnover in the State as under:
1% of ₹ 32,00,000 [₹ 15,00,000 + 17,00,000]
= ₹ 32,000 [CGST = ₹ 16,000 and SGST = ₹ 16,000]

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(ii) If M/s Heeralal and Sons is a trader:

Tax is to be paid @ 1% (½% CGST + ½%SGST) of the turnover of taxable supplies of goods and
services in the State as under:
= 1% of ₹ 15,00,000
= ₹ 15,000 [CGST = ₹ 7,500 and SGST = ₹ 7,500]
Question 11
Harishchandra of New Delhi makes a request for a motor cab to "Super ride" for travelling from New
Delhi to Gurgaon (Haryana). After Harishchandra pays the cab charges using his debit card, he gets details
of the driver - Jorawar Singh and the cab's registration number.
"Super ride" is a mobile application owned and managed by Perry India Ltd. located in India. The
application "Super ride" facilitates a potential customer to connect with the persons providing cab
service under the brand name of "Super ride".
Perry India Ltd. claims that cab service is provided by Jorawar Singh and hence, he is liable to pay GST.
With reference to the provisions of IGST Act, 2017, determine who is the person liable to pay GST in this
case?
Answer
Section 5(5) of the IGST Act, 2017 provides that tax on inter-State supplies of specified services notified
by Government shall be paid by the electronic commerce operator (ECO) located in taxable territory if
such services are supplied through it. Services by way of transportation of passengers by a motor cab
supplied through ECO is one of the notified service.
Electronic commerce operator (ECO) means any person who owns, operates or manages digital or
electronic facility or platform for supply of goods or services or both [Section 2(45)].
Since Perry India Ltd. owns and manages a mobile application in the name of “Super ride”, to facilitate
supply of passenger transportation service in motor cabs over a digital network, it is an ECO. Thus, Perry
India Ltd., an ECO located in India, is liable to pay GST in the given case.
Question 12
MN Ltd. has two registered places of business in the State of Haryana. Its aggregate turnover during the
previous financial year for both the places of business was ₹ 62 lakh. It wishes to opt for composition
levy under sub-sections (1) and (2) of section 10 for one of the place of business in the current year and
wants to continue with registration under regular scheme and pay taxes at the normal rate for the other
place of business. Can MN Ltd. do so? Explain with reason.
Answer
As per proviso to section 10(2), where more than one registered persons are having the same PAN issued
under the Income-tax Act, 1961, the registered person shall not be eligible to opt for the composition
scheme under section 10(1) unless all such registered persons opt to pay tax under said composition
scheme.
In the given case, since MN Ltd. has two places of business (they are not separate entities under the
Income-tax Act, 1961), they would be registered under the same PAN. Therefore, MN Ltd. cannot opt for
composition levy for only one of the places of business and pay tax under regular scheme for other place
of business.

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Question 13
Ranveer Industries, registered in Himachal Pradesh, is engaged in making inter-State supplies of
readymade garments. The aggregate turnover of Ranveer Industries in the preceding financial year is ₹
70 lakh. It has opted for composition levy under sub-sections (1) and (2) of section 10 in the current
financial year and paid tax for the April – June quarter of current year under composition levy.
The proper officer has levied penalty for wrongly availing the scheme on Ranveer Industries in addition
to the tax payable by it.
Examine the validity of the action taken by proper officer.
Answer
As per section 10(1), a registered person, whose aggregate turnover in the preceding financial year did
not exceed ₹ 1.5 crore in a State/UT [₹ 75 lakh in case of Special Category States except Assam, Himachal
Pradesh and Jammu and Kashmir], may opt for composition scheme.
However, he shall not be eligible to opt for composition scheme if, inter alia, he is engaged in making any
inter-State outward supplies of goods.
In the given case, since Ranveer Industries is engaged in making inter-State supplies of readymade
garments, it is not eligible to opt for composition scheme in current year irrespective of its turnover not
exceeding the threshold limit of ₹ 75 lakh in the preceding FY.
Further, if the proper officer has reasons to believe that a taxable person has paid tax under composition
scheme despite not being eligible, such person shall, in addition to any tax payable, be liable to a penalty
and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and
penalty.
Thus, the action taken by the proper officer of levying the penalty for wrongly availing the composition
scheme is valid in law.

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Question 14
Examine whether the suppliers are eligible for composition scheme in the following independent cases.
Is there any other option available for concessional tax payment with any of these suppliers, wherever
composition scheme cannot be availed?
(a) M/s. Devlok, a registered dealer, is dealing in intra-State trading of electronic appliances in Jaipur
(Rajasthan). It has turnover of ₹ 130 lakh in the preceding financial year. In the current financial
year, it has also started providing repairing services of electronic appliances.
(b) M/s. Narayan & Sons, a registered dealer, is running a “Khana Khazana” Restaurant near City Palace
in Jaipur. It has turnover of ₹ 140 lakh in the preceding financial year. In the current financial year,
it has also started dealing in intra-State trading of beverages in Jaipur (Rajasthan).
(c) M/s. Indra & Bro, a registered dealer, is providing restaurant services in Uttarakhand. It has
turnover of ₹ 70 lakh in the preceding financial year. It has started providing intra-State interior
designing services in the current financial year and discontinued rendering restaurant services.
(d) M/s. Him Naresh, a registered dealer, is exclusively providing intra-State architect services in
Uttarakhand. It has turnover of ₹ 40 lakh in the preceding financial year.
Answer
As per section 10(1) of the CGST Act, 2017, the following registered persons, whose aggregate turnover
in the preceding financial year did not exceed ₹ 1.5 crore, may opt to pay tax under composition levy:
a) Manufacturer,
b) Persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II
(restaurant services), and
c) Any other supplier eligible for composition levy.
Thus, essentially, the composition scheme under sub-sections (1) and (2) of section 10 can be availed in
respect of goods and only one service namely, restaurant service. However, the scheme permits supply
of other marginal services for a specified value along with the supply of goods and restaurant service, as
the case may be. Such marginal services can be supplied for a value up to 10% of the turnover in the
preceding year or ₹ 5 lakh, whichever is higher.
Further, the registered person should not be engaged in making any inter- State outward supplies of
goods.
Furthermore, newly inserted section 10(2A) provides an option to a registered person, who is not eligible
to pay tax under section 10(1) and 10(2), of paying tax @ 6% (CGST-3% and SGST/UTGST-3%) provided
his aggregate turnover in the preceding financial year is upto ₹ 50 lakh. Said person can pay tax @ 6% of
the turnover in State or turnover in Union territory up to an aggregate turnover of ₹ 50 lakh, subject to
specified conditions. One of such condition is that the registered person should not be engaged in making
any inter-State outward taxable supplies of goods or services.
In view of the above-mentioned provisions, the answer to the given independent cases is as under:-
a. The turnover limit for composition scheme under sub-sections (1) and (2) of section 10 in case of
Jaipur (Rajasthan) is ₹ 1.5 crore. Thus, M/s. Devlok can opt for composition scheme as its aggregate
turnover is less than ₹1.5 crore and he is making intra-State supplies. Further, since the registered
person opting for composition scheme can also supply services (other than restaurant services)
for a value up to 10% of the turnover in the preceding year or ₹ 5 lakh, whichever is higher. Thus,
M/s. Devlok can supply repair services up to a value of ₹13 lakh [10% of ₹130 lakh]in the current
financial year.

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b. In the given case:-

(i) the turnover in the preceding year is less than the eligible turnover limit, i.e. ₹ 1.5 crore.
(ii) the supplier is engaged in providing restaurant service which is an eligible supply under
composition scheme.
(iii) the supplier wants to engage in trading of goods which is also an eligible supply under
composition scheme.
Thus, M/s. Narayan & Sons is eligible for composition scheme.
c. The turnover limit for composition scheme under sub-sections (1) and (2) of section 10 in case of
Uttarakhand is ₹ 75 lakh. Further, a registered person who is exclusively engaged in supplying
services other than restaurant services are not eligible for composition scheme. Thus, M/s. Indra&
Bro cannot opt for composition scheme.
Further, the benefit of concessional tax payment under section 10(2A) is available in case of a
registered person whose aggregate turnover in the preceding financial year does not exceed ₹ 50
lakh. Thus, in view of the above-mentioned provisions, M/s. Indra& Bro cannot avail the benefit of
concessional tax payment under section 10(2A) as its aggregate turnover in the preceding financial
year is more than ₹ 50 lakh.
d. An service provider can opt for the composition scheme under sub- sections (1) and (2) of section
10 only if he is engaged in supply of restaurant services. The composition scheme permits supply
of marginal services for a specified value, but only when the same are supplied along with goods
and/ or restaurant service.
Since M/s. Him Naresh is exclusively engaged in supply of services other than restaurant services,
it is not eligible for composition scheme under sub-sections (1) and (2) of section 10 even though
its turnover in the preceding year is less than ₹ 75 lakh, the eligible turnover limit for Uttarakhand.
However, since M/s. Him Naresh is not eligible to opt for composition scheme under sub-sections
(1) and (2) of section 10, its aggregate turnover in the preceding financial year does not exceed ₹
50 lakh and it is exclusively engaged in supply of intra- State services other than restaurant
services, M/s. Him Naresh is entitled to avail benefit of concessional payment of tax under section
10(2A) of the CGST Act, 2017.
Question 15
XYZ Ltd., New Delhi, manufactures biscuits under the brand name ‘Tastypicks’. Biscuits are supplied to
wholesalers and distributors located across India on FOR basis from the warehouse of the company
located at New Delhi. The company uses multiple modes of transport for supplying the biscuits to its
customers spread across the country. The transportation cost is shown as a line item in the invoice and
is billed to the customers with a mark-up of 2% on total amount of freight paid (inclusive of taxes).
Flour used for the production process is procured from vendors located in Madhya Pradesh on ex-factory
basis. The company engages goods transport agencies (GTA) to transport the flour from the factories of
the vendors to its factory located in New Delhi.
The company has provided the following data relating to transportation of biscuits and flour in the month
of April 20XX:
- For sales within the NCR region (₹ 20,00,000), the company arranged a local mini-van belonging
to an individual and paid him ₹ 54,000.
- For sales to locations in distant States (₹ 1,78,00,000), the company booked the goods by Indian
Railways and paid rail freight of ₹ 3,17,000.
- For sales to locations in neighbouring States (₹ 55,00,000), the company booked the goods by road
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carriers (GTAs) and paid road freight of ₹ 3,73,000. Out of the total sales to neighbouring States,
goods worth ₹ 10,00,000 were booked through a GTA which paid tax @ 12%. Freight of ₹ 73,000
was paid to such GTA.
- For purchase of flour from Madhya Pradesh (₹ 25,00,000), the company booked the goods by a GTA
and paid road freight of ₹ 55,000.
- For purchase of butter from Punjab (₹ 15,00,000), the company booked the goods by a GTA and
paid road freight of ₹ 35,000.
- For local purchase of baking powder, the company booked the goods by a GTA in a single carriage
and paid road freight of ₹ 1,500.
- For transferring the biscuits (open market value - ₹ 4,00,000) to one of its sister concern in
Rajasthan, the company booked the goods by a GTA and paid road freight of ₹ 40,000.
(i) Based on the particulars given above, compute the GST payable on the amount paid for
transportation by XYZ Ltd. when it avails the services of different transporters.
(ii) Compute the GST charged on transportation cost billed by the company to its customers.
Note: - Assume the rate of GST on transportation of goods to be 5% [except where any other rate is
specified in the question] and GST on supply of biscuits to be 12%
Answer
(i) Computation of GST payable on amount paid for transportation by XYZ Ltd. when it
avails the services of different transporters
Particulars Freight [₹] GST payable [₹]

Transportation of biscuits in a local mini van belonging to an 54,000 Nil
individual
[Only the transportation of goods by road by a GTA is liable to
GST. Therefore, transportation of goods by road otherwise
than by a GTA is exempt from GST – Notification No. 12/2017
CT(R) & 9/2017 IT (R) both dated 28.06.2017.]
Transportation of biscuits by Indian Railways 3,17,000 15,850
Transportation of biscuits by GTA 3,00,000 15,000
[GST is payable by XYZ Ltd. under reverse charge in terms of
section 5(3) of the IGST Act, 2017 read with Notification No.
10/2017 IT (R) dated 28.06.2017.]
Transportation of biscuits by GTA @ 12% 73,000 8,760
[When the GTA pays tax @ 12%, tax is payable by the GTA
under forward charge and not by the recipient under reverse
charge - Notification No. 10/2017 IT (R) dated 28.06.2017.]
Transportation of flour by GTA 55,000 Nil
[Services provided by GTA by way of transport (in a goods
carriage) of, inter alia, flour are exempt from GST vide
Notification No. 9/2017 IT (R) dated 28.06.2017.]
Transportation of butter by GTA 35,000 1,750
[Though services provided by GTA by way of transport (in a
goods carriage) of, inter alia, milk is exempt from GST vide
Notification No. 9/2017 IT (R) dated 28.06.2017, road
transport of butter will not be exempted as butter is milk

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product and not milk.

GST is payable by XYZ Ltd. under reverse charge in terms of
10/2017 IT (R) dated 28.06.2017.]
Transportation of baking powder by GTA 1,500 Nil
[Services provided by a GTA by way of transport in a goods
carriage of goods, where consideration charged for the
transportation of goods on a consignment transported in a
single carriage does not exceed ₹ 1,500, are exempt from GST
vide Notification No. 9/2017 IT (R) dated 28.06.2017.]
Transportation of biscuits by GTA to sister concern 40,000 2,000
[GST is payable by XYZ Ltd. under reverse charge in terms of
10/2017 IT (R) dated 28.06.2017.]
Total tax payable by XYZ Ltd. on availing services of 43,360
different transporters
(ii) Computation of GST charged on transportation cost billed by XYZ Ltd. to its customers
Since XYZ Ltd. is supplying biscuits on FOR basis, the service of transportation of biscuits gets
bundled with the supply of biscuits. Thus, the supply of biscuits and transportation service is a
composite supply, chargeable to tax at the rate applicable to the principal supply (biscuits) i.e.,12%
[Section 8(a) of the CGST Act, 2017 read with the definition of ‘composite supply’ under section
2(30) of the CGST Act, 2017 and ‘principal supply’ under section 2(90) of the CGST Act, 2017].
Freight billed
Freight GST paid on GST charged
(with mark-up @
Particulars paid [₹] freight [₹] @ 12%
2% on [A] + [B])
[A] [B] [₹]
[₹]
Transportation of biscuits in
a local minivan belonging to 54,000 - 55,080 6,610
an individual
Transportation of biscuits by
3,17,000 15,850 3,39,507 40,741
Indian Railways
3,00,000 15,000 3,21,300 38,556
GTA
73,000 8,760 83,395 10,007
GTA @ 12%
Total tax charged by XYZ
Ltd. on Transportation cost 95,914
billed to the customers*
*Note: It has been assumed that there is no mark-up on transportation cost billed to sister concern
(non-customer).
Question 16
Mr. Sanjay of New Delhi made a request for a Motor cab to "Super ride" for travelling from New Delhi to
Gurgaon (Haryana). After Mr. Sanjay pays the cab charges using his debit card, he gets details of the driver
Mr. Jorawar Singh and the cab's registration number.

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Charge of GST
"Super ride" is a mobile application owned and managed by D.T. Ltd. located in India. The application
"Super ride" facilitates a potential customer to connect with the persons providing cab service under the
brand name of "Super ride".
D.T. Ltd. claims that cab service is provided by Mr. Jorawar Singh and hence, he is liable to pay GST. With
reference to the provisions of IGST Act, 2017, determine who is liable to pay GST in this case?
Would your answer be different, if D.T. Ltd. is located in New York (USA)? Also briefly state the statutory
provisions involved.
Answer
Section 5 of IGST Act, 2017 provides that tax on inter-State supplies of specified services notified by
Government shall be paid by the electronic commerce operator (ECO) located in taxable territory if such
services are supplied through it. Services by way of transportation of passengers by a motor cab supplied
through ECO is one of the notified service.
Electronic commerce operator means any person who owns, operates or manages digital or electronic
facility or platform for supply of goods or services or both, including digital products over digital or
electronic network.
Since DT Ltd. owns and manages a mobile application to facilitate supply of passenger transportation
service in motor cabs over a digital network, it is an ECO. Thus, DT Ltd., an ECO located in India is liable
to pay GST in the given case.
However, where an ECO does not have a physical presence in the taxable territory, person representing
ECO is liable to pay tax. Further, where ECO has neither the physical presence nor any representative in
the taxable territory, person appointed by the ECO for the purpose of paying the tax is liable to pay tax.
Accordingly, if D.T. Ltd. is located in New York (USA), any person representing DT Ltd. for any purpose
in India is liable to pay tax.
Further, if D.T. Ltd. also does not have a representative in India, it shall appoint a person in India for the
purpose of paying tax and such person shall be liable to pay tax.
Question 17
Mr. Rajbeer, a registered person at Delhi, is in the business of selling goods relating to interior decoration
under the firm name M/s. Rajbeer & Sons. He has opted for composition scheme for the Financial Year
(FY) 2018-19.
His turnover for FY 2018-19 is ₹ 80 lakh and is expected to achieve ₹ 130 lakh in FY 2019-20. Discuss
whether M/s Rajbeer & Sons can still enjoy the benefits of composition scheme in FY 2019-20.
His son Karan wants to start business of providing services relating to interior decoration, after
completing post-graduation course in interior decoration under same firm name M/s Rajbeer & Sons
with effect from 01.04.2019 and wants to enjoy the benefits of composition scheme under GST.
Advise Mr. Rajbeer and his son Karan.
Answer
As per section 10 of the CGST Act, 2017, a registered person, whose aggregate turnover in the preceding
financial year did not exceed ₹ 1.5 crore in a State/UT may opt for composition scheme, provided he is,
inter alia, engaged in supply of goods and/or restaurant service.
However, a person who opts for composition scheme is permitted to supply services other than
restaurant service of value not exceeding 10% of turnover in a State/UT in the preceding financial year
or ₹ 5 lakh, whichever is higher.

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Charge of GST
In the given case, M/s. Rajbeer & Sons (It has been assumed that M/s Rajbeer & Sons is a sole
proprietorship.), engaged in business of selling goods relating to interior decoration, is eligible for
composition scheme in FY 2019-20 since its aggregate turnover in preceding FY (viz. ₹ 80 lakh) does not
exceed ₹ 1.5 crore.
If Karan wishes to start the business of providing services relating to interior decoration under the same
firm name M/s Rajbeer & Sons, the sole proprietorship needs to be first converted into a partnership
firm. Further, new GST registration under the new PAN is required to be obtained.
In such a case, the firm can provide services relating to interior decoration up to a value of ₹ 5 lakh (10%
of zero turnover of last year or ₹ 5 lakh, whichever is higher) to continue enjoying the benefit of
composition scheme in FY 2019-20.
Question 18
M/s All-in-One, a partnership concern and a registered supplier under GST, is engaged in providing
various services under one roof. The concern provides the following information pertaining to supply
made/input services availed by it during the month of March 2020:
Particulars ₹
(i) Provided Direct Selling Agent service to Y Bank Ltd. 4,00,000
(ii) Provided security services to ABC P. Ltd., a registered person under GST 60,000
(iii) Provided security services to PSR Trust, an unregistered person under GST 1,00,000
(iv) Provided renting of motor vehicle to Amaze Tours Ltd. and supply value 75,000
included cost of fuel
(v) Provided renting of motor vehicle to Priti & Co., CA firm and supply value 40,000
included cost of fuel
(vi) Availed representational service from PB and Co., a law firm towards a 70,000
Consumer Court case
Determine the GST liability of M/s All-in-One for the month of March, 2020 by giving necessary
explanations for treatment of various items. Rate of tax for both inward and outward supply is
CGST/SGST@ 9% each except renting a vehicle, for which CGST/SGST @ 2.5% each is applicable. M/s All-
in-One commenced its business from February, 2020. All the supplies are intra-State only.
Answer
GST liability of M/s All-in-One
Particulars Value CGST SGST

[₹] payable [₹] payable [₹]
A. GST liability on outward supply
(i) Direct selling agent service to Y Bank Ltd. [Tax is 4,00,000 36,000 36,000
payable under forward charge since the supplier of [4,00,000 x [4,00,000 x
such service is a 9%] 9%]
partnership firm and not an individual.]
(ii) Security services to ABC P. Ltd., a registered person* -
[Tax is payable under reverse charge by the
recipient since security services are provided by a
non-body corporate to a registered person.]
*It is assumed that security services are the services

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Charge of GST
provided by way of supply of security personnel.

And it is also assumed that ABC Pvt. Ltd. pays tax
under section 9 of the CGST Act, 2017.
(iii) Security services to PSR Trust, an unregistered 1,00,000 9,000 9,000
person [1,00,000 x [1,00,000 x
[Tax is payable under forward charge since security 9%] 9%]
services are provided by a non- body corporate to
an unregistered person.]
(iv) Renting of motor vehicle to Amaze Tours Ltd. where -
value included cost of fuel
[Tax is payable under reverse charge by recipient
since such services are provided by a non-body
corporate to a body corporate and GST is payable @
5%.]
(v) Renting of motor vehicle to Priti & Co., CA firm, 40,000 1,000 1,000
where supply value included cost of fuel [40,000 x [40,000 x
[Tax is payable under forward charge since such 2.5%] 2.5%]
services are provided by a non-body corporate to a
non-body corporate.]
Total GST liability on outward supplies 46,000 46,000
B. GST liability on inward supplies under reverse charge
(vi) Availed representational service from PB and Co, a 70,000 - -
law firm
[Legal services provided by a partnership firm of
advocates/individual advocate other than a senior
advocate to a business entity with an aggregate
turnover up to such amount in the preceding
financial year as makes it eligible for exemption
from registration, are exempt from GST.
Since M/s All-in-One started its business in
February 2020, its turnover in the preceding
financial year is zero making it eligible for
exemption from registration in the preceding
financial year and hence, the legal services provided
to it are exempt from GST.]
GST liability on inward supplies under reverse - -
charge
Question 19
Determine whether the supplier in the following cases are eligible for composition levy provided their
turnover in preceding year does not exceed Rs. 1.5 Crore:
a) Mohan Enterprises is engaged in trading of pan masala in Rajasthan and is registered in the same
State.
b) Sugam Manufacturers has registered offices in Punjab and Haryana and supplies goods in
neighbouring States.
Answer
a) A supplier engaged in the manufacture of goods as notified under section 10(2)(e), during the

Page 3.18
Charge of GST
preceding FY is not eligible for composition scheme. Ice cream and other edible ice, whether or not
containing cocoa, Pan masala and Tobacco and manufactured tobacco substitutes are hereby
notified. However, in the given case, since Mohan Enterprises is engaged in trading of pan masala
and not manufacture and his turnover does not exceed Rs. 1.5 crore, he is eligible for composition
scheme subject to fulfilment of specified conditions.
b) Since supplier of inter-State outward supplies of goods is not eligible for composition levy, Sugam
Manufacturers is not eligible for composition levy.
Question 20
A person availing composition scheme in Haryana during a financial year crosses the turnover of Rs. 1.5
crore during the course of the year i.e. he crosses the turnover of Rs. 1.5 crore in December? Will he be
allowed to pay tax under composition scheme for the remainder of the year, i.e. till 31st March?
Answer
No. The option to pay tax under composition scheme lapses from the day on which the aggregate turnover
of the person availing composition scheme during the financial year exceeds the specified limit (Rs. 1.5
crore). Once he crosses the threshold, he is required to file an intimation for withdrawal from the scheme
in prescribed form within 7 days of the occurrence of such event.
Every person who has furnished such an intimation, may electronically furnish at the common portal, a
statement in prescribed form containing details of the stock of inputs and inputs contained in semi-
finished or finished goods held in stock by him on the date on which the option is withdrawn, within a
period of 30 days from the date from which the option is withdrawn.
Question 21
State person liable to pay GST in the following independent cases provided recipient is located in the
taxable territory:
a) Services provided by an arbitral tribunal to any business entity.
b) Sponsorship services provided by a company to an individual.
c) Renting of immovable property service provided by the Central Government to a registered
business entity.
Answer
a) Since GST on services provided or agreed to be provided by an arbitral tribunal to any business
entity located in the taxable territory is payable under reverse charge, in the given case, GST is
payable by the recipient - business entity.
b) GST on sponsorship services provided by any person to anybody corporate or partnership firm
located in the taxable territory is payable under reverse charge. Since in the given case, services
have been provided to an individual, reverse charge provisions will not be attracted. GST is payable
under forward charge by the supplier – company.
c) GST on services supplied by Central Government, State Government, Union territory/ local
authority by way of renting of immovable property to a person registered under CGST Act, 2017 is
payable under reverse charge. Therefore, in the given case, GST is payable under reverse charge
by the recipient – registered business entity.

Page 3.19
CHAPTER - 4
Exemptions from GST
Question 1
Examine whether the following independent intra-State services are exempt from GST:
(a) Legal services provided by BMC & Partners, Delhi, a partnership firm of advocates, to Vastukaar
Enterprises, registered in Delhi, providing architect services (with preceding financial year’s
aggregate turnover as ₹ 21 lakh).
(b) Minimum balance charges collected by Dhanvarsha Bank from current account and saving account
holders.
Answer
(a) Services provided by a partnership firm of advocates or an individual as an advocate other than a
senior advocate, by way of legal services to a business entity with an aggregate turnover up to such
amount in the preceding financial year as makes it eligible for exemption from registration under
the CGST Act, 2017, are exempt from GST vide Notification No. 12/2017 CT (R) dated 28.06.2017
(hereinafter referred to as exemption notification).
Since in the given case, services are being provided by the partnership firm of advocates - BMC &
Partners to a business entity – Vastukaar Enterprises whose aggregate turnover in the preceding FY
exceeded ₹ 20 lakh i.e. the threshold limit for registration applicable to a service provider in Delhi,
said services are not exempt from GST.
(b) Services by way of extending deposits, loans or advances in so far as the consideration is represented
by way of interest or discount (other than interest involved in credit card services) are exempt from
GST vide exemption notification.
However, service charges/ fees, documentation fees, broking charges, administrative charges, entry
charges or such like fees or charges collected over and above interest on loan, advance or a deposit
are not exempt and liable to GST.
In view of the above, minimum balance charges collected by Dhanvarsha Bank from current account
and saving account holders are not exempt and are liable to GST.
Question 2
Shiva Medical Centre, a Multi-speciality hospital, is a registered supplier in Mumbai. It hires senior
doctors and consultants independently, without entering into any employer-employee agreement with
them. These doctors and consultants provide consultancy to the in-patients - patients who are admitted
to the hospital for treatment – without there being any contract with such patients. In return, they are
paid the consultancy charges by Shiva Medical Centre.
However, the money actually charged by Shiva Medical Centre from the in-patients is higher than the
consultancy charges paid to the hired doctors and consultants. The difference amount retained by the
hospital, i.e. retention money, includes charges for providing ancillary services like nursing care,
infrastructure facilities, paramedic care, emergency services, checking of temperature, weight, blood
pressure, etc.
The Department took a stand that senior doctors and consultants are providing services to Shiva Medical
Centre and not to the patients. Hence, their services are not the health care services and must be subject
to GST.

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Exemptions from GST
Further, GST is applicable on the retention money kept by Shiva Medical Centre.
You are required to examine whether the stand taken by the Department is correct.
Answer
No, the stand taken by the Department is not correct.
Services by way of health care services by a clinical establishment, an authorised medical practitioner or
para-medics are exempt from GST vide exemption notification.
Health care services have been defined to mean any service by way of diagnosis or treatment or care for
illness, injury, deformity, abnormality or pregnancy in any recognised system of medicines in India and
includes services by way of transportation of the patient to and from a clinical establishment, but does
not include hair transplant or cosmetic or plastic surgery, except when undertaken to restore or to
reconstruct anatomy or functions of body affected due to congenital defects, developmental
abnormalities, injury or trauma.
Circular No. 32/06/2018 GST dated 12.02.2018 has clarified that the entire amount charged by the
hospitals from the patients including the retention money and the fee/payments made to the doctors etc.,
is towards the healthcare services provided by the hospitals to the patients and is exempt from GST. In
view of the same, GST is not applicable on the retention money kept by Shiva Medical Centre.
The circular also clarifies that services provided by senior doctors/ consultants/ technicians hired by the
hospitals, whether employees or not, are also healthcare services exempt from GST. Hence, services
provided by the senior doctors and consultants hired by Shiva Medical Centre, being healthcare services,
are also exempt from GST.
Question 3
Vedanta Hospital, Gurgaon has its own restaurant – Annapurna Bhawan - in the basement which supplies
food to its in-patients (patients admitted in the hospital) as per the advice of the doctor/nutritionist.
Annapurna Bhawan also supplies food to other patients (who are not admitted) or their attendants or
visitors. The food is prepared by the employees of the hospital and nothing is outsourced to any third-
party vendors. Vedanta Hospital is of the view that all services provided by a clinical establishment are
exempt from GST and thus, it is not liable to pay any tax. You are required to test the correctness of the
view taken by Vedanta Hospital.
Answer
Services by way of health care services by a clinical establishment, an authorised medical practitioner or
para-medics are exempt from GST vide exemption notification. Circular No. 32/06/2018 GST dated
12.02.2018 has clarified that food supplied by the hospital canteen to the in-patients as advised by the
doctor/nutritionists is a part of composite supply of healthcare services and is not separately taxable.
Thus, it is exempt from GST. However, other supplies of food by a hospital to patients (not admitted) or
their attendants or visitors are taxable.
In view of the same, GST is not applicable on the food supplied by Annapurna Bhawan to in-patients as
advised by doctors/nutritionists while other supplies of food by it to patients (not admitted) or their
attendants/visitors are taxable.
Question 4
Indian Institutes of Management (IIM), Indore organizes a placement drive for the students studying in
the campus. Many multinational companies register for the placement program and pay the registration

Page 4.2
Exemptions from GST
fee of ₹ 1,00,000. IIM, Indore is of the view that such consideration received from multinational
companies for participating in the placement program is exempt from GST. Explain whether the view
taken by IIM, Indore is correct.
Answer
Indian Institutes of Management Act, 2017 (IIM Act, 2017) empowers IIMs to (i) grant degrees, diplomas,
and other academic distinctions or titles, (ii) specify the criteria and process for admission to courses or
programmes of study, and (iii) specify the academic content of programmes. Resultantly, all the IIMs fall
under purview of “educational institutions” as they provide education as a part of a curriculum for
obtaining a qualification recognized by law for the time being in force.
Further, the services provided by an educational institution to its students, faculty and staff are exempt
from GST vide exemption notification.
However, in the given case, services have been provided by the educational institution (viz. IIM, Indore),
to the multinational companies. Therefore, the same is not exempt from GST.
Question 5
India Corporations Ltd., a Public Sector Undertaking (PSU), has taken loan from a banking company -
Wellness Bank. The loan was guaranteed by the Central Government. India Corporations Ltd. defaulted
in the repayment of such loan. Examine whether the services of guaranteeing of loan by the Central
Government, in the given case, is liable to GST.
Answer
Services supplied by Central Government, State Government, Union territory to their undertakings or
Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs
from the banking companies and financial institutions are exempt from GST vide exemption notification.
In the present case, Central Government has guaranteed the loan taken by India Corporations Ltd. [a
PSU], from Wellness Bank, [a banking company]. Consequently, services provided by the Central
Government, in the form of guarantee of loan, are exempt from tax
Question 6
British High Commission, chief diplomatic mission of the United Kingdom in India, is providing advisory
services to the students willing to travel to UK for further studies. The mission has organized a seminar
for such students and a registration fee of ₹ 5,000 per student has been charged from the students for
the same. You are required to determine whether the advisory services provided by British High
Commission are liable to GST.
Answer
Services by a foreign diplomatic mission located in India are exempt from GST vide exemption
notification. Hence, in the given case, advisory services by British High Commission located in Delhi to
the students are exempt from GST.
Question 7
Bhushan Biomedical Waste Ltd. is providing service of bio-medical waste treatment to Vishudhi Pharma
Company. For such services, Bhushan Biomedical Waste Ltd. has charged a fixed sum on monthly basis.

Page 4.3
Exemptions from GST
Whether the service provided by Bhushan Biomedical Waste Ltd. is exempt under GST?
Answer
Services provided by operators of the common bio-medical waste treatment facility to a clinical
establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto
are exempt GST vide exemption notification. Further, the term “clinical establishment” means a hospital,
nursing home, clinic, sanatorium or any other institution by, whatever name called, that offers services
or facilities requiring diagnosis or treatment or care for illness, injury, deformity, abnormality or
pregnancy in any recognised system of medicines in India, or a place established as an independent entity
or a part of an establishment to carry out diagnostic or investigative services of diseases
In the present case the bio-medical waste treatment services are being provided to a pharma company.
The definition of term “clinical establishment” does not cover a pharma company within its purview.
Therefore, services provided by Bhushan Biomedical Waste Ltd. to Vishudhi Pharma Company are not
exempt from GST.
Question 8
Determine whether GST is payable in respect of each of the following independent services provided by
the registered persons:
(1) Fees charged from office staff for in-house personality development course conducted by
Mungerilal College providing education as part of a curriculum for obtaining a qualification
recognised by Indian law -₹ 10,000.
(2) Bus fees collected from students by Rosemary College providing education as part of a curriculum
for obtaining a qualification recognised by Indian law - ₹ 2,500 per month.
(3) Housekeeping service provided by M/s. Clean Well to Himavarsha Montessori school, a play school,
for cleaning its playground and classrooms - ₹ 25,000 per month.
(4) Info link supplied ‘Tracing Alphabets’, an online educational journal, to students of UKG class of
Sydney Montessori School - ₹ 2,000.
Answer
(1) Services provided by an educational institution to its students, faculty and staff are exempt from
GST vide exemption notification. Educational Institution has been defined to mean, inter alia, an
institution providing services by way of education as a part of a curriculum for obtaining a
qualification recognised by any law for the time being in force.
Since Mungerilal College provides education as part of a curriculum for obtaining a qualification
recognised by Indian law, the services provided by it to its staff by way of conducting personality
development course would be exempt from GST.
(2) Since Rosemary College provides education as a part of a curriculum for obtaining a qualification
recognised by Indian law, the transport services provided by Rosemary College to its students are
exempt from GST.
(3) Services provided to an educational institution, by way of, inter alia, house-keeping services
performed are exempt from GST vide exemption notification where such services are performed
in such educational institution. However, such exemption is available only when the said services
are provided to a pre-school education and a higher secondary school or equivalent.
In view of the above discussion, house-keeping services provided to Himavarsha Montessori Play
School are exempt from GST since housekeeping services have been performed in such play school

Page 4.4
Exemptions from GST
itself.
(4) Services provided to an educational institution by way of supply of online educational journals or
periodicals is exempt from GST vide exemption notification. However, such exemption is available
only when the said services are provided to an educational institution providing education as a
part of a curriculum for obtaining a qualification recognised by any law for the time being in force.
Therefore, supply of online journal to students of UKG class of Sydney Montessori School is not
exempt from GST.
Question 9
Sarva Sugam Charitable Trust, a trust registered under section 12AA of the Income – tax Act, 1961,
provides the following information relating to supply of its services for the month of August:
Amount (₹)
Renting of residential dwelling for use as a residence 18,00,000
Renting of rooms for devotees (Charges per day ₹ 750) 6,00,000
Renting of kalyanamandapam (Charges per day ₹ 15,000) 12,00,000
Renting of halls and open space (Charges per day ₹ 7,500) 10,75,000
Renting of shops for business (Charges per month ₹ 9,500) 4,75,000
Renting of shops for business (Charges per month ₹ 12,000) 7,50,000
Compute the GST liability of Sarva Sugam Charitable Trust for the month of August assuming that the
above amounts are exclusive of GST and rate of GST, wherever applicable, is 18%.
Note: The rooms/ Kalyanamandapam/ halls/ open space/ shops owned by the trust are located within
the precincts of a religious place, meant for general public, owned by the trust.
Answer
Renting of precincts of a religious place meant for general public, owned/managed by, inter alia, an entity
registered as a charitable trust under section 12AA of the Income-tax Act are exempt from GST vide
exemption notification. However, said exemption is not available if:
(i) charges for rented rooms are ₹ 1,000 per day or more;
(ii) charges for rented community halls, Kalyan mandapam, open area are₹ 10,000 per day or more;
(iii) charges for rented shops are ₹ 10,000 per month or more.
Further, services by way of renting of residential dwelling for use as residence are also exempt vide
exemption notification.
Computation of GST liability of Sarva Sugam Charitable Trust for August
Particulars Value (₹) GST @18% (₹)

Renting of residential dwelling for use as residence 18,00,000 Nil
[Exempt vide exemption notification]
Renting of rooms for devotees 6,00,000 Nil
[Exempt since charges per day are below ₹1,000]
Renting of Kalyanamandapam 12,00,000 2,16,000
[Taxable since charges per day exceed ₹10,000]
Renting of halls and open spaces 10,75,000 Nil
[Exempt since charges per day are below ₹10,000]
Renting of shops for business 4,75,000 Nil

Page 4.5
Exemptions from GST
[Exempt since charges per month are below ₹10,000]

Renting of shops for business 7,50,000 1,35,000
[Taxable since charges per month exceed ₹10,000]
Total 3,51,000
Question 10
Mr. Nagarjun, a registered supplier of Chennai, has received the following amounts in respect of the
activities undertaken by him during the month of September:
S. No. Particulars Amount(₹)

(i) Amount charged for service provided to recognizedsports body as selector of 50,000
national team.
(ii) Commission received as an insurance agent from insurance company. 65,000
(iii) Amount charged as business correspondent for the services provided to the 15,000
urban branch of anationalized bank with respect to savings bank accounts.
(iv) Service to foreign diplomatic mission located in India. 28,000
(v) Funeral services. 30,000
He received the services from unregistered goods transport agency for his business activities and paid
freight of ₹ 45,000 (his aggregate turnover of previous year was ₹ 9,90,000).
Note: All the transactions stated above are intra-State transactions and also are exclusive of GST.
You are required to calculate gross GST liability (ignoring ITC provisions) of Mr. Nagarjun for the month
of September assuming that the rate of GST, wherever applicable, is 18% except the GTA services where
the rate of GST is 5%. Working notes should form part of your answer.
Answer
Computation of gross GST liability of Mr. Nagarjun
Particulars Value GST (₹)

(₹)
Supplies on which Mr. Nagarjun is liable to pay GST under forward charge
Amount charged for service provided to recognized sports body as selector of 50,000 9,000
national team [Note 1]
Commission received as an insurance agent frominsurance company [Note Nil Nil
2]
Amount charged as business correspondent forthe services provided to the 15,000 2,700
urban branch of a nationalised bank with respect to savings bank accounts
[Note 3]
Services provided to foreign diplomatic mission located in India [Note 4] 28,000 5,040
Funeral services [Note 5] Nil Nil
Supplies on which Mr. Nagarjun is liable to pay GST under reverse charge
Services received from GTA [Note 6] 45,000 2,250
GST payable 18,990
Notes:
(1) Services provided to a recognized sports body by an individual only as a player, referee, umpire,

Page 4.6
Exemptions from GST
coach or team manager for participation in a sporting event organized by a recognized sports body
are exempt from GST vide exemption notification. Thus, service provided as selector of team is
liable to GST.
(2) Commission for providing insurance agent’s services is liable to GST. However, the tax payable
thereon is to be paid by the recipient of service i.e., insurance company, under reverse charge in
terms of Notification No. 13/2017 CT (R) dated 28.06.2017. Thus, Mr. Nagarjun will not be liable
to pay GST on such commission.
(3) Services provided by business correspondent to a banking company with respect to accounts in its
rural area branch are exempt from GST vide exemption notification. Thus, such services provided
in respect of urban area branch will be taxable.
(4) While services provided by a foreign diplomatic mission located in India are exempt from GST vide
exemption notification, services provided to such mission are taxable.
(5) Funeral services being covered in Schedule III of CGST Act are not a supply and thus, are outside
the ambit of GST.
(6) GST on services provided by a GTA (not paying tax @ 12%) to, inter alia, a registered person is
payable by the recipient of service i.e., the registered person, under reverse charge in terms of
Notification No. 13/2017 CT (R) dated 28.06.2017. The turnover of previous year is irrelevant in
this case.
Question 11
Vividh Pvt. Ltd. is a supplier of goods and services at Bangalore, registered in the State of Karnataka,
having turnover of ₹ 200 lakh in the last financial year. It has furnished the following information for the
month of June.
Particulars Amount (₹)
excluding GST
Services provided by way of a labour contract for repairing a single
1,30,000
residential unit otherwise than as a part of residential complex
Fee received from students of a competitive examtraining academy
5,40,000
run by Vividh Pvt. Ltd.
4 buses each with a seating capacity of 72 passengersgiven on hire to
6,00,000
State Transport Undertaking
Rent paid to Local Municipal Corporation for premisestaken on rent
2,50,000
for competitive exam training academy
Goods transport services received from GTA, tax ispayable on such
1,80,000
services @ 12%
Compute gross GST liability (ignoring ITC provisions) of Vividh Pvt. Ltd. for the month of June assuming
that the above amounts are exclusive of GST and rate of GST, wherever applicable, is 18% unless
otherwise mentioned
Answer
Computation of gross GST liability of Vividh Pvt. Ltd.
Particulars Value of GST @

supply (₹) 18% (₹)
Services provided by way of labour contracts for repairing a single 1,30,000 2,34,000

Page 4.7
Exemptions from GST
residential unit otherwisethan as a part of residential complex

[Services by way of pure labour contracts of construction, erection,
commissioning, or installation of original works pertaining to a single
residential unit otherwise than as a part of a residential complex are
exempt vide exemption notification. Labour contracts for repairing, are
thus, taxable.]
Fee received from students of competitive exam training academy 5,40,000 97,200
[Fee received from students of competitive exam training academy is
taxable as it is not an educational institution since competitive exam
training does not lead to grant of a recognized qualification]
Buses each with seating capacity of 72 passengers given on hire to State 6,00,000 Nil
Transport Undertaking
[Services by way of giving on hire to a state transport undertaking (STU), a
motor vehicle meant to carry more than 12 passengers, are exempt from
GST vide exemption notification.]
Services on which tax is payable under reverse charge:
Rent paid to Local Municipal Corporation 2,50,000 45,000
[GST is payable under reverse charge in case of renting of immovable
property services supplied by a local authority to a registered person.]
GTA services availed 1,80,000 Nil
[Since GTA is paying tax @ 12%, tax is payable under forward charge by
GTA only and not by Vividh Pvt. Ltd.]
Gross GST payable 3,76,200
Question 12
“Chanakya Academy” is registered under GST in the State of Uttar Pradesh. The Academy runs the
following educational institutions:
(i) ‘Keshav Institute of Technology’ (KIT), a private engineering college in Ghaziabad. KIT also runs
distance learning post graduate engineering programmes. Exams for such programmes are
conducted in select cities at centres appointed by the KIT. All the engineering courses including the
distance learning post graduate engineering programme run by KIT are recognised by the law [The
All India Council for Technical Education (AICTE)].
(ii) ‘Little Millennium’, a pre-school in Lucknow.
(iii) ‘Bright Minds’, a coaching institute in Kanpur. The Institute provides coaching for Institute of
Banking Personnel Selection (IBPS) Probationary Officers Exam.
(iv) ‘Spring Model’ a higher secondary school affiliated to CBSE Board.
The Academy provides the following details relating to the expenses incurred by the various institutions
run by it during the period April to September:
Little Bright Spring

S. KIT
Particulars Millennium Minds Model
No. (₹)
(₹) (₹) (₹)
(i) Printing services for printing the question
papers (paper and content are provided by 2,50,000 1,50,000 2,00,000
the Institutions)
(ii) Paper procured for printing the question 4,30,000 2,58,000 3,44,000
Page 4.8
Exemptions from GST
papers
(iii) Honorarium to paper setters and
examiners (not on the rolls of the 5,00,000
Institution)
(iv) Rent for exam centers taken on rent like
8,00,000 1,00,000
schools etc., for conducting examination
(v) Subscription for online educational
journals [Little Millennium has taken the
4,00,000 80,000 2,20,000 2,40,000
subscription for online periodicals on child
development and experiential learning]
(vi) Hire charges for buses used to transport
students and faculty from their residence 4,80,000 5,50,000 1,30,000 7,50,000
to the institutions and back
(vii) Catering services for running a canteen in
the campus for students (Catering services
for KIT include a sum of ₹ 60,000 for 3,20,000 2,60,000 1,80,000 5,00,000
catering at a student event organised in a
banquet hall outsidethe campus)
(viii) Security and housekeeping services for the
institution(s) (Security and housekeeping
services for Spring Model include a sum of
₹ 80,000 payable for security and 6,00,000 4,00,000 3,75,000 4,65,000
housekeeping at the student event
organised in a banquet hall outside the
campus)
With the help of the above details, determine the amount of GST payable, if any, (ignoring ITC provisions)
on goods and services received during April to September by the various educational institutions run by
the ‘Chanakya Academy’; all the amounts given above are exclusive of taxes, wherever applicable.
Note: Rate of GST on goods is 12%, catering service is 5% and on other services is 18%
Answer
Exemption notification exempts select services provided to an educational institution. Here, the
“educational institution” means an institution providing services by way of,-
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time
being in force;
(iii) education as a part of an approved vocational education course;
The select services which are exempt when provided to an educational institution are-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State
Government or Union territory;
(iii) security or cleaning or house-keeping services performed in such educational institution;
(iv) services relating to admission to, or conduct of examination by, such institution;
(v) supply of online educational journals or periodicals
However, the services mentioned in points (i), (ii) and (iii) are exempt only when the same are provided

Page 4.9
Exemptions from GST
to an educational institution providing services by way of pre-school education and education up to

higher secondary school or equivalent.
Also, the supply of online educational journals or periodicals is not exempt from GST when provided to-
(i) pre-school education and education up to higher secondary school or equivalent; or
(ii) education as a part of an approved vocational education course.
Further, services by way of giving on hire motor vehicle for transport of students, faculty and staff, to a
person providing services of transportation of students, faculty and staff to an educational institution
providing services by way of pre-school education and education upto higher secondary school or
equivalent is exempt17.
In the given case, all the engineering courses including the distance learning post graduate engineering
programme run by KIT are recognised by the law [The All India Council for Technical Education (AICTE)].
Therefore, since KIT imparts education as a part of a curriculum for obtaining a qualification recognised
by the Indian law, the same is an educational institution in terms of the exemption notification.
Similarly, Little Millennium and Spring Model, being a pre-school and a higher secondary school
respectively are also educational institutions in terms of the exemption notification.
However, Bright Minds, being a coaching centre, training candidates to secure a banking job, is not an
educational institution in terms of the exemption notification. Hence, none of the select services
(mentioned above) will be exempt when provided to Bright Minds.
In the light of the foregoing provisions, the amount of GST payable on goods and services received by
these educational institutions during April to September is computed as under:
Particulars KIT Little BrightMinds Spring

Millennium Model
(₹) (₹) (₹) (₹)
Printing services for printing Exempt
the question papers (paper [Services Provided to 27,000
and Content are provided by educational institution [1,50,000 x Exempt
the Institutions) in relation to conduct 18%]
of examination]
Paper procured for printing
the question papers [Supply
of Select services to 30,960 41,280
51,600
educational institutions is [2,58,000 x [3,44,000 x
[4,30,000 x 12%]
exempt and not supply of 12%] 12%]
goods to such educational
institutions]
Honorarium to paper setters Exempt
And examiners (not on the [Services provided to
rolls Of the Educational educational institution
institution) in relation to conduct
of examination]
Rent for exam centres taken Exempt
on rent like schools etc., for [Servicesprovided 18,000
conducting examination educational institution [1,00,000 x
in relation to conduct 18%]
of examination]
Subscription for online Exempt 14,400 39,600 43,200

Page 4.10
Exemptions from GST
educational journals [Little [80,000 x [2,20,000 x [2,40,000 x

Millennium has taken the 18%] 18%] 18%]
subscription for online
periodicals on child
development & experiential
learning]
Hire charges forbuses used
23,400
to transport students and 86,400
Exempt [1,30,000 x Exempt
Faculty from their residence [4,80,000 x 18%]
18%]
to the institutions and back
Catering servicesfor running
a canteen in the campus for
students [Catering service
provided to pre-school and
the higher secondary school 9,000
16,000
is exempt irrespective of Exempt [1,80,000 x Exempt
[3,20,000 x 5%]
whether the same is provided 5%]
within or outside the
premises of the pre-school
and the higher secondary
school]
Security and housekeeping
services for the institution(s)
[Security and Housekeeping
service provided to pre-
school & higher secondary
school for the student event 67,500 14,400
1,08,000
organised in a banquet hall Exempt [3,75,000 x [80,000 x
[6,00,000 x 18%]
will be taxable as only the 18%] 18%]
security & housekeeping
service provided within the
premises of the pre-school
and the higher secondary
school areexempt.]
Total GST Payable on goods
2,62,000 14,400 2,15,460 98,880
and services received

Page 4.11
Exemptions from GST

Question 13
“Chanakya Academy” is registered under GST in the State of Uttar Pradesh. The Academy runs the
following educational institutions:
(i) ‘Keshav Institute of Technology’ (KIT), a private engineering college in Ghaziabad. KIT also runs
distance learning post graduate engineering programmes. Exams for such programmes are
conducted in select cities at centres appointed by the KIT. All the engineering courses including the
distance learning post graduate engineering programme run by KIT are recognised by the law [The
All India Council for Technical Education (AICTE)].
(ii) ‘Little Millennium’, a pre-school in Lucknow.
(iii) ‘Bright Minds’, a coaching institute in Kanpur. The Institute provides coaching for Institute of
Banking Personnel Selection (IBPS) Probationary Officers Exam.
(iv) ‘Spring Model’ a higher secondary school affiliated to CBSE Board.
The Academy provides the following details relating to the expenses incurred by the various institutions
run by it during the period April 20XX to September 20XX:
Table 1
S. Little Bright Spring

Particulars KIT (₹)
No. Millennium (₹) Minds (₹) Model (₹)
(i) Printing services for printing the
question papers (paper and
2,50,000 1,50,000 2,00,000
content are provided by the
Institutions)
(ii) Paper procured for printing the
4,30,000 2,58,000 3,44,000
question papers
(iii) Honorarium to paper setters and
examiners (not on the rolls of the 5,00,000
Institution)
(iv) Rent for exam centers taken on rent
like schools etc., for conducting 8,00,000 1,00,000
examination
(v) Subscription for online educational
journals [Little Millennium has
taken the subscription for online 4,00,000 80,000 2,20,000 2,40,000
periodicals on child development
and experiential learning]
(vi) Hire charges for buses used to
transport students and faculty from
4,80,000 5,50,000 1,30,000 7,50,000
their residence to the institutions
and back
(vii) Catering services for running a
canteen in the campus for students
(Catering services for KIT include a
3,20,000 2,60,000 1,80,000 5,00,000
sum of ₹ 60,000 for catering at a
student event organised in a
banquet hall outside the campus)

Page 4.12
Exemptions from GST
(viii) Security and housekeeping services

for the institution(s) (Security and
housekeeping services for Spring
Model include a sum of ₹ 80,000
6,00,000 4,00,000 3,75,000 4,65,000
payable for security and
housekeeping at the student event
organised in a banquet hall outside
the campus)
The academy further provides the following details relating to the receipts of the various institutions run
by it during the period April 20XX to September 20XX:
Table 2
S. Little Bright Spring

No. Millennium (₹) Minds (₹) Model (₹)
(i) Tuition fee 35,00,000 15,00,000 20,00,000 25,00,000
(ii) Transport fee charged from
5,00,000 6,00,000 1,30,000 8,50,000
students
With the help of the above details –

(i) determine the amount of GST payable, if any, on goods and services received during April 20XX to
September 20XX by the various educational institutions run by the ‘Chanakya Academy’;
(ii) Compute net GST liability of the ‘Chanakya Academy’ payable from the Electronic Cash Ledger, for
the period April 20XX to September 20XX.
All the amounts given above are exclusive of taxes, wherever applicable.
Notes:
(a) Rate of GST on goods is 12%, catering service is 5% and on other services is 18%.
(b) Wherever relevant, all the conditions necessary for availing the ITC have been complied with.
Answer
(i) Notification No. 12/2017 CT(R) dated 28.06.2017 (hereinafter referred to as exemption
notification) which exempts various services from GST leviable thereon exempts select services
provided to an educational institution.
Here, the “educational institution” means an institution providing services by way of,-
(i) pre-school education and education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for
the time being in force;
(iii) education as a part of an approved vocational education course;
The select services which are exempt when provided to an educational institution are-
(i) transportation of students, faculty and staff;
(ii) catering, including any mid-day meals scheme sponsored by the Central Government, State
Government or Union territory;
(iii) security or cleaning or house-keeping services performed in such educational institution;
(iv) services relating to admission to, or conduct of examination by, such institution;
(v) supply of online educational journals or periodicals
However, the services mentioned in points (i), (ii) and (iii) are exempt only when the same are
Page 4.13
Exemptions from GST
provided to an educational institution providing services by way of pre-school education and

education up to higher secondary school or equivalent.
Also, the supply of online educational journals or periodicals is not exempt from GST when
provided to-
(i) pre-school education and education up to higher secondary school or equivalent; or
(ii) education as a part of an approved vocational education course.
Further, as per S. No. 22 of Notification No. 12/2017 CT (R) services by way of giving on hire motor
vehicle for transport of students, faculty and staff, to a person providing services of transportation
of students, faculty and staff to an educational institution providing services by way of pre-school
education and education upto higher secondary school or equivalent is exempt.
In the given case, all the engineering courses including the distance learning post graduate
engineering programme run by KIT are recognised by the law [The All India Council for Technical
Education (AICTE)]. Therefore, since KIT imparts education as a part of a curriculum for obtaining
a qualification recognised by the Indian law, the same is an educational institution in terms of the
exemption notification.
Similarly, Little Millennium and Spring Model, being a pre-school and a higher secondary school
respectively are also educational institutions in terms of the exemption notification.
However, Bright Minds, being a coaching centre, training candidates to secure a banking job, is not
an educational institution in terms of the exemption notification. Hence, none of the select services
(mentioned above) will be exempt when provided to Bright Minds.
In the light of the foregoing provisions, the amount of GST payable on goods and services received
by these educational institutions during April 20XX to September 20XX is computed as under:
Little Bright Spring

Millennium (₹) Minds (₹) Model (₹)
Printing services for Exempt
printing the question [Services provided
27,000
papers (paper & content to educational
[1,50,000 x Exempt
are provided by the institution in
18%]
Institutions) relation to conduct
of examination]
Paper procured for
printing the question
papers – [Supply of select
30,960 41,280
services to educational 51,600
[2,58,000 x [3,44,000 x
institutions is exempt and [4,30,000 x 12%]
12%] 12%]
not supply of goods to
such educational
institutions]
Honorarium to paper Exempt
setters and examiners [Services provided
(not on the rolls of the to educational
educational institution) institution in
relation to conduct
of examination]

Page 4.14
Exemptions from GST
Rent for exam centres Exempt

taken on rent like schools [Services provided
18,000
etc. for conducting to educational
[1,00,000 x
examination institution in
18%]
relation to conduct
of examination]
Subscription for online
educational journals
[Little Millennium has 39,600 43,200
14,400
taken the subscription for Exempt [2,20,000 x [2,40,000 x
[80,000 x 18%]
online periodicals on child 18%] 18%]
development and
experiential learning]
Hire charges for buses
used to transport students 23,400
86,400
and faculty from their Exempt [1,30,000 x Exempt
[4,80,000 x 18%]
residence to the 18%]
institutions and back
Catering services for
running a canteen in the
campus for students
[Catering service provided
to pre- school and the
9,000
higher secondary school is 16,000
Exempt [1,80,000 x Exempt
exempt irrespective of [3,20,000 x 5%]
5%]
whether the same is
provided within or outside
the premises of the pre-
school and the higher
secondary school]
Security & housekeeping
services for institution(s)
[Security & housekeeping
service provided to pre-
secondary school for the
student event organised in 67,500 14,400
1,08,000
a banquet hall will be Exempt [3,75,000 x [80,000 x
[6,00,000 x 18%]
taxable as only the 18%] 18%]
security & housekeeping
service provided within
the premises of the pre-
secondary school are
exempt.]
Total payable GST on the
2,62,000 14,400 2,15,460 98,880
goods and Services

Page 4.15
Exemptions from GST
received by the
educational institutions
(ii) (1) Sl. No. 66 of Notification No. 12/2017 CT(R) dated 28.06.2017 also exempts services provided
by an educational institution to its students, faculty and staff. All the educational institutions
run by the Chanakya Academy except Bright Minds are educational institutions in terms of the
exemption notification (as explained under point (i) above). Therefore, the education services
and the transport services provided by KIT, Little Millennium, and Spring Model to its students
will be exempt from GST under Sl. No. 66 of the exemption notification. Thus, only the
educational services provided by Bright Minds will be liable to GST @ 18%.
(2) No input tax credit (ITC) will be availed on inputs and input services used in providing exempt
education services, i.e. education services by KIT, Little Millennium, and Spring Model. Only
Bright Minds will be entitled to avail ITC on inputs and input services used in providing taxable
education services. However, ITC on outdoor catering services will be blocked in terms of
section 17(5)(b)(i) of the CGST Act, 2017.
(3) Since there are no common inputs and input services being used for providing taxable and
exempt services, the need for reversal of ITC attributable to exempt supplies will not arise.
In the light of the foregoing provisions, the net GST liability of Chanakya Academy, which will
comprise of only the tax liability of Bright Minds, is computed as under:
Particulars Bright Minds (₹)

Tuition fee 20,00,000
Transport fee charged from students 1,30,000
Value of output supply taxable @ 18% 21,30,000
GST liability @ 18% 3,83,400
Less: ITC [Total tax payable by Bright Minds on the service received by it as
computed in point (i) above less the tax payable on catering charges
(2,15,460 - 9,000)] 2,06,460
Net GST payable from Electronic Cash Ledger 1,76,940
Question 14
Pethalal has obtained registration in the current financial year in Uttar Pradesh. His turnover in the
preceding financial year was ₹ 19,90,000. He has received the following amounts in respect of the
activities undertaken by him in the month of September:
S. No. Particulars Amount (₹)

(i) Funeral services 8,80,000
(ii) Services of warehousing of jaggery 50,000
(iii) Electrically operated buses given on hire to Municipal Corporation 5,00,000
(iv) Service provided to recognized sports body as commentator 2,00,000
(v) Commission received as an insurance agent from insurance company 65,000
(vi) Commission received as business facilitator for the services provided to the 15,000
urban branch of a nationalized bank with respect to savings bank accounts

Page 4.16
Exemptions from GST
(vii) Security services (supply of security personnel) provided to Damodar 28,000

Engineering College (DEC)* [registered under GST] for the security of the
college premises
*All the engineering courses run by DEC are recognised by the law [The All
India Council for Technical Education (AICTE)]
Further, he has received following services in the month of September:
(a) Freight paid to unregistered goods transport agency for his business 1,00,000
activities relating to serial number (i) above
(b) Legal advice received from M/s Kanoon Associates, a partnership firm, 50,000
seeking advice in relation to a tax dispute of the business
All the transactions stated above are intra-State transactions and amounts given are exclusive of GST,
wherever applicable.
You are required to calculate net GST payable by Pethalal for the month of September. There was no
opening balance of input tax credit. Rate of CGST and SGST is 9% each for all the outward supplies made
by Pethalal.
Answer
Computation of net GST payable by Pethalal
Particulars Amount (₹) CGST (₹) SGST (₹)

Supplies on which Pethalal is liable to pay GST under
forward charge
Funeral services [Note 1] 8,80,000
Services of warehousing of jaggery [Note 2] 50,000
Services by way of giving on hire electrically operated 5,00,000
buses to Municipality [Note 3]
Service provided to recognized sports body as 2,00,000 18,000 18,000
commentator taxable @ 9% CGST & 9% SGST [Note 4]
Commission received as an insurance agent from 65,000
insurance company [Note 5]
Commission received as business facilitator 15,000
for the services provided to the urban branch of a
nationalised bank with respect to savings bank accounts
[Note 6]
Security services (supply of security personnel) provided 28,000
to DEC for the security of the college premises [Note 7]
Value of taxable supply 2,00,000
Total tax liability on outward supplies (A) 18,000 18,000
Supplies on which Pethalal is liable to pay GST under
reverse charge
Services received from GTA taxable at 2.5% CGST & 2.5% 1,00,000 2,500 2,500
SGST [Note 8]
Legal services received [Note 9] 50,000
Page 4.17
Exemptions from GST
Total tax liability on inward supplies under reverse 2,500 2,500

charge (B) - payable in cash [Note 10]
ITC available on input services [Note 8] Nil Nil
Net GST payable (A) + (B) 20,500 20,500
Notes:
(1) Funeral services being covered in entry 4 of Schedule III to the CGST Act, 2017 are not a supply and
thus, are outside the ambit of GST.
(2) Services by way of storage/ warehousing of, inter alia, jaggery are exempt from GST vide
Exemption Notification No. 12/2017 CT(R) dated 28.06.2017 (hereinafter referred to as
exemption notification). Thus, services of warehousing of jaggery are exempt.
(3) Services by way of giving on hire to a local authority, an Electrically operated vehicle (EOV) meant
to carry more than 12 passengers are exempt vide exemption notification. Buses are EOVs meant
to carry more than 12 passengers. Hence, services of giving electrically operated buses on hire to
Municipal Corporation are exempt from GST.
(4) Services provided to a recognized sports body by an individual only as a player, referee, umpire,
are exempt from GST vide exemption notification. Thus, service provided as commentator is liable
to GST.
(5) Though commission for providing insurance agent’s services to any person carrying on insurance
business is liable to GST, the tax payable thereon is to be paid by the recipient of service i.e.,
insurance company, under reverse charge in terms of Notification No. 13/2017 CT(R) dated
28.06.2017 (hereinafter referred to as reverse charge notification). Thus, Pethalal will not be liable
to pay GST on such commission.
(6) Services provided by a business facilitator to a banking company with respect to accounts in its
rural area branch are exempt from GST vide exemption notification. Thus, services provided by
him in respect of urban area branch of the bank will be taxable. However, the tax payable thereon
is to be paid by the recipient of service i.e., banking company, under reverse charge in terms of
reverse charge notification. Hence, Pethalal will not liable to pay GST on commission received for
said services.
(7) Services provided to an educational institution, by way of security services performed in such
educational institution are exempt from GST only when said services are provided to an institution
providing services by way of pre-school education and education up to higher secondary school or
equivalent, vide exemption notification. Thus, in the given case, security services provided to DEC
are not exempt. Further, the tax on security services (supply of security personnel) provided by
any person other than a body corporate to a registered person is payable by the recipient of service
under reverse charge in terms of reverse charge notification. Hence, Pethalal will not be liable to
pay GST in the given case.
(8) GST on services provided by a GTA (not paying tax @ 12%) to, inter alia, a registered person is
payable by the recipient of service i.e., the registered person, under reverse charge in terms of
reverse charge notification. Since in the given case, GTA is unregistered, Pethalal is liable to pay tax
under reverse charge @ 5% (CGST @ 2.5% and SGST @ 2.5%). Further, since said input services
are being exclusively used for effecting non-taxable supplies [funeral services], input tax credit of
the GST paid on the same will not be available.
(9) Legal services provided by a partnership firm of advocates to a business entity (with an aggregate
turnover up to such amount in the preceding FY as makes it eligible for exemption from
registration under the CGST Act, 2017) are exempt from GST vide exemption notification. Since the

Page 4.18
Exemptions from GST
aggregate turnover of Pethalal did not exceed ₹ 20 lakh [the applicable threshold limit for
registration for Pethalal being a supplier of services] in the preceding FY, legal services received
by him are exempt from GST.
(10) As per section 49(4) of the CGST Act, 2017, amount available in the electronic credit ledger may be
used for making payment towards output tax. However, tax payable under reverse charge is not an
output tax in terms of section 2(82) of the CGST Act, 2017. Therefore, tax payable under reverse
charge cannot be set off against the input tax credit and thus, will have to be paid in cash.
(11) Since all the transactions given hereunder are intra-State, CGST and SGST are payable in terms of
section 9(1) of the CGST Act, 2017
Question 15
Parikshit Ltd., engaged in providing a bouquet of services, is registered under GST law. It furnishes the
following information for the month of March in relation to various services provided by it:
Particulars ₹
Fees from prospective employers for campus interview in its college 5,20,000
Five buses each with seating capacity of 40 passengers given on hire to State Transport 6,50,000
Undertaking
Receipts of 'Shiny', a commercial coaching institute providing coaching in the field of 1,82,000
commerce (a certificate was awarded to each trainee after completion of the training)
Interest received on fixed deposits of the company with Dhanvarsha Bank 6,50,000
Receipts from running a Boarding School (including receipts for providing residential 39,00,000
dwelling service of ₹ 18,20,000)
Receipts of 'Sikshit Samudai' - an Industrial Training Institute (ITI) affiliated to the 2,60,000
National Council for Vocational Training (NCVT). Courses run by said ITI are in
designated trades
Receipts of 'Pratibha Institute', an institute registered with Directorate General of 1,30,000
Employment and Training (DGET), Union Ministry of Labour and Employment, running
a Modular Employable Skill Course (MESC) approved by the National Council for
Vocational Training (NCVT)
Professional services provided to foreign diplomatic mission located in India 1,04,000
Compute the GST payable by Parikshit Ltd. assuming that all the above receipts are exclusive of GST
wherever applicable and the rate of GST applicable on all the supplies is 18%.
Answer
Computation of GST payable by Parikshit Ltd. for the month of March
Particulars Value GST @ 18%

(₹) (₹)
Fees from prospective employers for campus interview in its college
[Taxable since such services are not specifically exempt] 5,20,000 93,600
Five buses each with seating capacity of 40 passengers given on hire to State
Transport Undertaking
[Services by way of giving on hire to a State transport undertaking (STU), a
motor vehicle meant to carry more than 12 passengers, are exempt vide Nil Nil
Notification No. 12/2017 CT(R) dated 28.06.2017 (hereinafter referred to as

Page 4.19
Exemptions from GST
exemption notification).]
Receipts of Shiny– a coaching institute
[Services provided by an educational institution to its students, faculty and
staff are exempt vide exemption notification. However, coaching institute is 1,82,000 32,760
not an educational institution.]
Interest received on fixed deposits of the company with Dhanvarsha Bank
[Services by way of extending deposits, loans or advances in so far as the
consideration is represented by way of interest or discount (other than
interest involved in credit card services) are exempt vide exemption Nil Nil
notification.]
Receipts from Boarding School including receipts for residential dwelling
service Nil Nil
staff are exempt vide exemption
notification. Boarding School providing education up to higher secondary
school or equivalent is an educational institution since it provides composite
supply of education service coupled with other services like providing
dwelling units for residence and food wherein the principal supply is supply
of education service.]
Receipts of Sikshit Samudai
staff are exempt vide exemption notification. Sikshit Samudai is an Nil Nil
educational institution running approved vocational education course.]
Receipts of 'Pratibha Institute' running Modular Employable Skill Course
staff are exempt vide exemption notification. Pratibha Institute is an
educational institution running approved vocational education course.] Nil Nil
Professional services provided to foreign diplomatic mission located in India
[While services provided by a foreign diplomatic mission located in India are
exempt from GST vide exemption notification, no such exemption is 1,04,000 18,720
available to the services provided to such mission.]
GST payable 8,06,000 1,45,080
Question 16
Rahul Agri Millers Ltd., located in Haryana, is engaged in customs milling of paddy into rice. It does not
pay GST on the same as it is of the view that the process of milling of paddy into rice is exempt under GST
since is an intermediate production process in relation to cultivation of plants. However, Department
demands tax on said activity contending that it is not eligible for said exemption. You are required to
determine the veracity of the Department’s contention.
Answer
Yes, the contention of the Department is correct. As per Notification No. 12/2017 CT (R) dated
28.06.2017, carrying out an intermediate production process as job work in relation to cultivation of
plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw
material or other similar products or agricultural produce is exempt under GST.
Milling of paddy is not an intermediate production process in relation to cultivation of plants. It is a

Page 4.20
Exemptions from GST
process carried out after the process of cultivation is over and paddy has been harvested. Further,
processing of paddy into rice is not usually carried out by cultivators, but by rice millers. Milling of paddy
into rice also changes its essential characteristics.
Therefore, milling of paddy into rice cannot be considered as an intermediate production process in
relation to cultivation of plants for food, fibre or other similar products or agricultural produce. In view
of the above, it is clarified by CBIC that milling of paddy into rice is not eligible for exemption under said
notification. Thus, GST is payable on the said activity.
Question 17
BODMAS Ltd., providing educational services, furnishes you with the following information for the
various services provided by it for the month of March, 2019:
Particulars ₹
Receipts from running a Boarding School (including receipts for providing residential 30,00,000
dwelling service of ₹ 14,00,000)
Receipts of ‘Gyan Uday’ - an Industrial Training Institute (ITI) affiliated to the National 2,00,000
Council for Vocational Training (NCVT)
Receipts of 'Lakshya', an institute, registered with Directorate General of Employment 1,00,000
and Training (DGET), Union Ministry of Labour and Employment, running a Modular
Employable Skill Course (MESC) approved by the National Council for Vocational
Training (NCVT)
Receipts of 'Wizard", a Commercial Coaching Institute providing commercial coaching 80,000
in the field of arts and science (no certificate was issued on completion of the training)
Fees from prospective employers for campus interview 4,00,000
Renting of furnished flats for temporary stay to different persons 5,00,000
Receipts of 'Concepts', a Commercial coaching institute providing coaching in the field 1,40,000
of commerce (a certificate was awarded to each trainee after completion of the training)
Receipts of Gurukul School providing education upto higher secondary 5,00,000
Compute the value of taxable supply assuming that all the above receipts are exclusive of GST.
Answer
Services provided by an educational institution to its students, faculty and staff are exempt vide
Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017. Further, an educational institution means,
inter alia, an institution providing services by way of-
(i) education up to higher secondary school or equivalent;
(ii) education as a part of a curriculum for obtaining a qualification recognised by any law for the time
being in force;
(iii) education as a part of an approved vocational education course.
In view of the aforesaid provisions, value of taxable supply of BODMAS Ltd. for the month of March,
2019 has been computed as follows:

Receipts from Boarding School including receipts for residential dwelling service Exempt
[Educational institution providing education up to higher secondary school or
equivalent]

Page 4.21
Exemptions from GST
Receipts of Gyan Uday Exempt

[Educational institution running approved vocational education course (assuming that
such courses are run in designated trades)]
Receipts of Lakshya running Modular Employable Skill Course [Educational institution Exempt
running approved vocational education course]
Receipts of Wizard - a coaching institute 80,000
[Taxable since coaching institute is not an educational institution]
Fees from prospective employers for campus interview [Taxable since such services 4,00,000
are not specifically exempt]
Renting of furnished flats for temporary stay to different persons* 5,00,000
[Not exempt since services by a hotel, inn, guest house, club or campsite, by whatever
name called, for residential or lodging purposes, are exempt only when the value of
supply of a unit of accommodation is below ₹ 1,000 per day.]
*It has been assumed that rent per flat per day ≥ ₹ 1,000.
Receipts of Concepts – a coaching institute 1,40,000
[Taxable since coaching institute is not an educational institution]
Receipts of Gurukul School providing education upto higher secondary Exempt
Question 18
An individual acts as a referee in a football match organized by Sports Authority of India. He has also
acted as a referee in another charity football match organized by a local sports club, in lieu of a lump sum
payment. Discuss whether he is required to pay any GST?
Answer
Services provided to a recognized sports body by an individual inter alia as a referee in a sporting event
organized by a recognized sports body is exempt from GST.
Since in the first case, the football match is organized by Sports Authority of India, which is a recognized
sports body, services provided by the individual as a referee in such football match will be exempt.
However, when he acts as a referee in a charity football match organized by a local sports club, he would
not be entitled to afore-mentioned exemption as a local sports club is not a recognized sports body and
thus, GST will be payable in this case.
Question 19
RXL Pvt. Ltd. manufactures beauty soap with the brand name ‘Forever Young’. RXL Pvt. Ltd. has organized
a concert to promote its brand. Ms. Ahana Kapoor, its brand ambassador, who is a leading film actress,
has given a classical dance performance in the said concert. The proceeds of the concert worth Rs.
1,20,000 will be donated to a charitable organization Whether Ms. Ahana Kapoor will be required to pay
any GST?
Answer
Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii) dance, or
(iii) theatre are exempt from GST, if the consideration charged for such performance is not more than Rs.
1,50,000. However, such exemption is not available in respect of service provided by such artist as a

Page 4.22
Exemptions from GST
brand ambassador.
Since Ms. Ahana Kapoor is the brand ambassador of ‘Forever Young’ soap manufactured by RXL Pvt. Ltd.,
the services rendered by her by way of a classical dance performance in the concert organized by RXL
Pvt. Ltd. to promote its brand will not be eligible for the above-mentioned exemption and thus, be liable
to GST. The fact that the proceeds of the concert will be donated to a charitable organization will not have
any bearing on the eligibility or otherwise to the above-mentioned exemption.
Question 20
Determine taxable value of supply under GST law with respect to each of the following independent
services provided by the registered persons:
Gross amount
Particulars
charged (Rs.)
Fees charged for yoga camp conducted by a charitable trust registered under
50,000
section 12AA of the Income-tax Act, 1961
Amount charged by business correspondent from banking company for the
services provided to the rural branch of a bank with respect to Savings Bank 1,00,000
Accounts
Amount charged by cord blood bank for preservation of stem cells 5,00,000
Amount charged for service provided by commentator to a recognized sports
5,20,000
body
Answer
Computation of value of taxable supply
Particulars (Rs.)
Fees charged for yoga camp conducted by a charitable trust registered under
Nil
section 12AA of the Income-tax Act, 1961 [Note-1]
Amount charged by business correspondent for the services provided to the rural
Nil
branch of a bank with respect to Savings Bank Accounts [Note-2]
Amount charged by cord blood bank for preservation of stem cells [Note-3] Nil
Service provided by commentator to a recognized sports body [Note-4] 5,20,000
Notes:
1. Services by an entity registered under section 12AA of the Income-tax Act, 1961 by way of
charitable activities are exempt from GST. The activities relating to advancement of yoga are
included in the definition of charitable activities. So, such activities are exempt from GST.
2. Services by business facilitator or a business correspondent to a banking company with respect to
accounts in its rural area branch have been exempted from GST.
3. Services provided by cord blood banks by way of preservation of stem cells or any other service in
relation to such preservation are exempt from GST.
4. Services provided to a recognized sports body only by an individual as a player, referee, umpire,
are exempt from GST. Thus, services provided by commentators are liable to GST.
Question 21

Page 4.23
Exemptions from GST
Examine whether GST is exempted on the following independent supplies of services:

1) Service provided by a private transport operator to Scholar Boys Higher Secondary School in
relation to transportation of students to and from the school.
2) Services provided by way of vehicle parking to general public in a shopping mall.
Answer
1) Yes, Services provided to an educational institution by way of transportation of students are
exempted from GST.
2) No, Services provided by way of vehicle parking to general public are not exempted from GST.
Therefore, GST is payable on the same.
Question 22
Discuss whether GST is payable in respect of transportation services provided by Raghav Goods
Transport Agency in each of the following independent cases:
Customer Nature of services provided Amount charged

A Transportation of milk Rs. 20,000
B Transportation consignment goods carriage Rs. 3000
C Transportation of chairs for a single consignee in the goods carriage Rs. 600
Answer
Nature of services Amount

Customer Taxability
provided charged
Transportation of Exempt Transportation of milk by goods
A Rs. 20,000
milk transport agency is exempt.
GST is payable. Exemption is available for
Transportation transportation of goods only where the
B consignment goods Rs. 3000 consideration for transportation of goods on a
carriage consignment transported in a single goods
carriage does not exceed Rs. 1,500.
Transportation of Exempt. Transportation of goods where
chairs for a single consideration for transportation of all goods for a
C Rs. 600
consignee in the single consignee does not exceed Rs. 750 is
goods carriage exempt.

Page 4.24
CHAPTER - 5
Place of Supply
Question 1
In case of a domestic supply, what is the place of supply where goods are removed?
Answer
As per section 10(1)(a), the place of supply of goods is the location of the goods at the time at which the
movement of goods terminates for delivery to the recipient.
Question 2
What will be the place of supply if the goods are delivered by the supplier to a person on the direction of
a third person?
Answer
As per section 10(1)(b), it would be deemed that the third person has received the goods and the place
of supply of such goods will be the principal place of business of such person.
Question 3
What is the place of supply where the goods or services are supplied on board a conveyance, such as a
vessel, an aircraft, a train or a motor vehicle?
Answer
As per section 10(1)(e), in respect of goods, the place of supply is the location at which such goods are
taken on board.
However, in respect of services, the place of supply is the location of the first scheduled point of departure
of that conveyance for the journey in terms of sections 12(10) and 13(11).
Question 4
The place of supply in relation to immovable property is the location of immovable property. Suppose a
road is constructed from Delhi to Mumbai covering multiple states.
What will be the place of supply of construction services?
Answer
Where the immovable property is located in more than one State, the supply of service is treated as made
in each of the States in proportion to the value for services separately collected or determined, in terms
of the contract or agreement entered into in this regard or, in the absence of such contract or agreement,
on such other reasonable basis as may be prescribed in this behalf [Explanation to section 12(3) for
domestic supplies].
In the absence of a contract or agreement between the supplier and recipient of services in this regard,
the proportionate value of services supplied in different States/Union territories (where the immovable
property is located) is computed on the basis of the area of the immovable property lying in each State/

Page 5.1
Place of Supply
Union territories [Rule 4 of the IGST Rules].
Question 5
What would be the place of supply of services provided by an event management company for organizing
a sporting event for a Sports Federation which is held in multiple States?
Answer
In case of an event, if the recipient of service is registered, the place of supply of services for organizing
the event is the location of such person. However, if the recipient is not registered, the place of supply is
the place where event is held.
Since the event is being held in multiple states and a consolidated amount is charged for such services,
the place of supply will be deemed to be in each State in proportion to the value for services determined
in terms of the contract or agreement entered into in this regard [Explanation to section 12(7)].
In the absence of a contract or agreement between the supplier and recipient of services, the
proportionate value of services made in each State (where the event is held) will be computed in
accordance with rule 5 of the IGST Rules by the application of generally accepted accounting principles.
Question 6
What is the place of supply of services by way of transportation of goods, including mail or courier when
the both the supplier and the recipient of the services are located in India?
Answer
If the recipient is registered, the location of such person is the place of supply. However, if the recipient
is not registered, the place of supply is the place where the goods are handed over for transportation.
Further, if the goods are transported outside India, the destination of such goods is the place of supply
[Section 12(8)].
Question 7
What will be the place of supply of passenger transportation service, if a person travels from Mumbai to
Delhi and back to Mumbai?
Answer
If the person is registered, the place of supply will be the location of recipient. If the person is not
registered, the place of supply for the forward journey from Mumbai to Delhi will be Mumbai, the place
where he embarks [Section 12(9)].
However, for the return journey, the place of supply will be Delhi as the return journey has to be treated
as separate journey [Explanation to section 12(9)].
Question 8
What is the place of supply for mobile connection? Can it be the location of supplier?
Answer
The location of supplier of mobile services cannot be the place of supply as the mobile companies are
Page 5.2
Place of Supply
providing services in multiple states and many of these services are inter-state. The consumption
principle will be broken if the location of supplier is taken as place of supply and all the revenue may go
to a few states where the suppliers are located.
The place of supply for mobile connection would depend on whether the connection is on postpaid or
prepaid basis. In case of postpaid connections, the place of supply is the location of billing address of the
recipient of service.
In case of pre-paid connections, the place of supply is the place where payment for such connection is
received or such pre-paid vouchers are sold. However, if the recharge is done through internet/e-
payment, the location of recipient of service on record will be taken as the place of supply.
Question 9
A person from Mumbai goes to Kullu-Manali and takes some services from ICICI Bank in Manali. What is
the place of supply?
Answer
If the service is not linked to the account of person, place of supply will be Kullu, i.e. the location of the
supplier of services. However, if the service is linked to the account of the person, the place of supply will
be Mumbai, the location of recipient on the records of the supplier.
Question 10
An unregistered person from Gurugram travels by Air India flight from Mumbai to Delhi and gets his
travel insurance done in Mumbai.
What is the place of supply of insurance services?
Answer
When insurance service is provided to an unregistered person, the location of the recipient of services
on the records of the supplier of insurance services is the place of supply. So Gurugram is the place of
supply [Section 12(13)].
Question 11
XY Ltd. (registered in Rajasthan) received legal services from an attorney in UK (unrelated person) in
relation to registration of a trademark in UK. A consideration of £ 8,000 was paid by the company to the
attorney in UK.
Determine the place of supply for the service and suggest if XY Ltd. is required to pay tax under reverse
charge on this transaction.
Answer
In the given case, the service provider is outside India, and the service recipient is in India. Thus, the place
of supply will be determined on the basis of the provisions of section 13. Since the given service does not
get covered under any of the specific provisions of section 13, the place of supply thereof will be governed
by the general rule, i.e. place of supply of services will be the location of the recipient of service, which in
this case is Rajasthan (India).
Further, the given case is import of service in terms of section 2(11) as the supplier of service is located
outside India, the recipient of service is located in India and the place of supply of service is in India. Since
Page 5.3
Place of Supply
the services are imported for a consideration from an unrelated person, the same tantamounts to supply
in terms of section 7(1)(b) of CGST Act and are liable to GST.
As per reverse charge Notification No. 10/2017 IT(R) dated 28.06.2017, if a service is supplied by a
person located in a non-taxable territory to a person located in the taxable territory, other than non-
taxable online recipient, the tax is payable by the recipient of service under reverse charge.
Therefore, XY Ltd. will pay GST under reverse charge on £ 8000 paid by it to the attorney in UK.
Question 12
Damani Industries has recruited Super Events Pvt. Ltd., an event management company of Gujarat, for
organising the grand party for the launch of its new product at Bangalore. Damani Industries is registered
in Mumbai. Determine the place of supply of the services provided by Super Events Pvt. Ltd. to Damani
Industries.
Will your answer be different if the product launch party is organised at Dubai?
Answer
Section 12(7)(a)(i) stipulates that when service by way of organization of an event is provided to a
registered person, place of supply is the location of recipient.
Since, in the given case, the product launch party at Bangalore is organized for Damani Industries
(registered in Mumbai), place of supply is the location of Damani Industries, i.e. Mumbai, Maharashtra.
In case the product launch party is organised at Dubai, the answer will remain the same, i.e. the place of
supply is the location of recipient (Damani Industries)– Mumbai, Maharashtra.
Question 13
Priyank Sales of Pune, Maharashtra enters into an agreement to sell goods to Bisht Enterprises of Bareilly,
Uttar Pradesh. While the goods were being packed in Pune godown of Priyank Sales, Bisht got an order
from Sahil Pvt. Ltd. of Shimoga, Karnataka for the said goods. Bisht Enterprises agreed to supply the said
goods to Sahil Pvt. Ltd. and asked Priyank Sales to deliver the goods to Sahil Pvt. Ltd. at Shimoga.
You are required to determine the place of supply(ies) in the above situation.
Answer
The supply between Priyank Sales (Pune) and Bisht Enterprises (Bareilly) is a bill to ship to supply where
the goods are delivered by the supplier [Priyank Sales] to a recipient [Sahil Pvt. Ltd. (Shimoga)] or any
other person on the direction of a third person [Bisht Enterprises]. The place of supply in case of domestic
bill to ship to supply of goods is determined in terms of section 10(1)(b).
As per section 10(1)(b), where the goods are delivered by the supplier to a recipient or any other person
on the direction of a third person, whether acting as an agent or otherwise, before or during movement
of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that
the said third person has received the goods and the place of supply of such goods shall be the principal
place of business of such person.
Thus, in the given case, it is deemed that the Bisht Enterprises has received the goods and the place of
supply of such goods is the principal place of business of Bisht Enterprises. Accordingly, the place of
supply between Priyank Sales (Pune) and Bisht Enterprises (Bareilly) will be Bareilly, Uttar Pradesh.
This situation involves another supply between Bisht Enterprises (Bareilly) and Sahil Pvt. Ltd. (Shimoga).
The place of supply in this case will be determined in terms of section 10(1)(a).

Page 5.4
Place of Supply
Section 10(1)(a) stipulates that where the supply involves movement of goods, whether by the supplier
or the recipient or by any other person, the place of supply of such goods shall be the location of the goods
at the time at which the movement of goods terminates for delivery to the recipient.
Thus, the place of supply in second case is the location of the goods at the time when the movement of
goods terminates for delivery to the recipient (Sahil Pvt. Ltd.), i.e. Shimoga, Karnataka.
Question 14
Musicera Pvt. Ltd. owned by Nitish Daani - a famous classical singer - wishes to organise a ‘Nitish Daani
Music Concert’ in Gurugram (Haryana). Musicera Pvt. Ltd. (registered in Ludhiana, Punjab) enters into a
contract with an event management company, Supriya (P) Ltd. (registered in Delhi) for organising the
said music concert at an agreed consideration of ₹ 10,00,000. Supriya (P) Ltd. books the lawns of Hotel
Dumdum, Gurugram (registered in Haryana) for holding the music concert, for a lump sum consideration
of ₹ 4,00,000. Musicera Pvt. Ltd. fixes the entry fee to the music concert at ₹ 5,000. 400 tickets for ‘Nitish
Daani Music Concert’ are sold.
You are required to determine the CGST and SGST or IGST liability, as the case may be, in respect of the
supply(ies) involved in the given scenario.
Will your answer be different if the price per ticket is fixed at ₹ 450?
Note: Rate of CGST and SGST is 9% each and IGST is 18%. All the amounts given above are exclusive of
taxes, wherever applicable.
Answer
In the given situation, three supplies are involved:
(i) Services provided by Musicera Pvt. Ltd. to audiences by way of admission to music concert.
(ii) Services provided by Supriya (P) Ltd. to Musicera Pvt. Ltd. by way of organising the music concert.
(iii) Services provided by Hotel Dumdum to Supriya (P) Ltd. by way of accommodation in the Hotel
lawns for organising the music concert.
The CGST and SGST or IGST liability in respect of each of the above supplies is determined as under:
(i) As per the provisions of section 12(6), the place of supply of services provided by way of admission
to, inter alia, a cultural event shall be the place where the event is actually held.
Therefore, the place of supply of services supplied by Musicera Pvt. Ltd. (Ludhiana, Punjab) to
audiences by way of admission to the music concert is the location of the Hotel Dumdum, i.e.
Gurugram, Haryana.
Since the location of the supplier (Ludhiana, Punjab) and the place of supply (Gurugram, Haryana)
are in different States, IGST will be leviable. Therefore, IGST leviable will be computed as follows:
Consideration for supply (400 tickets @ ₹ 5,000 per ticket) = ₹ 20,00,000 IGST @ 18% on value of
supply = ₹ 20,00,000 x 18% = ₹ 3,60,000.
(ii) Section 12(7)(a)(i) stipulates that the place of supply of services provided by way of organization
of, inter alia, a cultural event to a registered person is the location of such person.
Therefore, the place of supply of services supplied by Supriya (P) Ltd. (Delhi) to Musicera Pvt. Ltd.
(Ludhiana, Punjab) by way of organising the music concert is the location of the recipient, i.e.
Ludhiana (Punjab).
Since the location of the supplier (Delhi) and the place of supply (Ludhiana, Punjab) are in different
States, IGST will be leviable. Therefore, IGST leviable will be computed as follows:
Consideration for supply = ₹ 10,00,000 IGST @ 18% on value of supply = ₹ 10,00,000 x 18% = ₹

Page 5.5
Place of Supply
1,80,000
(iii) As per the provisions of section 12(3)(c) of the IGST Act, 2017, the place of supply of services, by
way of accommodation in any immovable property for organizing, inter alia, any cultural function
shall be the location at which the immovable property is located.
Therefore, the place of supply of services supplied by Hotel Dumdum (Gurugram, Haryana) to
Supriya (P) Ltd. (Delhi) by way of accommodation in Hotel lawns for organising the music concert
shall be the location of the Hotel Dumdum, i.e. Gurugram, Haryana.
Since the location of the supplier (Gurugram, Haryana) and the place of supply (Gurugram,
Haryana) are in the same State, CGST and SGST will
be leviable. Therefore, CGST and SGST leviable will be computed as follows:
Consideration for supply = ₹ 4,00,000
CGST @ 9% on value of supply = ₹ 4,00,000 x 9% = ₹ 36,000
SGST @ 9% on value of supply = ₹ 4,00,000 x 9% = ₹ 36,000
If the price for the entry ticket is fixed at ₹ 450, answer will change in respect of supply of service
provided by way of admission to music concert, as mentioned in point (i) above. There will be no IGST
liability if the consideration for the ticket is ₹ 450 as the inter-State services by way of right to admission
to, inter alia, musical performance are exempt from IGST vide Notification No. 9/2017 IT (R) dated
28.06.2017, if the consideration for right to admission to the event is not more than ₹ 500 per person.
However, there will be no change in the answer in respect of supplies mentioned in point (ii) and (iii)
above.
Question 15
RST Inc., a corn chips manufacturing company based in USA, intends to launch its products in India.
However, the company wishes to know the taste and sensibilities of Indians before launching its products
in India. For this purpose, RST Inc. has approached ABC Consultants, Mumbai, (Maharashtra) to carry out
a survey in India to enable it to make changes, if any, in its products to suit Indian taste.
The survey is to be solely based on the oral replies of the surveyees; they will not be provided any sample
by RST Inc. to taste. ABC Consultants will be paid in convertible foreign exchange for the assignment.
With reference to the provisions of GST law, determine the place of supply of the service. Also, explain
whether the said supply will amount to export of service?
Answer
As per section 13(2), in case where the location of the supplier of services or the location of the recipient
of services is outside India, the place of supply of services except the services specified in sub-sections
(3) to (13) shall be the location of the recipient of services. Sub-sections (3) to (13) provide the
mechanism to determine the place of supply in certain specific situations.
The given case does not fall under any of such specific situations and thus, the place of supply in this case
will be determined under sub-section (2) of section 13. Thus, the place of supply of services in this case
is the location of recipient of services, i.e. USA.
As per section 2(6), export of services means the supply of any service when,–
(a) the supplier of service is located in India;
(b) the recipient of service is located outside India;
(c) the place of supply of service is outside India;
(d) the payment for such service has been received by the supplier of service in convertible foreign

Page 5.6
Place of Supply
exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and
(e) the supplier of service and the recipient of service are not merely establishments of a distinct
Since all the above five conditions are fulfilled in the given case, the same will be considered as an export
of service.
Question 16
ABC Pvt. Ltd., New Delhi, provides support services to foreign customers in relation to procuring goods
from India. The company identifies the prospective vendor, reviews product quality and pricing and then
shares the vendor details with the foreign customer.
The foreign customer then directly places purchase order on the Indian vendor for purchase of the
specified goods. ABC Pvt. Ltd. charges its foreign customer cost plus 10% mark up for services provided
by it.
The company has charged US $ 1,00,000 (exclusive of GST) to its foreign customer for the services
provided by it. With reference to the provisions of GST law, examine whether the said supply will amount
to export of service?
Answer
Section 2(13) defines “intermediary” to mean a broker, an agent or any other person, by whatever name
called, who arranges or facilitates the supply of goods or services or both, or securities, between two or
more persons, but does not include a person who supplies such goods or services or both or securities
on his own account.
In this case, since ABC Pvt. Ltd. is arranging or facilitating supply of goods between the foreign customer
and the Indian vendor, the said services can be classified as intermediary services.
If the location of the supplier of services or the location of the recipient of service is outside India, the
place of supply is determined in terms of section
13. Since, in the given case, the recipient of supply is located outside India, the provisions of supply of
intermediary services will be determined in terms of section 13.
As per section 13(8)(b), the place of supply in case of intermediary services is the location of the supplier,
i.e. the location of ABC Pvt. Ltd. which is New Delhi.
As per section 2(6) of the IGST Act, 2017, export of services means the supply of any service when,–
(a) the supplier of service is located in India;
(b) the recipient of service is located outside India;
(c) the place of supply of service is outside India;
(d) the payment for such service has been received by the supplier of service in convertible foreign
exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and
(e) the supplier of service and the recipient of service are not merely establishments of a distinct
Since, in the given case, place of supply is in India, this transaction does not tantamount to export of
service.
Question 17
Mr. Murthy, an unregistered person and a resident of Pune, Maharashtra hires the services of Sun Ltd. an

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Place of Supply
event management company registered in Delhi, for organising of the new product launch in Bengaluru,
Karnataka.
(i) Determine the place of supply of services provided by Sun Ltd.
(ii) What would be your answer if the product launch takes place in Bangkok?
(iii) What would be your answer if Mr. Murthy is a registered person and product launch takes place
in-
(a) Bengaluru
(b) Bangkok?
Answer
(i) As per section 12(7)(a)(ii), when service by way of organization of an event is provided to an
unregistered person, the place of supply is the location where the event is actually held and if the
event is held outside India, the place of supply is the location of recipient.
Since, in the given case, the service recipient [Mr. Murthy] is unregistered and event is held in India,
place of supply is the location where the event is actually held, i.e. Bengaluru, Karnataka. The
location of the supplier and the location of the recipient is irrelevant in this case.
(ii) However, if product launch takes place outside India [Bangkok], the place of supply will be the
location of recipient, i.e. Pune, Maharashtra
(iii) When service by way of organization of an event is provided to a registered person, place of supply
is the location of recipient vide section 12(7)(a)(i).
Therefore, if Mr. Murthy is a registered person, then in both the cases, i.e. either when product
launch takes place in Bengaluru or Bangkok, the place of supply will be the location of recipient, i.e.
Pune, Maharashtra.
Question 18
Mr. Mahendra Goyal, an interior decorator provides professional services to Mr. Harish Jain in relation
to two of his immovable properties.
Determine the place of supply in the transactions below as per provisions of GST law in the following
independent situations:
Case Location of Mr. Mahendra Goyal Location of Mr. Harish Jain Property situated at
I. I Delhi Maharashtra New York (USA)
II. II Delhi New York Paris (France)
Explain the relevant provisions of law to support your conclusions.
Answer
Case I
As per section 12(3), where both the service provider and the service recipient are located in India, the
place of supply of services directly in relation to an immovable property, including services provided by
interior decorators is the location of the immovable property. However, if the immovable property is
located outside India, the place of supply is the location of the recipient.
Since in the given case, both the service provider (Mr. Mahendra Goyal) and the service recipient (Mr.
Harish Jain) are located in India and the immovable property is located outside India (New York), the
place of supply will be the location of recipient, i.e. Maharashtra.

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Place of Supply
Case II
As per section 13(4), where either the service provider or the service recipient is located outside India,
the place of supply of services directly in relation to an immovable property including services of interior
decorators is the location of the immovable property.
Since in the given case, service provider (Mr. Mahendra Goyal) is located in India and service recipient
(Mr. Harish Jain) is located outside India (New York), the place of supply will be the location of immovable
property, i.e. Paris (France).
Question 19
Asha Enterprises, supplier of sewing machines, is located in Kota (Rajasthan) and registered for purpose
of GST in the said State. It receives an order from Deep Traders, located in Jalandhar (Punjab) and
registered for the purpose of GST in the said State. The order is for the supply of 100 sewing machines
with an instruction to ship the sewing machines to Jyoti Sons, located in Patiala (Punjab) and registered
in the said State for purpose of GST. Jyoti Sons is a customer of Deep Traders. Sewing machines are being
shipped in a lorry by Asha Enterprises.
Briefly explain the following:
(a) the place of supply;
(b) the nature of supply:- whether inter-State or intra-State and
(c) whether CGST/SGST or IGST would be applicable in this case.
Answer
The supply between Asha Enterprises (Kota, Rajasthan) and Deep Traders (Jalandhar, Punjab) is a bill to
ship to supply where the goods are delivered by the supplier [Asha Enterprises] to a recipient [Jyoti Sons
(Patiala, Punjab)] on the direction of a third person [Deep Traders].
In case of such supply, it is deemed that the said third person has received the goods and the place of
supply of such goods is the principal place of business of such person [Section 10(1)(b)]. Thus, the place
of supply between Asha Enterprises (Rajasthan) and Deep Traders (Punjab) will be Jalandhar, Punjab.
Since the location of supplier and the place of supply are in two different States, the supply is an inter-
State supply in terms of section 7, liable to IGST.
This situation involves another supply between Deep Traders (Jalandhar, Punjab) and Jyoti Sons (Patiala,
Punjab). In this case, since the supply involves movement of goods, place of supply will be the location of
the goods at the time at which the movement of goods terminates for delivery to the recipient, i.e. Patiala,
Punjab [Section 10(1)(a)].
Since the location of supplier and the place of supply are in the same State, the supply is an intra-State
supply in terms of section 8, liable to CGST and SGST.
Question 20
Determine the place of supply for the following independent cases:
(i) Grand Gala Events, an event management company at Kolkata, organises two award functions for
Narayan Jewellers of Chennai (Registered in Chennai, Tamil Nadu) at New Delhi and at Singapore.
(ii) Perfect Planners (Bengaluru, Karnataka) is hired by Dr. Kelvin (unregistered person based in
Kochi, Kerala) to plan and organise his son's wedding at Mumbai, Maharashtra.
Will your answer be different if the wedding is to take place in Malaysia?

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Place of Supply
Answer
(i) When service by way of organization of an event is provided to a registered person, place of supply
is the location of recipient in terms of section 12(7)(a)(i).
Since, in the given case, the award functions at New Delhi and Singapore are organized for Narayan
Jewellers (registered in Chennai), place of supply in both the cases is the location of Narayan
Jewellers, i.e. Chennai, Tamil Nadu.
(ii) As per section 12(7)(a)(ii), when service by way of organization of an event is provided to an
unregistered person, the place of supply is the location where the event is actually held and if the
event is held outside India, the place of supply is the location of recipient.
Since, in the given case, the service recipient [Dr. Kelvin] is unregistered and event is held in India,
place of supply is the location where the event is actually held, i.e. Mumbai, Maharashtra.
However, if the wedding is to take place outside India [Malaysia], the place of supply is the location
of recipient, i.e. Kochi, Kerala.

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Place of Supply

Question 21
Raman Row, a registered supplier under GST in Mumbai, Maharashtra is directed by Nero Enterprises,
Kolkata, West Bengal to deliver goods valued at ₹ 12,00,000 to Fabricana of Aurangabad in Maharashtra.
Raman Row makes out an invoice at 9% tax rate under CGST and SGST respectively (scheduled rate) and
delivers it locally in Maharashtra.
Discuss and comment on the above levy of tax and determine the tax liability of goods in the above
circumstances.
Answer
The supply between Raman Row (Mumbai, Maharashtra) and Nero Enterprises (Kolkata, West Bengal)
is a bill to ship to supply where the goods are delivered by the supplier [Raman Row] to a recipient
[Fabricana (Aurangabad, Maharashtra)] or any other person on the direction of a third person [Nero
Enterprises]. In such a case, it is deemed that the said third person has received the goods and the place
of supply of such goods is the principal place of business of such person [Section 10(1)(b) of IGST Act,
2017].
Accordingly, the place of supply between Raman Row (Mumbai, Maharashtra) and Nero Enterprises
(Kolkata, West Bengal) will be Kolkata and thus, it will be an inter-State supply liable to IGST. Hence,
Raman Row should charge 18% IGST on ₹ 12,00,000, which comes out to ₹ 2,16,000.
This situation involves another supply between Nero Enterprises (Kolkata, West Bengal) and Fabricana
(Aurangabad, Maharashtra). The place of supply in this case will be the location of the goods at the time
when the movement of goods terminates for delivery to the recipient i.e., Aurangabad, Maharashtra in
terms of section 10(1)(a) of IGST Act, 2017. Thus, being an inter-State supply, the same will also be
chargeable to IGST.
Question 22
(i) Parth of Pune, Maharashtra enters into an agreement to sell goods to Bakul of Bareilly, Uttar
Pradesh. While the goods were being packed in Pune godown of Parth, Bakul got an order from
Shreyas of Shimoga, Karnataka for the said goods. Bakul agreed to supply the said goods to Shreyas
and asked Parth to deliver the goods to Shreyas at Shimoga.
You are required to determine the place of supply(ies) in the above situation.
(ii) Damani Industries has recruited Super Events Pvt. Ltd., an event management company of Gujarat,
for organising the grand party for the launch of its new product at Bangalore. Damani Industries is
registered in Mumbai. Determine the place of supply of the services provided by Super Events Pvt.
Ltd. to Damani Industries.
Will your answer be different if the product launch party is organised at Dubai?
Answer
(i) The supply between Parth (Pune) and Bakul (Bareilly) is a bill to ship to supply where the goods
are delivered by the supplier [Parth] to a recipient [Shreyas (Shimoga)] or any other person on the
direction of a third person [Bakul]. The place of supply in case of bill to ship to supply of goods is
determined in terms of section 10(1)(b) of IGST Act, 2017.
As per section 10(1)(b) of IGST Act, 2017, where the goods are delivered by the supplier to a
recipient or any other person on the direction of a third person, whether acting as an agent or
otherwise, before or during movement of goods, either by way of transfer of documents of title to

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Place of Supply
the goods or otherwise, it shall be deemed that the said third person has received the goods and the
place of supply of such goods shall be the principal place of business of such person.
Thus, in the given case, it is deemed that the Bakul has received the goods and the place of supply of
such goods is the principal place of business of Bakul. Accordingly, the place of supply between Parth
(Pune) and Bakul ( Bareilly) will be Bareilly, Uttar Pradesh.
This situation involves another supply between Bakul (Bareilly) and Shreyas (Shimoga). The place
of supply in this case will be determined in terms of section 10(1)(a) of IGST Act, 2017.
Section 10(1)(a) of IGST Act, 2017 stipulates that where the supply involves movement of goods,
whether by the supplier or the recipient or by any other person, the place of supply of such goods
shall be the location of the goods at the time at which the movement of goods terminates for delivery
to the recipient.
Thus, the place of supply in second case is the location of the goods at the time when the movement
of goods terminates for delivery to the recipient (Shreyas) i.e., Shimoga, Karnataka.
(ii) Section 12(7)(a)(i) of IGST Act, 2017 stipulates that when service by way of organization of an event
is provided to a registered person, place of supply is the location of recipient.
Since, in the given case, the product launch party at Bangalore is organized for Damani Industries
(registered in Mumbai), place of supply is the location of Damani Industries i.e., Mumbai.
In case the product launch party is organised at Dubai, the answer will remain the same, i.e. the place
of supply is the location of Damani Industries – Mumbai.
Question 23
‘PQ’, a statutory body, deals with the all the advertisement and publicity of the Government. It has issued
a release order to ‘Moon Plus’ channel (registered in State ‘A’) for telecasting an advertisement relating
to one of the schemes of the Government in the month of September 20XX. The advertisement will be
telecasted in the States of ‘A’, ‘B’, ‘C’, ‘D’ and ‘E’. The total value of the service contract entered into
between ‘Moon Plus’ and ‘PQ’ is ₹ 10,00,000 (exclusive of GST).
You are required to determine the place of supply of the services in the instant case as also the value of
supply attributable to the States of ‘A’, ‘B’, ‘C’, ‘D’ and ‘E’.
Further, compute the GST liability [CGST & SGST or IGST, as the case may be] of ‘Moon Plus’ as also advise
it as to whether it should issue one invoice for the entire contract value or separate State-wise invoices.
The other relevant information is given hereunder:
Table 1
States Viewership figures of ‘Moon Plus’ channel in the last week of June
20XX as provided by the Broadcast Audience Research Council
A 50,000
B+C 1,00,000
D+E 50,000
Table 2
States Population as per latest census (in crores)

A 50
B 180
C 20

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Place of Supply
D 100
E 25
The applicable rate of tax is as under:
CGST SGST IGST

9% 9% 18%
Answer
As per section 12(14) of the IGST Act, 2017, the place of supply of advertisement services to the Central
Government, a State Government, a statutory body or a local authority meant for the States or Union
territories identified in the contract or agreement is taken as being in each of such States or Union
territories (where the advertisement is broadcasted/ run /played/disseminated).
Therefore, in the given case, the place of supply of advertisement service is in the States of ‘A’, ‘B’, ‘C’, ‘D’
and ‘E’.
The value of the supply of such advertisement services specific to each State/Union territory is in
proportion to the amount attributable to the services provided by way of dissemination in the respective
States/Union territories determined in terms of the contract or agreement entered into in this regard.
In the absence of such a contract or agreement between the supplier and recipient of services, the
proportionate value of advertisement services attributable to different States/Union territories (where
the advertisement is broadcasted/run/played/ disseminated) is computed in accordance with rule 3 of
the IGST Rules, 2017.
As per rule 3(f) of the IGST Rules, 2017, in the case of advertisement on television channels, the amount
attributable to the value of advertisement service disseminated in a State shall be calculated on the basis
of the viewership of such channel in such State, which in turn, shall be calculated in the following manner,
namely: -
(i) the channel viewership figures for that channel for a State or Union territory shall be taken from
the figures published in this regard by the Broadcast Audience Research Council;
(ii) the figures published for the last week of a given quarter shall be used for calculating viewership
for the succeeding quarter;
(iii) where such channel viewership figures relate to a region comprising of more than one State or
Union territory, the viewership figures for a State or Union territory of that region, shall be
calculated by applying the ratio of the populations of that State or Union territory, as determined
in the latest Census, to such viewership figures;
(iv) the ratio of the viewership figures for each State or Union territory as so calculated, when applied
to the amount payable for that service, shall represent the portion of the value attributable to the
dissemination in that State or Union territory.
Therefore, value of supply attributable to ‘A’, ‘B’, ‘C’, ‘D’ and ‘E’, will be computed as under:
States Viewership figures of ‘Moon Viewership ratio of Proportionate value of

Plus’ channel as provided by ‘Moon Plus’ channel in advertisement services
the Broadcast Audience the States ‘A’, (‘B’ + ‘C’) for States A’, (‘B’ + ‘C’) and
Research Council in the last and (‘D’ + ‘E’) (‘D’ + ‘E’)
week of June 20XX
A 50,000 50,000: 1,00,000: ₹ 10,00,000 x 1/4 =
50,000 = 1:2:1 ₹ 2,50,000

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Place of Supply
B+C 1,00,000 ₹ 10,00,000 x 2/4 =

₹ 5,00,000
D+E 50,000 ₹ 10,00,000 x 1/4 =
₹ 2,50,000
States Population as per Population ratio in Proportionate value of advertisement

latest census the States ‘B’ & ‘C’ and services in the States ‘A’, ‘B’, ‘C’, ‘D’ &
(in crores) ‘D’ & ‘E’ ‘E’
A 50 ₹ 2,50,000
B 180 ₹ 5,00,000 x 9/10 = ₹ 4,50,000
B:C = 180:20 = 9:1
C 20 ₹ 5,00,000 x 1/10 = ₹ 50,000
D 100 ₹ 2,50,000 x 4/5 = ₹ 2,00,000
D:E = 100:25 = 4:1
E 25 ₹ 2,50,000 x 1/5 = ₹ 50,000
Since, there are five different places of supply in the given case, ‘Moon Plus’ channel will have to issue
five separate invoices for each of the States namely, ‘A’, ‘B’, ‘C’, ‘D’ & ‘E’ indicating the value pertaining to
that State. The GST liability of ‘Moon Plus’ channel will, therefore, be worked out as under:
Computation of GST liability of ‘Moon Plus’
States Proportionate value of CGST @ 9% SGST @ 9% IGST @ 18%

advertisement services (₹) (₹) (₹) (₹)
A 2,50,000 22,500 22,500
B 4,50,000 81,000
C 50,000 9,000
D 2,00,000 36,000
E 50,000 9,000
Only in case of supply of services in State ‘A’, the location of supplier (State ‘A’) and the place of supply
are in the same State, hence the same is an intra-State supply in terms of section 8(1) of the IGST Act,
2017 and is thus, liable to CGST and SGST. In all the remaining cases of supply of services, the location of
the supplier (State ‘A’) and the places of supply (States ‘B’, ‘C’, ‘D’ & ‘E’) are in two different States, hence
the same are inter-State supplies liable to IGST [Section 7(1)(a) of the IGST Act, 2017 read with section
5(1) of that Act].
Question 24
Determine the place of supply in the following independent cases:
(i) Mr. Sahukaar (New Delhi) boards the New Delhi-Kota train at New Delhi. Mr. Sahukaar sells the
goods taken on board by him (at New Delhi), in the train, at Jaipur during the journey.
(ii) Vidhyut Pvt. Ltd. imports electric food processors from China for its Kitchen Store in Noida, Uttar
Pradesh. Vidhyut Pvt. Ltd. is registered in Uttar Pradesh.
(iii) Mr. Aatmaram, a manager in a Bank, is transferred from Bareilly, Uttar Pradesh to Bhopal, Madhya
Pradesh. Mr. Aatmaram’s family is stationed in Kanpur, Uttar Pradesh. He hires Gokul Carriers of
Lucknow, Uttar Pradesh (registered in Uttar Pradesh), to transport his household goods from
Kanpur to Bhopal.
(iv) Bholunath, a resident of New Delhi, opens his saving account in New Delhi branch of Best Bank
after undergoing the KYC process. He goes to Amritsar for some official work and withdraws

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Place of Supply
money from Best Bank’s ATM in Amritsar thereby crossing his limit of free ATM withdrawals.
(v) Mr. Chakmak, an architect (New Delhi), enters into a contract with Mr. Zeeshaan of New York to
provide professional services in respect of immovable properties of Mr. Zeeshaan located in Pune
and New York.
Answer
(i) Section 10(1)(e) of the IGST Act, 2017 lays down that place of supply of goods supplied on board a
conveyance like aircraft, train, vessel, or a motor vehicle, is the location where such goods have
been taken on board. Thus, in the given case, the place of supply of the goods sold by Mr. Sahukaar
is the location at which the goods are taken on board, i.e. New Delhi and not Jaipur where they have
been sold.
(ii) As per section 11(a) of the IGST Act 2017, if the goods have been imported in India, the place of
supply of goods is the place where the importer is located. Thus, in the present case, the place of
supply of the goods imported by Vidhyut Pvt. Ltd. is Noida, Uttar Pradesh.
(iii) As per section 12(8) of the IGST Act, 2017, the place of supply of services by way of transportation
of goods, including by mail or courier provided to an unregistered person, is the location at which
such goods are handed over for their transportation.
Since in the given case, the recipient – Aatmaram – is an unregistered person, the place of supply
is the location where goods are handed to Gokul Carriers over for their transportation, i.e. Kanpur.
(iv) As per section 12(12) of the IGST Act, 2017, the place of supply of banking and other financial
services, including stock broking services to any person is the location of the recipient of services
in 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 bank, i.e. New Delhi.
(v) As per section 13(4) read with section 13(6) of the IGST Act, 2017, where services supplied directly
in relation to an immovable property are supplied at more than one location, including a location
in the taxable territory, the place of supply is the location in the taxable territory. Since in the given
case, the immovable properties are located in more than one location including a location in the
taxable territory, the place of supply of architect service is the location in the taxable territory, i.e.
Pune.
Question 25
Answer the following questions in the light of the place of supply provisions contained in the IGST Act,
2017:
(1) Quickdeal Enterprises (Ahmednagar, Gujarat) opens a new branch office at Hissar, Haryana. It
purchases a building for office from Ruhani Builders (Hissar) along with pre-installed office
furniture and fixtures. Determine place of supply of the pre-installed office furniture and fixtures.
(2) Supra Events, an event management company at New Delhi, organizes an award function for Chirag
Diamond Merchants of Varanasi (registered in U.P.), at Mumbai. Determine place of supply of the
service supplied by Supra Events. Will your answer be different, if the award function is organised
at Mauritius instead of Mumbai?
Answer
1. Section 10(1)(c) of the IGST Act stipulates that if the supply does not involve movement of goods,
the place of supply is the location of goods at the time of delivery to the recipient. Since there is no
movement of office furniture and fixtures in the given case, the place of supply of such goods is
their location at the time of delivery to the recipient (Quickdeal Enterprises) i.e., Hissar, Haryana.
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Place of Supply
2. Section 12(7) of the IGST Act stipulates that the place of supply of services provided by way of
organisation of a cultural, artistic, sporting, scientific, educational or entertainment event including
supply of services in relation to a conference, fair, exhibition, celebration or similar events is the
location of recipient in a case where such service is provided to a registered person. In the given
case, since the recipient (Chirag Diamond Merchants) is a registered person, the place of supply is
the location of the recipient, i.e., Varanasi, U.P.
Further, the place of supply will not change even if the award function is organised at Mauritius
instead of Mumbai as the location of recipient remains unchanged. Thus, in that case also, the place
of supply is the location of the recipient, i.e., Varanasi, U.P.
Question 26
M/s Joinder Drills of Australia exports rough rock cutting diamonds to M/s Ankit Enterprises of India, a
registered supplier in the State of Haryana. M/s Ankit Enterprises is expected to process them into tools
and export the same to the supplier in Australia. The process does not involve any sophisticated process
other than cutting, polishing and finishing. M/s Ankit Enterprises requests M/s Joinder Drills for use of
such tools for his business in India for 3 months, which is agreed to by the supplier. It then exports it to
the Australian supplier, invoicing it for ₹ 12,00,000 for processing it into the required tool.
M/s Ankit Enterprises is of the assumption that it is an export transaction and therefore, it is entitled to
treat it as a zero-rated supply and decides that no tax is payable under LUT although the rate applicable
to such services for domestic supplies is CGST - 9%, SGST - 9% and IGST - 18%.
State the provisions relating to the above supply of service and explain whether the stand taken by M/s
Ankit Enterprises is correct and also determine the tax, if applicable, as the goods are now moving out of
Haryana.
Answer
One of the conditions for a supply of service to qualify as export of service is that the place of supply of
said service must be outside India.
The place of supply of services supplied in respect of the goods which are temporarily imported into
India for any other treatment/process and are exported after such treatment/process without being put
to any use in India, other than that which is required for such treatment/process, is the location of
recipient of such service [Second proviso to section 13(3)(a) of the IGST Act, 2017].
In view of the above, in the given case, the place of supply of the services provided by M/s Ankit
Enterprises is the place where the services are actually performed, i.e., in India as the tools to be exported
have been used in India for 3 months before their export. Resultantly, the supply of services by M/s Ankit
Enterprises do not qualify as export of service.
Since the recipient is outside India, the place of supply is governed by section 13 and hence, the supply
is not an intra-State supply in terms of section 8(2) of the IGST Act, 2017. [In case where the place of
supply (determined under section 13 of the IGST Act, 2017) and the location of supplier are in the same
State, CBIC FAQs on ‘Banking, Insurance and Stock Brokers Sector’ have taken a view that such supplies
will be treated as intra-State supply.]
Therefore, since the place of supply is in India and the supply is not an intra -State supply, the same is an
inter-State supply [in terms of section 7(5)(c) of the IGST Act, 2017] of services and not of goods. Thus,
the same is liable to IGST of ₹ 1,83,051 (₹ 12,00,000/118 x 18). [It has been assumed that the amount of
₹ 12,00,000 is inclusive of IGST.]

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Place of Supply
Question 27
Determine place of supply along with reasons in the following cases:
(i) Mr. X, an architect (Kolkata), provides interior decorator services to Mr. Y of New York (USA) in
relation to his immovable property located in New Delhi.
(ii) Mr. A (a Chartered Accountant registered in Kolkata) supplies services to his client in Bhubaneswar
(registered in Bhubaneswar, Odisha).
(iii) ABC Ltd. of Patna imported certain goods from XYZ Inc. of USA. The goods were imported through
vessel and delivery of goods was taken at Kolkata, whereafter the movement terminates and the
goods are stored.
(iv) Mr. X, registered in Guwahati, has availed land-line services from BSNL. The telephone is installed
in residential premises in Kolkata and the billing address is office of Mr. X in Guwahati.
(v) Mr. X, residing in Chennai, is travelling with an Indian Airline aircraft and is provided with movie-
on-demand service for ₹100 as on-board entertainment during Delhi-Chennai leg of a Bangkok-
Delhi-Chennai flight.
(vi) Mr. X of Kolkata purchased online tickets for Aquatica water p ark in Mumbai.
(vii) Mr. Z, an unregistered person of Kolkata, sends a courier from New Delhi to his friend in Chennai,
Tamil Nadu while he was on trip to New Delhi.
(viii) Mr. X, a registered person in Ranchi, Jharkhand, buys shares from a broker in Patna on NSE,
Mumbai. Determine the place of supply of brokerage service.
(ix) XYZ Ltd., New Delhi entered into contract with an Indian airline for the supply of biscuit packets
for further supply by airline to the passengers in Kolkata-Guwahati route. The biscuits were loaded
on board in Lucknow.
Answer
(i) New Delhi. In a case where location of the supplier or location of recipient of service is outside
India, the place of supply of services supplied directly in relation to an immovable property
including that of interior decorators is the place where the immovable property is located.
(ii) Bhubaneshwar, Odisha. The place of supply of services, except the specified services made to a
registered person, is the location of such person.
(iii) Patna. The place of supply of goods imported into India is the location of the importer.
(iv) Kolkata. The place of supply of services by way of fixed telecommunication line is the location
where the telecommunication line is installed for receipt of services.
(v) Bangkok. The place of supply of services on board an aircraft is the location of the first scheduled
point of departure of that aircraft or flight for the journey
(vi) Mumbai. The place of supply of services provided by way of admission to an amusement park is
the place where the park is located.
(vii) New Delhi. The place of supply of services by way of transportation of goods by courier to a person
other than a registered person is the location at which such goods are handed over for their
transportation.
(viii) Ranchi, (Jharkhand). The place of supply of stock broking services to any person shall be the
location of the recipient of services on the records of the supplier of services. [It has been assumed
that the location of the recipient of service is available in the records of the supplier of service.]
(ix) Where the supply involves movement of goods, the place of supply of such goods is the location of
the goods at the time at which the movement of goods terminates for delivery to the recipient.

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Place of Supply
Therefore, the place of supply of biscuit packets sold by XYZ Ltd. to Indian Airlines is Lucknow. [It
has been assumed that in the given case, the movement of goods (biscuit packets) terminates at
Lucknow.]
Further, where the goods are supplied on board an aircraft, the place of supply shall be the location
at which such goods are taken on board. Thus, the place of supply of biscuit packets sold by Indian
Airlines to the passengers in Kolkata-Guwahati route is Lucknow.

Page 5.18
CHAPTER - 6
Time of Supply
Question 1
Kanchenjunga Pvt. Ltd. supplies taxable goods to Sutlej Pvt. Ltd. for ₹ 2,50,000 on 23rd June and issues
the invoice on 25th June. Payment for the goods is made by Sutlej Pvt. Ltd. on 15th July.
Determine the time of supply of goods for the purpose of payment of tax.
Answer
In terms of section 12(2), the time of supply of goods is the earlier of, the date of issue of invoice/last
date on which the invoice is required to be issued or date of receipt of payment. However, Notification
No. 66/2017 CT dated 15.11.2017 specifies that a registered person (excluding composition supplier)
has to pay GST on the outward supply of goods at the time of supply as specified in section 12(2)(a), i.e.
date of issue of invoice or the last date on which invoice ought to have been issued in terms of section 31.
As per section 31(1), invoice for supply of goods should be issued before or at the time of removal of
goods for supply to the recipient, where supply involves movement of goods. Therefore, time of supply
of goods is 23rd June being the last date on which invoice ought to have been issued and not 25th June
when the invoice is actually issued.
Question 2
I buy a set of modular furniture from a retail store. Invoice is issued to me and I make the payment. The
furniture is to be delivered to me later in the week when a technician is available to assemble and install
it. The next day the rate of tax applicable to modular furniture is revised upward, and the store sends me
a supplementary invoice with the delivery note accompanying the furniture to collect the differential
amount of tax.
Is this correct on store’s part? Explain.
Answer
No, the store is not correct in issuing supplementary invoice with revised rate of tax. The revised rate of
tax is not applicable to the transaction, as the issuance of invoice as well as receipt of payment occurred
before the supply. Therefore, in terms of section 14(b)(ii), the time of supply is earlier of the two events
namely, issuance of invoice or receipt of payment, both of which are before the change in rate of tax, and
thus, the old rate of tax remains applicable.
Question 3
An online portal, Best Info, raises invoice for database access on 21st February on Roy &
Bansal Ltd. The payment is made by Roy & Bansal Ltd. by a demand draft sent on 25th February, which
is received and entered in the accounts of Best Info on 28th February. Best Info encashes the demand
draft and thereafter, gives access to the database to Roy & Bansal Ltd from 3rd March. In the meanwhile,
the rate of tax is changed from 1st March.
Determine the time of supply of the service of database access by Best Info.
Answer
As issuance of invoice and receipt of payment (entry of the payment in Best Info’s accounts) occurred
Page 6.1
Time of Supply
before the change in rate of tax, the time of supply of service by the online portal is earlier of the date of
issuance of invoice (21st February) or date of receipt of payment (28th February) i.e., 21st February. This
would be so even though the service commences after the change in rate of tax [Section 14(b)(ii)].
Question 4
Trust Industries Ltd. has entered into a contract with VST Ltd. to supply gas by a pipeline to VST Ltd. for
a period of one year. As per the terms of the contract-
(i) VST Ltd. shall make monthly payments [Payment for a month shall be made by 7th day of the next
month]
(ii) Every quarter, Trust Industries Ltd. shall issue a statement of account showing the quantity and
value of goods dispatched, payments received and payment due.
(iii) The differential amount, if any, as mentioned in the statement of account shall be paid by VST Ltd.
The details of the various events are:
August 5,
September 5, Payments of ₹ 2 lakh made in each month for the quarter July-September
October 6
Statement of accounts for the quarter July – September issued by the supplier
October 3
showing amount of ₹ 2,56,000 as unpaid
Balance payment of ₹ 56,000 received by supplier for the quarter July –
October 17
September
Determine the time of supply of goods for the purpose of payment of tax.
Answer
As per Notification No. 66/2017 CT dated 15.11.2017, a registered person (excluding composition
supplier) has to pay GST on the outward supply of goods at the time of supply as specified in section
12(2)(a), i.e. date of issue of invoice or the last date on which invoice ought to have been issued in terms
of section 31. As per section 31(4), in case of continuous supply of goods, where successive statements
of accounts or successive payments are involved, the invoice is issued before or at the time of each such
statement is issued or, as the case may be, each such payment is received.
Therefore, invoices should be issued for ₹ 2 lakh each on or before August 5, and September 5, when
monthly payments of ₹ 2 lakh are received. Further, invoice should also be issued for differential payment
of ₹ 2,56,000 on or before October 3, when statement of account is issued
Thus, assuming that the invoice is issued on August 5, September 5 and October 3, the time of supply for
the purpose of payment of tax will be August 5 and September 5 respectively for goods valued at ₹ 2 lakh
each and October 3 for the goods valued at ₹ 2,56,000.
Question 5
Renduhoot Ltd. enters into a contract with XYZ Ltd. on 2nd July 2019 for a period of 2 years for
construction of a new building - to be used for commercial purposes - for a total consideration of ₹ 150
lakh. As per the terms of contract, Renduhoot Ltd. is required to make payment at different stages of
completion of the building namely, 50%, 75% and 100%.
Determine the time of supply using relevant details given as under:

Page 6.2
Time of Supply
Stage Date of various Date of issuance of Date of Amount paid

stages invoice payment (₹)
Initial booking 02.07.2019 02.07.2019 02.07.2019 15 lakh
50% completion of 15.03.2020 22.03.2020 29.03.2020 60 lakh
building
building
building
Answer
As per section 13, the time of supply of services is the earlier of the dates arrived at by methods (A) and
(B), as follows:
(A) Date of invoice or date of receipt of payment (to the extent the invoice or payment covers the supply
of services), whichever is earlier, if the invoice is issued within the time prescribed under section
31;
(B) Date of provision of service or date of receipt of payment (to the extent the payment covers the
supply of services), whichever is earlier, if the invoice is not issued within the time prescribed
under section 31
Since in the present case, the construction services are provided under a contract for a period exceeding
three months with periodic payment obligations, such services would fall within the ambit of term
“continuous supply of services” as defined under section 2(33).
As per section 31(5), in case of continuous supply of services, the invoice should be issued either (i) on/
before the due date of payment or (ii) before/ at the time when the supplier of service receives the
payment, if the due date of payment is not known (iii) on/ before the date of completion of the milestone
event when the payment is linked to completion of an event [Section 31(5)].
Accordingly, the time of supply with respect to each of the stages of completion is as follows:
Stages of Time of supply

completion
Initial Since invoice is issued within the prescribed time limit, earlier of the date of issue of
booking invoice or date of receipt of payment is the time of supply. However, date of issuance
of invoice (02.07.2019) and date of receipt of payment (02.07.2019) are the same.
Therefore, time of supply is 02.07.2019.
50% Since invoice has not been issued on or before the date of 50% completion, earlier of
date of provision of service (15.03.2020) or date of receipt of payment (29.03.2020),
i.e. 15.03.2020 is the time of supply.
75% Since invoice has not been issued on or before the date of 75% completion, earlier of
date of provision of service (20.06.2020) or date of receipt of payment (23.07.2020),
i.e. 20.06.2020 is the time of supply.
100% Since invoice is issued within the prescribed time limit, earlier of the date of issue of
invoice (30.09.2020) or date of receipt of payment (20.09.2020), i.e. 20.09.2020 is the
time of supply.
Question 6
Mint Industries Ltd., a registered supplier, imports business support services from Green Inc. of USA on
Page 6.3
Time of Supply
13th August. The relevant invoice for $ 1,20,000 is raised by Green Inc on 18th August. Mint Industries
Ltd. makes the payment against the said invoice as follows:
Case I 22nd September

Case II 27th December
Determine time of supply in each of the aforesaid cases.
Answer
In case of services supplied by any person located in a non-taxable territory to any person other than
non-taxable online recipient, tax is payable under reverse charge by the person located in the taxable
territory. [Notification No. 10/2017 IT (R) dated 28.06.2017]. Hence, in the given case, since the business
support services are provided by Green Inc (located in non-taxable territory) to Mint Ltd. (person other
than non-taxable online recipient and located in taxable territory), tax is payable under reverse charge
by Mint Ltd.
The time of supply of services taxable under reverse charge is the earlier of the following:
 Date of payment, or
 Date immediately following 60 days since issue of invoice (or any other document in lieu of invoice)
by the supplier.
If it is not possible to determine the time of supply by using these parameters, then the time of supply
will be the date of entry of the service in the books of account of the recipient of supply.
In view of the aforesaid provisions, the time of supply in each of the given cases will be as under:
CASE Time of supply

CASE I Since Mint Ltd makes the payment within 60 days of the date ofissue of invoice, the
time of supply is the date of payment, i.e. 22nd September.
CASE II As Mint Ltd. makes the payment after 60 days from the date of invoice, time of supply
is the date immediately following the saidperiod of 60 days, i.e. 61st day which is 18th
October.
Question 7
Kothari Ltd., Mumbai, holds 51% of shares of Wilson Inc., a USA based company. Wilson Inc. provides
business auxiliary services to Kothari Ltd. From the following details, determine the time of supply of
service provided by Wilson Inc:
Agreed consideration US $1,00,000

Date on which services are provided by Wilson Inc. 16th June
Date on which invoice is issued by Wilson Inc. 19th August
Date of debit in the books of account of Kothari Ltd. 30th September
Date on which payment is made by Kothari Ltd. 23rd December
Answer
Since Kothari Ltd. holds 51% shares of Wilson Inc., Kothari Ltd. and Wilson Inc. are ‘associated
enterprises’ as per section 92A of the Income-tax Act, 1961. As per second proviso to section 13(3), in
case of supply by associated enterprises, where the supplier of service is located outside India, the time
of supply is the earlier of the following two dates:

Page 6.4
Time of Supply
Date of entry in the books of account of the recipient ofsupply [which is Kothari 30th September
Ltd. in the present case]
OR
Date of payment [by Kothari Ltd. in the present case] 23rd December
Thus, time of supply is 30th September.
Question 8
Basis the following information, determine the time of supply:
S. No. Event Date

(1) Commencement of provision of service 05th June
(2) Completion of service 10th October
(3) Invoice issued 20th October
(4) Payment received by cheque and entered in the books 15th October
(5) Amount credited in Bank account 18th October
(6) Rate changed from 12% to 18% 16th October
Note: Assume that all the days covered in the above case are working days.
Answer
The explanation to section 14 lays down that the date of receipt of payment is the date on which the
payment is entered in the books of account of the supplier or the date on which the payment is credited
to his bank account, whichever is earlier. However, the date of receipt of payment is the date of credit in
the bank account if such credit in the bank account is after 4 working days from the date of change in the
rate of tax.
In the given case, the payment has been credited in the bank account within 4 working days from the
date of change in the rate of tax. Therefore, the date of receipt of payment is 15th October being the date
of entry in the books of account of the supplier which is earlier than the date of credit of the payment in
the bank account (18th October).
As per section 14(a)(iii), in case of change in rate of tax, if the service is supplied before the change in
rate of tax and the invoice is issued after the change in rate of tax but the payment is received before such
change in rate of tax, the time of supply is the date of receipt of payment.
Therefore, applying the provisions of section 14(a)(iii) to the given case, the time of supply is 15th
October.
Question 9
M/s KLM Ltd., a publishing and printing house registered in Maharashtra, is engaged in supply of books,
letter cards, envelopes, guides and reference materials. The following information is provided by the
company:
Event Printing of books Printing of envelopes

Date of entering into printing contract 16th March 20th March
Date of receipt of advance 20th March 25th March
Date of completion of printing 10th April 5th April
Date of issue of invoice 15th May 10th April

Page 6.5
Time of Supply
Date of removal of books and letter heads to buyer 13th May 7th April
Date of receipt of balance payment 31st May 30th April
In respect of printing of books, content was supplied by the author. For printing of envelopes, the design
and logo were supplied by the buyer.
Determine the time of suppl(ies) for the purpose of payment of tax.
Answer
As per Circular No. 11/11/2017 GST dated 20.10.2017, in case of printing of books where only content
is supplied by the person who owns the usage rights to the intangible inputs while the physical inputs
including paper used for printing belong to the printer, supply of printing [of the content supplied by the
recipient of supply] is the principal supply and therefore, such supplies would constitute supply of
service.
In case of supply of printed envelopes by the printer using its physical inputs including paper to print the
design, logo etc. supplied by the recipient of goods, predominant supply is supply of goods and the supply
of printing of the content [supplied by the recipient of supply] is ancillary to the principal supply of goods
and therefore, such supplies would constitute supply of goods.
Accordingly, the time of supply of books and envelopes will be governed by sections 12 and 13
respectively.
As per section 31(1), invoice for supply of goods should be issued before or at the time of removal of
goods for supply to the recipient, where supply involves movement of goods. Therefore, in the given case,
the last date by which invoice ought to have been issued is 7th April. Thus, the time of supply of
envelopes for the purpose of payment of tax is 7th April.
As per section 13, the time of supply of services is the earlier of the dates arrived at by methods (A) and
(B), as follows:
(A) Date of invoice or date of receipt of payment (to the extent the invoice or payment covers the supply
of services), whichever is earlier, if the invoice is issued within the time prescribed under section
31;
(B) Date of provision of service or date of receipt of payment (to the extent the payment covers the
supply of services), whichever is earlier, if the invoice is not issued within the time prescribed
under section 31.
Since in the given case, invoice for the services is not issued within 30 days, the time of supply for the
advance received is the date of receipt of payment, i.e. 20th March being earlier than the date of provision
of service. However, the time of supply for the balance payment is the date of provision of service, i.e.
10th April being earlier than the date of receipt of balance payment.
Question 10
Andes Pvt. Ltd., a registered supplier, manufactures product ‘A’ and ‘B’. While ‘A’ is taxable under forward
charge, ‘B’ is taxable under reverse charge. The following details are provided in relation to two
individual supplies of products ‘A’ and ‘B’ made by the company:

Page 6.6
Time of Supply
S. No Date Event
I 10th February Payment of ₹ 1,00,000 made by buyer for supplyof ‘A’ to be delivered
in the month of March
II 13th February Receipt of ₹ 1,00,000 [as mentioned in point (i)above]
III 17th February Payment of ₹ 2,00,000 made by buyer for supplyof ‘B’ to be delivered
in the month of March
IV 20th February Receipt of ₹ 2,00,000 [as mentioned in point (iii)above]
V 5th March Product ‘A’ manufactured and removed
VI 6th March Receipt of product ‘A’ [as mentioned in point (v)above] by the buyer
VII 10th March Product ‘B’ manufactured and removed
VIII 23rd March Receipt of product ‘B’ [as mentioned in point (vii)above] by the buyer
IX 4th March Invoice for ₹ 2,00,000 issued for supply of ‘A’
X 11th March Invoice for ₹ 4,00,000 issued for supply of ‘B’
XI 25th March Payment made by the buyer of ‘A’
XII 31st March Payment [as mentioned in point (xi) above] received
XIII 1st April Payment made by the buyer of ‘B’
XIV 4th April Payment [as mentioned in point (xiii) above] received
Determine the time of suppl(ies) of goods for the purpose of payment of tax.
Answer
Also, it is important to note that the relief of not paying GST at the time of receipt of advance is available
only in case of supply of goods, the tax on which is payable under forward charge. In case of reverse
charge, GST is payable at the time of payment, if payment is recorded/made before receipt of goods
(advance payment) [Section 12(3)].
Therefore, time of supply of product ‘A’, which is taxable under forward charge, is 4th March being the
date of issue of invoice. However, time of supply of product ‘B’, which is taxable under reverse charge, is
17th February to the extent of ₹ 2,00,000 paid as advance being the earliest of the three stipulated dates
namely, date of receipt of goods (23rd March), date of payment (17th February) and date immediately
following 30 days of issuance of invoice (11th April). For balance ₹ 2,00,000, the time of supply of product
‘B’ is 23rd March being the earliest of the three stipulated dates namely, date of receipt of goods (23rd
March), date of payment (1st April) and date immediately following 30 days of issuance of invoice (11th
April).

Page 6.7
Time of Supply

Question 11
Mr. Mahendra Sharma, an interior decorator registered at Ahmedabad (Gujarat), provided service to one
of his clients XYZ Company Ltd., registered at Pune (Maharashtra). The provision of service was
completed on 10-08-20XX and payment received was entered in the books of Mr. Mahendra Sharma on
11-08-20XX.
With effect from 16/08/20XX, applicable GST rate was increased from 5% to 12%. However, payment
for the service received was credited in his bank account on 17/08/20XX and invoice for the same was
raised on 23-08-20XX.
Mr. Mahendra Sharma claimed that he is liable to pay IGST @ 5%. But the department took the view that
he is liable to pay IGST @12%.
Examine the correctness of Mr. Mahendra Sharma's contention and determine the time of supply and
applicable rate of tax as per the statutory provisions.
Would your answer undergo any change in the above case if the payment was credited to the bank
account on 14-08-20XX instead of 17-08-20XX?
Note: You may assume that all days are working days.
Answer
As per section 14 of the CGST Act, 2017, in case of change in rate of tax, date of receipt of payment is
earlier of:
(i) date of entering payment in the books of account of the supplier (11.08.20XX)
or
(ii) date on which the payment is credited to his bank account (17.08.20XX).
However, if the payment is credited in the bank account after 4 working days from the date of change in
the rate of tax, the date of receipt of payment will be the date of credit in the bank account.
In the given case, since the payment has been credited in the bank within 4 working days from the date
of change in the rate of tax, the date of receipt of payment will be 11.08.20XX [i.e., earlier of 11.08.20XX
or 17.08.20XX].
Section 14 further provides that where goods and/or services have been supplied before the change in
rate of tax (10.08.20XX) and the payment has been received before the change in rate of tax (11.08.20XX),
but the invoice for the same is issued after the change in rate of tax (23.08.20XX), the time of supply shall
be the date of receipt of payment.
Therefore, in the given case, the time of supply will be 11.08.20XX and the applicable rate of tax will be
rate prevalent at the time of supply, i.e. IGST @ 5%.
Therefore, the contention of Mahendra Sharma is correct.
Further, if the date on which the payment is credited to bank account of supplier is 14.08.20XX, the date
of receipt of payment will continue to be 11.08.20XX [i.e., earlier of 11.08.20XX or 14.08.20XX] since the
payment is credited in the bank account before change in rate of tax. Consequently, with other things
remaining the same, the time of supply and the applicable rate of tax will remain the same.
Question 12
Determine the time of supply from the following particulars:

Page 6.8
Time of Supply
8th September Community hall booked for a marriage, sum agreed ₹ 1,20,000, advance ₹
20,000 recorded in the books of account.
10th September Advance amount credited in bank account.
2nd November Marriage held in the Community hall.
18th December Invoice issued for ₹ 1,20,000 indicating the balance of ₹ 1,00,000 payable
22nd December Balance ₹ 1,00,000 recorded in the books of account.
24th December Payment ₹ 1,00,000 credited to the bank account
Answer
As per section 31(2) of the CGST Act, 2017 read with rule 47 of CGST Rules, 2017a tax invoice is to be
issued within 30 days of supply of service. In the given case, the invoice is not issued within the
prescribed time limit. As per section 13(2)(b) of CGST Act, 2017, in a case where the invoice is not issued
within the prescribed time, the time of supply of service is –
(i) date of provision of service
or
(ii) date of recording the payment in the books of account of the supplier
or
(iii) date of crediting of payment in the supplier’s bank account whichever is earlier.
Therefore, the time of supply of service to the extent of advance of ₹ 20,000 is 8th September (date of
recording the payment in the books of account) as it is earlier than the date of crediting of payment in
the bank account and the date of provision of service.
The time of supply of service to the extent of the balance ₹ 1,00,000 is 2nd November, which is the date
of provision of service as it is earlier than the other two events in this case.
Question 13
Chiku Traders is a registered supplier of plastic goods. On 10th April, 20XX, Chiku Traders received an
order from Neelu Traders for supply of a consignment of plastic goods. Chiku Traders gets the
consignment ready by 15th April, 20XX. The invoice for the consignment was issued the next day, 16th
April, 20XX. Neelu Traders collects the consignment from the godown of Chiku Traders on 25th April,
20XX and hands over the cheque towards payment on the same date. The said payment is entered in the
books of accounts of Chiku Traders on 26th April, 20XX and amount is credited in their bank account on
27th April, 20XX.
Determine the time of supply of the plastic goods supplied by Chiku Traders to Neelu Traders as per the
provisions of CGST Act, 2017.
Answer
In terms of section 12(2) of the CGST Act, the time of supply of goods is the earlier of the date of issue of
invoice/last date on which the invoice is required to be issued or date of receipt of payment. However,
Notification No. 66/2017 CT dated 15.11.2017 specifies that a registered person (excluding composition
12(2)(a) of the CGST Act, 2017, i.e. date of issue of invoice or the last date on which invoice ought to have
been issued in terms of section 31.
As per section 31(1), the invoice in case of supply of goods needs to be issued either before or at the time
of removal/delivery of goods.

Page 6.9
Time of Supply
In this case, the invoice is issued before the removal of the goods and is thus, within the time limit
prescribed under section 31(1). Therefore, time of supply is the date of issue of invoice, which is 16th
April, 20XX.
Question 14
A machine has to be supplied at site. It is done by sourcing various components from vendors and
assembling the machine at site. The details of the various events are:
Purchase order with advance of Rs. 50,000 is received for machine worth Rs. 12
17th September
lakh and entry duly made in the seller’s books of account
20th October The machine is assembled, tested at site, and accepted by buyer
23rd October Invoice raised
4th November Balance payment of Rs. 11,50,000 received
Determine the time of supply(ies) in the above scenario for the purpose of payment of tax.
Answer
12(2)(a) i.e., date of issue of invoice or the last date on which invoice ought to have been issued in terms
of section 31.
Therefore, the time of supply for the purpose of payment of tax for the entire amount of ₹ 12,00,000 is
20th October which is the date on which the goods were made available to the recipient as per section
31(1)(b), and the invoice should have been issued on this date [Section 12(2)(a)].
Question 15
Determine the time of supply from the given information.
May 4 Supplier invoices goods taxable on reverse charge basis to Bridge & Co. (30 days from the
date of issuance of invoice elapse on June 3)
May 12 Bridge & Co receives the goods
May 30 Bridge & Co makes the payment
Answer
Here, May 12 will be the time of supply, being the earliest of the three stipulated dates namely, and receipt
of goods, date of payment and date immediately following 30 days of issuance of invoice [Section 12(3)].
(Here, date of invoice is relevant only for calculating thirty days from that date.)
Question 16
May 4 Supplier invoices goods taxable on reverse charge basis to Pillar & Co. (30 days from the
date of issuance of invoice elapse on June 3)
June 12 Pillar & Co receives the goods, which were held up in transit
July 30 Payment made for the goods

Page 6.10
Time of Supply
Answer
Here, June 4, 31st day from the date of supplier’s invoice, will be the time of supply, being the earliest of
the three stipulated dates namely, receipt of goods, date of payment and date immediately following 30
days of issuance of invoice [Section 12(3)].
Question 17
Determine the time of supply from the following particulars:
6th May Booking of convention hall, sum agreed Rs. 15000, advance of Rs. 3000 received
15th September Function held in convention hall
27th October Invoice issued for Rs. 15000, indicating balance of Rs. 12000 payable
3rd November Balance payment of Rs. 12000 received
Answer
As per section 31(2) read with rule 47 of CGST Rules, the tax invoice is to be issued within 30 days of
supply of service. In the given case, the invoice is not issued within the prescribed time limit. As per
section 13(2)(b), in a case where the invoice is not issued within the prescribed time, the time of supply
of service is the date of provision of service or receipt of payment, whichever is earlier.
Therefore, the time of supply of service to the extent of Rs. 3,000 is 6th May as the date of payment of Rs.
3,000 is earlier than the date of provision of service. The time of supply of service to the extent of the
balance Rs. 12,000 is 15th September which is the date of provision of service.
Question 18
Investigation shows that ABC & Co carried out service of cleaning and repairs of tanks in an apartment
complex, for which the Apartment Owners’ Association showed a payment in cash on 4th April to them
against work of this description. The dates of the work are not clear from the records of ABC & Co. ABC
& Co have not issued invoice or entered the payment in their books of account.
Answer
The time of supply cannot be determined vide the provisions of clauses (a) and (b) of section 13(2) as
neither the invoice has been issued nor the date of provision of service is available as also the date of
receipt of payment in the books of the supplier is also not available. Therefore, the time of supply will be
determined vide clause (c) of section 13(2) i.e., the date on which the recipient of service shows receipt
of the service in his books of account.
Thus, time of supply will be 4th April, the date on which the Apartment Owners’ Association records the
receipt of service in its books of account.
Question 19
Determine the time of supply from the given information. (Assume that service being supplied is taxable
under reverse charge)
The supplier of service issues invoice for service provided. There is a dispute about
May 4
amount payable, and payment is delayed.
August 21 Payment made to the supplier of service

Page 6.11
Time of Supply
Answer
Here, July 4 will be the time of supply, being the earliest of the two stipulated dates namely, date of
payment and date immediately following 60 days since issue of invoice.
Question 20
A German company issues email informing its associated company ABC Ltd. of the
May 4
cost of technical services provided to it.
July 2 ABC Ltd transfers the amount to the account of the German company
Answer
As there is no prior entry of the amount in the books of account of ABC Ltd., July 2 will be the time of
supply, being the date of payment in terms of second proviso to section 13(3).
Question 21
Determine the time of supply in the following cases assuming that GST is payable under reverse charge:
Date of Date of issue of

S. N. receipt of Date of payment by the recipient of goods invoice by the
goods supplier of goods
(1) (2) (3)
(i) July 1 August 10 June 29
(ii) July 1 June 25 June 29
Part payment made on June 30 and balance amount
(iii) July 1 June 29
paid on July 20
Payment is entered in the books of account on June
(iv) July 5 June 1
28 and debited in recipient’s bank account on June 30
Payment is entered in the books of account on June
(v) July 1 June 29
30 and debited in recipient’s bank account on June 26
(vi) August 1 August 10 June 29
Answer
Date
Date of Issue
Date of Date of payment by immediately Time of supply of
of invoice by
S. N. receipt the recipient of following 30 goods [Earlier of
the supplier
of goods goods days from the (1), (2) & (4)]
of goods
date of invoice
(1) (2) (3) (4) (5)
(i) July 1 August 10 June 29 July 30 July 1
(ii) July 1 June 25 June 29 July 30 June 25
Part payment made June 30 for part
on June 30 and payment made and
(iii) July 1 June 29 July 30
balance amount paid July 1 for balance
on July 20 amount

Page 6.12
Time of Supply
Payment is entered in
June 28 (i.e., when
books of account on
payment is entered in
(iv) July 5 June 28 and debited June 1 July 2
the books of account
in recipient’s bank
of the recipient)
account on June 30
June 26 (i.e., when
books of account on
payment is debited in
(v) July 1 June 30 and debited June 29 July 30
the recipient’s bank
in recipient’s bank
account)
account on June 26
July 30 (i.e., 31st day
(vi) August 1 August 10 June 29 July 30 from issuance of
invoice)
Question 22
Determine the time of supply in the following cases assuming that GST is payable under reverse charge:
Date of issue of invoice

S. No. Date of payment by the recipient for supply of services by the supplier of
services
(1) (2)
(i) August 10 June 29
(ii) August 10 June 1
Part payment made on June 30 and balance amount paid on
(iii) June 29
September 1
Payment is entered in the books of account on June 28 and
(iv) June 1
debited in recipient’s bank account on June 30
Payment is entered in the books of account on June 30 and
(v) June 29
debited in recipient’s bank account on June 26
Answer
Date
Date of Issue immediately
Date of payment by the
of invoice by following 60 Time of supply of goods
S. N. recipient for supply of
the supplier days from the [Earlier of (1) & (3)]
services
of services date of
invoice
(1) (2) (3)
(i) August 10 June 29 August 29 August 10
(ii) August 10 June 1 August 1 August 1
Part payment made on
June 30 and balance June 30 for part payment and
(iii) June 29 August 29
amount paid on August 29 for balance amount
September 1

Page 6.13
Time of Supply
the books of account on June 28 (i.e. when payment is
(iv) June 28 and debited in June 1 August 1 entered in the books of
recipient’s bank account account of the recipient)
on June 30
the books of account on June 26 (i.e. when payment is
(v) June 30 and debited in June 29 August 29 debited in the recipient’s bank
recipient’s bank account account)
on June 26
Question 23
Determine the time of supply in the following cases assuming that rate of GST changes from 18% to 20%
w.e.f. June 1:
Sr. No. Date of supply of services Date of issue of invoice Date of receipt of payment
(i) June 9 July 25
(ii) May 28 May 28 July 25
(iii) June 9 May 26
(iv) May 28 June 25
(v) June 10 May 28 May 16
(vi) June 9 May 28
Answer
Date of supply Date of issue of Date of receipt

S. No. Time of supply Applicable rate
of services invoice of payment
(i) May 28 June 9 July 25 June 9 20%
(ii) May 28 July 25 May 28 18%
(iii) June 9 May 26 May 26 18%
(iv) June 10 May 28 June 25 June 25 20%
(v) May 28 May 16 May 16 18%
(iv) June 9 May 28 June 9 20%
Question 24
Kabira Industries Ltd engaged the services of a transporter for road transport of a consignment on 17th
June and made advance payment for the transport on the same date, i.e. 17th June. However, the
consignment could not be sent immediately on account of a strike in the factory, and instead was sent on
20th July. Invoice was received from the transporter on 22nd July.
What is the time of supply of the transporter’s service? Note: Transporter’s service is taxed on reverse
charge basis.
Answer
Time of supply of service taxable under reverse charge is the earlier of the following two dates in terms
of section 13(3):

Page 6.14
Time of Supply
• Date of payment
• 61st day from the date of issue of invoice
In this case, the date of payment precedes 61st day from the date of issue of invoice by the supplier of
service. Hence, the date of payment, i.e. 17th June, will be treated as the time of supply of service [Section
13(3)(a)].
Question 25
Raju Pvt Ltd. receives the order and advance payment on 5th January for carrying out an architectural
design job. It delivers the designs on 23rd April. By oversight, no invoice is issued at that time, and it is
issued much later, after the expiry of prescribed period for issue of invoice.
When is the time of supply of service?
Answer
Since the invoice has not been issued within the prescribed time period, time of supply of service will be
the earlier of the following two dates in terms of section 13(2)(b):
• Date of provision of service
• Date of receipt of payment
The payment was received on 5th January and the service was provided on 23rd April. Therefore, the
date of payment, i.e. 5th January is the time of supply of the service in this case.
Question 26
Investigation shows that 150 cartons of ceramic capacitors were dispatched on 2nd August but no invoice
was raised and the transaction (dispatch of cartons) was not entered in the accounts. There was no
evidence of receipt of payment.
What is the time of supply of 150 cartons for the purpose of payment of tax?
Answer
of section 31.
In this case since the invoice has not been issued, the time of supply for the purpose of payment of tax
will be the last date on which the invoice is required to be issued.
The invoice for supply of goods must be issued on or before the dispatch of goods, i.e. on 2nd August.
Therefore, the time of supply for the purpose of payment of tax for the goods will be 2nd August, the date
when the invoice should have been issued.
Question 27
An order is placed on Ram & Co. on 18th August for supply of a consignment of customized shoes. Ram
& Co. gets the consignment ready and informs the customer and issues the invoice on 2nd December. The
customer collects the consignment from the premises of Ram & Co. on 7th December and electronically
transfers the payment on the same date, which is entered in the accounts on the next day, 8th December.
What is the time of supply of the shoes for the purpose of payment of tax?
Page 6.15
Time of Supply
Answer
of section 31.
In this case, the invoice is issued before the removal of the goods and is thus, within the time limit
prescribed under section 31(1). Therefore, the time of supply for the purpose of payment of tax is the
date of issue of invoice, which is 2nd December.
Question 28
Meal coupons are sold to a company on 9th August for being distributed to the employees of the said
company. The coupons are valid for six months and can be used against purchase of food items. The
employees use them in various stores for purchases of various edible items on different dates throughout
the six months.
What is the date of supply of the coupons?
Answer
As the coupons can be used for a variety of food items, which are taxed at different rates, the supply
cannot be identified at the time of purchase of the coupons. Therefore, the time of supply of the coupons
is the date of their redemption in terms of section 12(4).
Question 29
A firm of lawyers issues invoice for services to ABC Ltd. on 17th Feb. The payment is contested by ABC
Ltd. on the ground that on account of negligence of the firm, the company’s case was dismissed by the
Court for non-appearance, which necessitated further appearance for which the firm is billing the
company. The dispute drags on and finally payment is made on 3rd November.
Identify the time of supply of the legal services.
Note: Legal services are taxable on reverse charge basis.
Answer
Time of supply of services that are taxable under reverse charge is earliest of the following two dates in
terms of section 13(3):
• Date of payment [3rd November]
• 61st day from the date of issue of invoice [19th April]
The date of payment comes subsequent to the 61st day from the issue of invoice by the supplier of service.
Therefore, the 61st day from the date of supplier’s invoice has to be taken as the time of supply. This fixes
19th April as the time of supply.
Question 30
Modern Security Co. provides service of testing of electronic devices. In one case, it tested a batch of
devices on 4th and 5th September but could not raise invoice till 19th November because of some dispute
about the condition of the devices on return. The payment was made in December.

Page 6.16
Time of Supply
What is the method to fix the time of supply of the service?
Answer
The time of supply of services, if the invoice is not issued in time, is the date of payment or the date of
provision of service, whichever is earlier [Section 13(2)(b)]. In this case, the service is provided on 5th
September but not invoiced within the prescribed time limit. Therefore, 5th September, the date of
provision of service, being earlier than the date of payment, will be the time of supply.

Page 6.17
CHAPTER - 7
Value of Supply
Question 1
BW Ltd. manufactures tobacco products. It has provided the following particulars relating to goods sold
by it to CF Ltd.
Particulars ₹
Price of the goods (exclusive of all taxes/duties and discounts) 60,000
Excise duty 6,000
Packing charges 2,000
Freight (arranged by BW Ltd.) 1600
Total amount billed to CF Ltd. before any discount 69,600
Discount @ 2% of the price of goods recorded in the invoice
The final amount charged from CF Ltd. is ₹ 69,600 less discount @ 2%.
Determine the value of taxable supply made by BW Ltd.
Answer
Particulars ₹
Price of the goods (exclusive of taxes and discounts) 60,000
Add: Excise duty [Note 1] 6,000
Packing charges [Note 2] 2,000
Freight [Note 3] 1600
Less: Discount @ 2% on ₹ 60,000 [Note 4] (1,200)
Value of taxable supply 68,400
Notes:
(1) As per section 15(2)(a), any taxes, duties, cesses, fees and charges other than CGST, SGST, UTGST,
IGST and GST Compensation Cess, if charged separately by the supplier should be included in the
value of supply. Thus, excise duty charged separately has been added in the value.
(2) As per section 15(2)(c), incidental expenses, including commission and packing, charged by the
supplier to the recipient of a supply should be included in the value. Thus, packing charges have
been added in the value.
(3) Since transport is arranged by the supplier, the contract of supply becomes a composite supply;
the principal supply being the supply of goods. Therefore, freight becomes part of the value of the
composite supply.
(4) As per section 15(3)(a), the value of the supply does not include any discount which is given before
or at the time of the supply if such discount has been duly recorded in the invoice issued in respect
of such supply. Therefore, since in this case, discount is known at the time of supply and recorded
in the supply, it is deductible from the value.
Question 2

Page 7.1
Value of Supply
SA Ltd. is a manufacturer of biscuits. The price of a 200 gm pack of biscuit sold by SA Ltd. is ₹ 30. It has
received subsidy of ₹ 5 per pack of biscuit sold from NM Ltd. as part of NM Ltd.’s CSR activity. SA Ltd.
supplied 1000 packs of biscuits @ ₹ 25 per pack to one of its wholesalers namely, MA Pvt. Ltd. during a
tax period. Loading charges of ₹ 1200 have also been charged separately from MA Pvt. Ltd. MA Pvt Ltd.
delayed the payment of consideration and thus, paid ₹ 5,000 as interest (no separate amount of GST is
paid on the interest by MA Ltd.) in the next tax period. Assume the rate of GST to be 18%.
Determine the value of taxable supply made by SA Ltd.
Answer
Particulars ₹
Price of 1,000 packs of biscuits @ ₹ 25 25,000
Add: Subsidy received from NM Ltd. @ ₹ 5 for 1000 packs ofbiscuits [Note 1] 5,000
Loading charges [Note 2] 1,200
Interest for delay in payment of consideration [Note 3](rounded off) 4,237
Notes:
(1) As per section 15(2)(e), subsidies directly linked to the price excluding subsidies provided by the
Central Government and State Governments should be included in the value.
(2) As per section 15(2)(c), incidental expenses, including commission and packing, charged by the
supplier to the recipient of a supply and any amount charged for anything done by the supplier in
respect of the supply of goods or services or both at the time of, or before delivery of goods or
supply of services should be included in the value.
(3) As per section 15(2)(e), interest or late fee or penalty for delayed payment of any consideration
for any supply should be included in the value. However, as per section 12(6), the time of supply
to the extent it relates to an addition in the value of supply by way of interest is the date when such
interest is received. In the given case, since GST has not been paid separately on the interest, the
same is inclusive of GST. Thus, the value has been computed by [{Interest / (100 + Tax Rate)} x
100]. This time of supply in relation to the addition in value by way of such interest will fall in the
next tax period on the date when the same is received.
Question 3
X Pvt. Ltd., a money changer, has exchanged US $ 10,000 to Indian rupees @ ₹ 74 per US $. X Pvt. Ltd.
wants to value the supply in accordance with rule 32(2)(b) of CGST Rules.
Determine the value of supply made by X Pvt. Ltd.
Answer
As per rule 32(2)(b) of CGST Rules, the value in relation to the supply of foreign currency, including
money changing, is deemed to be-
(i) 1% of the gross amount of currency exchanged for an amount up to ₹ 1,00,000, subject to a
minimum amount of ₹ 250;
(ii) ₹ 1,000 and 0.5% of the gross amount of currency exchanged for an amount exceeding ₹ 1,00,000
and up to ₹ 10,00,000.
Therefore, the value of supply, made by X Pvt. Ltd., under rule 32(2)(b) of CGST Rules is computed as

Page 7.2
Value of Supply
under:
Particulars ₹ ₹
Value of currency exchanged in Indian rupees [₹ 74 xUS $ 10,000] 7,40,000
Upto ₹ 1,00,000 1,000
For ₹ 6,40,000 [0.50% x ₹ 6,40,000] 3,200
Value of supply 4200
Question 4
UB & Sons is an air travel agent. Compute the value of supply of service made by the firm during a month
with the help of following particulars furnished by it:
Particulars Basic fare (₹) Other charges Taxes (₹) Total value of
and fee (₹) tickets (₹)
Domestic Bookings 1,00,900 9,510 4,990 1,15,400
InternationalBookings 3,16,880 20,930 15,670 3,53,480
Answer
Computation of value of supply of services made by UB & Sons in a month
Particulars ₹ ₹
Basic fare in case of domestic bookings 1,00,900
Value of supply @ 5% [A] Refer Note below 5,045
Basic fare in case of international bookings 3,16,880
Value of supply @ 10% [B] Refer Note below 31,688
Value of supply [A] + [B] (rounded off) 36,733
Note:
As per rule 32(3) of CGST Rules, the value of the supply of services in relation to booking of tickets for
travel by air provided by an air travel agent is 5% of the basic fare in the case of domestic bookings, and
10% of the basic fare in the case of international bookings.
Question 5
Income tax collected at source should be added in value of the supply in terms of section 15(2)(a).
Examine the correctness of the statement.
Answer
The statement is not correct. CBIC vide Circular No. 76/50/2018 GST dated 31.12.2018 (amended vide
corrigendum dated 7.03.2019) has clarified that for the purpose of determination of value of supply
under GST, tax collected at source (TCS) under the provisions of the Income Tax Act, 1961 would not be
includible as it is an interim levy not having the character of tax.
Question 6
How should the supply made by a component manufacturer be valued, when he uses moulds and dies
owned by the original equipment manufacturer sent free of cost to him? Explain.

Page 7.3
Value of Supply
Answer
Circular No. 47/21/2018 GST dated 08.06.2018 has clarified that while calculating the value of the supply
made by the component manufacturer using moulds and dies owned by Original Equipment
Manufacturers (OEM) sent free of cost (FOC) to him, the value of such moulds and dies shall not be added
to the value of supply made by him because the cost of moulds/dies was not to be incurred by the
component manufacturer and thus, does not merit inclusion in the value of supply in terms of section
15(2)(b).
However, if the contract between OEM and component manufacturer was for supply of components
made by using the moulds/dies belonging to the component manufacturer, but the same have been
supplied by the OEM to the component manufacturer on FOC basis, the amortised cost of such
moulds/dies shall be added to the value of the components.
Question 7
Examine whether the following discounts ought to be excluded to determine the value of supply:
(i) Company offering 20% discount for purchases above ₹ 10,000
(ii) Company offering additional discount of 1% on purchase of 10,000 pieces in a year
(iii) After selling a product, the company re-values the product at a lower value and issues credit note
to the buyer for the differential amount.
Answer
(i) The given case is a case of staggered discounts where rate of discount increases with increase in
purchase volume. Such discounts are shown on the invoice itself. Therefore, the same are excluded
to determine the value of supply.
(ii) The given case is a case of volume discount which are offered by the suppliers to their stockists,
etc. Such discounts are established in terms of an agreement entered into at or before the time of
supply though not shown on the invoice as the actual quantum of such discounts gets determined
after the supply has been effected and generally at the year end. Such type of volume discounts are
excluded to determine the value of supply provided they satisfy the parameters laid down in
section 15(3) including the reversal of ITC by the recipient of the supply as is attributable to the
discount on the basis of document (s) issued by the supplier.
(iii) This is a case of secondary discounts. These are the discounts which are not known at the time of
supply or are offered after the supply is already over. Therefore, such discounts shall not be
excluded while determining the value of supply.
Question 8
Rajesh & Co., a partnership firm, provides financial and management consultancy to a group of companies
for an annual retainership fee of ₹ 15 lakh. Further, the firm is provided with a car (along with a driver)
for its exclusive use throughout the year. The fuel cost is also borne by the Group. Rajesh & Co. pays GST
on the amount of ₹ 15 lakh.
Is the value for the service provided by Rajesh & Co. correct under GST law? If not, please elaborate.
Answer
Rajesh & Co. gets a car along with driver (including the fuel) for the whole year, which is an additional

Page 7.4
Value of Supply
non-monetary consideration for its services. The monetary value of such additional consideration must
be added to the retainer fee (₹ 15 lakh) in order to arrive at the value of the taxable service provided by
Rajesh & Co, as per rule 27 relating to valuation.
Question 9
The supplies of commodity ‘y’ to the market are channelled through a State Marketing Corporation which
conducts an auction each day to arrive at the price. Gupta and Co. supplies commodity ‘y’ through the
State Marketing Corporation.
How will the supply of ‘y’ made by Gupta and Co. to State Marketing Corporation be valued for paying
tax?
Answer
The State Marketing Corporation is an ‘agent’ in the meaning of the expression as defined in section 2(5),
which includes an auctioneer. Therefore, the value of supply of ‘y’ will be determined in terms of rule 29
relating to valuation.
There is no open market for the first supply of commodity ‘y’, as it is compulsorily supplied to the State
Marketing Corporation. However, Gupta & Co. has the option of valuing the supply of ‘y’ at 90% of price
of goods of like kind and quality sold by the State Marketing Corporation to its unrelated customers.
If the value cannot be determined by this method, it needs to be determined on the basis of the cost plus
10% mark up as per rule 30 or on the basis of Best Judgement Method as per rule 31, in that order.
Question 10
Easy Coupons Ltd. sells coupons that are redeemable against specified luxury food products at retail
outlets. Each coupon is sold for value of ₹ 900 but is redeemable for supplies worth ₹ 1000.
What is the value of supply of such coupon under GST law?
Answer
In terms of rule 32(6) relating to valuation, the value of a coupon is the money value of the goods
redeemable against it. Therefore, though the coupon is sold for ₹ 900, its value is ₹ 1000.
Question 11
A pharmaceutical company supplies a drug intermediate to its own unit in another State for conversion
into formulations. The product is exclusive to this company, and there is no market sale in India of this
drug intermediate. Goods of like kind and quality are also not available.
How will the value of the supply of this drug intermediate be determined under GST law?
Answer
Since the supply is made to a distinct person, the same will be valued in accordance with rule 28 relating
to valuation.
There is no open market value of the drug intermediate as also there are no like goods. Therefore, value
of supply of such drug intermediate will be determined in terms of clause (c) of rule 28 i.e., by using rule
30. Thus, the value of supply of such drug intermediate will be 110% of its cost of production or
manufacture.

Page 7.5
Value of Supply
However, if the recipient unit is eligible for full ITC, the value declared in the invoice will be deemed to
be the open market value of the drug intermediate and thus, the invoice value will be the value of taxable
supply.
Question 12
Dushyant rents out a commercial building owned by him to Bharat for the month of December, for which
he charges a rent of ₹ 19,50,000. Dushyant pays the maintenance charges of ₹ 1,00,000 (for the December
month) as charged by the local society. These charges have been reimbursed to him by Bharat. Also,
Dushyant has paid municipal tax of ₹ 2,85,000 which he has not charged from Bharat.
You are required to determine the value of supply and the GST liability of Dushyant for the month of
December assuming CGST and SGST rates to be 9% each.
Note: All the amounts given above are exclusive of GST.
Answer
Computation of the value of supply and the GST liability of Dushyant for the month of December
Particulars Amount(₹)
Rent of the commercial buiding 19,50,000
Maintenance charges paid to the local society, reimbursedby Bharat [Note 1] 1,00,000
Municipal tax paid by Dushyant [Note 2] Nil
Value of supply 20,50,000
CGST @ 9% 1,84,500
SGST @ 9% 1,84,500
Notes:
(1) Since such charges are reimbursed by the tenant (Bharat), such charges ultimately form part of the
rent paid by Bharat to Dushyant and thus, form part of the value.
(2) Since municipal tax is paid by the supplier (Dushyant) and not charged to the recipient, the same
is not includible in the value.
Question 13
Vayu Ltd. provides you the following particulars relating to goods supplied by it to Agni Ltd.:

List price of the goods (exclusive of taxes/duties and discounts) 76,000
Special packing at the request of customer to be charged to the customer 5,000
Duty levied by local authority on the sale of such goods 4,000
CGST and SGST charged in invoice 14,400
Subsidy received from an NGO in relation to the goods sold (The price of ₹ 76,000 given 5,000
above is after considering the subsidy)
Vayu Ltd. offers 3% discount on the list price of the goods which is recorded in the invoice for the goods.
Determine the value of taxable supplies made by Vayu Ltd.
Answer

Page 7.6
Value of Supply
Computation of value of taxable supplies by Vayu Ltd.
Particulars ₹
List price of the goods 76,000
Add: Special packing [Note 1] 5,000
Duty levied by local authority on sale of goods [Note 2] 4,000
CGST and SGST charged [Note 2] -
Subsidy received from an NGO [Note 3] 5,000
Less: Discount offered
= 3% of List price = ₹ 76,000 × 3% [Note-4] (2,280)
Value of taxable supplies 87,720
Notes:
1. Being incidental expenses charged by the supplier to the recipient of supply, packing charges are
includible in the value as per section 15(2)(c).
2. Taxes, duties, etc. levied under any law for the time being in force other than CGST, SGST/UTGST,
IGST are includible in the value as per section 15(2)(a).
3. Subsidy directly linked to the price received from a non-Government body is includible in the value
in terms of section 15(2)(e).
4. Since discount is known at the time of supply, it is deductible from the value in terms of section
15(3)(a).
Question 14
Binaca Electronics Ltd. (hereinafter referred to as BEL) is engaged in manufacturing televisions. It is
registered in the State of Haryana. It has appointed distributors across the country who sell the
televisions manufactured by it. The maximum retail price (MRP) printed on the package of a television is
₹ 12,000. The applicable rate of GST on televisions is 18%. BEL dispatches the stock of televisions to its
distributors ordered by them on a quarterly basis.
In order to promote its sales, the Sales Head of BEL has formulated a sales promotion scheme. Under this
scheme, BEL offers a discount of 10% (per television) on televisions supplied to the distributors if the
distributors sell 500 televisions in a quarter. The discount is offered on the price at which the televisions
are sold to the distributors (excluding all charges and taxes).
It appoints Shah Electronics (an unrelated party as per GST Law) as its distributor in Haryana on 1st April
and dispatches 750 televisions on 8th April as stock for the quarter April-June. BEL has sold the
televisions to distributor - Shah Electronics at ₹ 8,400 per television (exclusive of applicable taxes). Shah
Electronics has requested BEL for a special packing of the televisions delivered to it for which BEL has
charged ₹ 1,200 per television.
Shah Electronics places a purchase order of 1,000 televisions with BEL for the quarter July-September.
The distributor reports sales of 700 televisions for the quarter April-June and 850 televisions for the
quarter July-September. The discount policy offered by BEL as explained above is also available to Shah
Electronics as per the distributorship agreement.
While Shah Electronics reverses the input tax credit availed for the quarter July- September, it has failed
to reverse the input tax credit availed for the quarter April-June.
Examine the scenario with reference to section 15 and compute the taxable value of televisions supplied
by BEL to Shah Electronics during the quarters April-June and July-September assuming the rate of tax
applicable on the televisions as 18%.
Page 7.7
Value of Supply
Answer
Section 15(3)(a) allows discounts to be deducted from the value of taxable supply if the same is given
before or at the time of the supply and if such discount has been duly recorded in the invoice issued in
respect of such supply. In other words, pre-supply discounts recorded in invoices are allowed as
deduction.
Further, post supply discounts are also allowed as deduction from the value of supply under section
15(3)(b) if-
(i) such discount is established in terms of an agreement entered into at or before the time of such
supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier
has been reversed by the recipient of the supply.
In the given case, Shah Electronics is entitled for 10% discount on televisions supplied by BEL for the
quarters April-June as well as July-September as it has sold more than 500 televisions in each of these
quarters. However, since the sales targets are achieved after the entire stock for the respective quarters
of April-June and July-September has been dispatched, the discounts on the televisions supplied to Shah
Electronics for the quarters of April-June and July-September is a post-supply discount.
Such post-supply discount will be allowed as a deduction from the value of supply since the discount
policy was known before the time of such supply and the discount can be specifically linked to relevant
invoices (invoices pertaining to televisions supplied to Shah Electronics for the quarters of April- June
and July-September) provided Shah Electronics reverses the input tax credit attributable to the discount
on the basis of document issued by BEL.
The value of supply for the quarters of April-June and July-September will thus, be computed as under:
Computation of value of supply for the quarter - April-June

Price at which the televisions are supplied to ShahElectronics [Note 1] 8,400
Add: Packing expenses [Note 2] 1,200
Less: Discount [Note 3] Nil
Value of taxable supply of one unit of television 9,600
Value of taxable supply of televisions for the quarterApril-June [₹ 9,600 x 72,00,000
750]
Notes:
(1) The value of a supply is the transaction value, which is the price actually paid or payable for the
said supply, in terms of section 15(1) presuming that the supplier and the recipient of supply are
not related and price is the sole consideration for the supply as the supplier and recipient are not
related parties.
(2) The value of supply includes incidental expenses like packing charges in terms of section 15(2)(c).
(3) Since Shah Electronics has not reversed the input tax credit attributable to such discount on the
basis of document issued by BEL, the conditions specified in section 15(3)(b) have not been
fulfilled. Thus, the post- supply discount will not be allowed as deduction from the value of supply.
Computation of value of supply for quarter - July-September
Particulars Amount
(₹)
Price at which the televisions are supplied to ShahElectronics [Note 1] 8,400

Page 7.8
Value of Supply

Less: Discount [Note 3] (840)
Value of taxable supply of one unit of television 8,760
Value of taxable supply of televisions for the quarterJuly-September [₹ 8,760 87,60,000
x 1,000]
Notes:
said supply, in terms of section 15(1) presuming that the supplier and the recipient of supply are
not related and price is the sole consideration for the supply as the supplier and recipient are not
related parties.
(2) The value of supply includes incidental expenses like packing charges in terms of section 15(2)(c).
(3) Since all the conditions specified in section 15(3)(b) have been fulfilled, the post-supply discount
will be allowed as deduction from the value of supply. The input tax credit to be reversed will work
out to be ₹1,51,200 [1,000 x (8,400 x 10%) x 18%].
Question 15
Prada Forex Private Limited, registered in Delhi, is a money changer. It has undertaken the following
purchase and sale of foreign currency:
(i) 1,000 US $ are purchased from Nandi Enterprises at the rate of ₹ 74 per US $. RBI reference rate
for US $ on that day is ₹ 74.60.
(ii) 2,000 US $ are sold to Menavati at the rate of ₹ 74.50 per US$. RBI reference rate for US $ for that
day is not available.
Determine the value of supply in each of the above cases in terms of rule 32(2)(a) and rule 32(2)(b).
Answer
Rule 32(2) prescribes the provisions for determining the value of supply of services in relation to the
purchase or sale of foreign currency, including money changing.
Determination of value under rule 32(2)(a)
(i) Value of supply of services for a currency, when exchanged from, or to, Indian Rupees, shall be
equal to the difference in the buying rate or the selling rate, as the case may be, and the Reserve
Bank of India (RBI) reference rate for that currency at that time, multiplied by the total units of
currency. Thus, value of supply is:
= (RBI reference for US $ - Buying rate of US $) × Total number of units of US $ bought
= (74.6 – 74) × 1,000
= ₹ 600/-
(ii) When the RBI reference rate for a currency is not available, the value shall be 1% of the gross
amount of Indian Rupees provided or received by the person changing the money. Thus, value of
supply is:
= 1% of the gross amount of Indian Rupees received
= 1% of (74.50 × 2,000)
= ₹ 1,490/-
Determination of value under rule 32(2)(b)
Rule 32(2)(b) provides that value in relation to the supply of foreign currency, including money changing
Page 7.9
Value of Supply
shall be deemed to be –
S. No. Currency exchanged Value of supply

1% of the gross amount of currency exchanged OR ₹ 250
1. Upto₹ 1,00,000
whichever is higher
Exceeding ₹ 1,00,000 ₹ 1,000 + 0.50% of the (gross amountof currency exchanged -
2.
and upto₹ 10,00,000 1,00,000)
₹ 5,500 + 0.1% of the (gross amountof currency exchanged -
3. Exceeding ₹ 10,00,000
10,00,000) OR ₹ 60,000 whichever is lower
Thus, the value of supply in the given cases would be computed as under:
(i) Gross amount of currency exchanged = ₹ 74 × 1,000 = ₹ 74,000.
Since the gross amount of currency exchanged is less than ₹ 1,00,000, value of supply is 1% of the
gross amount of currency exchanged i.e. 1% of ₹ 74,000 or ₹ 250, whichever is higher, i.e. = ₹ 740/-
(ii) Gross amount of currency exchanged = ₹ 74.50 × 2,000 = ₹ 1,49,000.
Since the gross amount of currency exchanged exceeds ₹ 1,00,000 but is less than ₹ 10,00,000,
value of supply is ₹ 1,000 + 0.50% of (₹ 1,49,000 - ₹ 1,00,000), i.e. = ₹ 1,245/-
Question 16
Rolly Polly Manufacturers Ltd., registered in Mumbai (Maharashtra), is a manufacturer of footwear. It
imports a footwear making machine from USA. Rolly Polly Manufacturers Ltd. enters into a contract with
Rudra Logistics, a licensed customs broker with its office at Ahmedabad (Gujarat), to meet all the legal
formalities in getting the said machine cleared from the customs station.
Apart from this, Rolly Polly Manufacturers Ltd. authorises Rudra Logistics to incur, on its behalf, the
expenses in relation to clearance of the imported machine from the customs station and bringing the
same to the warehouse of Rolly Polly Manufacturers Ltd. which shall be reimbursed by Rolly Polly
Manufacturers Ltd. to Rudra Logistics on the actual basis in addition to agency charges.
Rudra Logistics provided following details:
S. Particulars Amount(₹)
No.
(i) Agency charges 5,00,000
(ii) Unloading of machine at Kandla port, Gujarat 50,000
(iii) Charges for transport of machine from Kandla port, Gujarat to its Rudra 25,000
Logistics’ godown in Ahmedabad, Gujarat
(iv) Charges for transport of machine from Rudra Logistics’ Ahmedabad godown 28,000
to the warehouse of Rolly Polly Export Import House in Mumbai, Maharashtra
(v) Prepared and submitted of Bill of Entry and paidcustoms duty 5,00,000
(vi) Dock dues paid 50,000
(vii) Port charges paid 50,000
(viii) Hotel expenses 45,000
(ix) Travelling expenses 50,000
(x) Telephone expenses 2,000
Compute the value of supply made by Rudra Logistics with the help of given information.
Would your answer be different if Rudra Logistics has charged ₹ 13,00,000 as a lump sum consideration

Page 7.10
Value of Supply
for getting the imported machine cleared from the customs station and bringing the same to the
warehouse of Rolly Polly Manufacturers Ltd.?
Answer
As per explanation to rule 33, a “pure agent” means a person who-
(a) enters into a contractual agreement with the recipient of supply to act as his pure agent to incur
expenditure or costs in the course of supply of goods or services or both;
(b) neither intends to hold nor holds any title to the goods or services or both so procured or supplied
as pure agent of the recipient of supply;
(c) does not use for his own interest such goods or services so procured; and
(d) receives only the actual amount incurred to procure such goods or services in addition to the
amount received for supply he provides on his own account.
The supplier needs to fulfil all the above conditions in order to qualify as a pure agent.
In the given case, Rudra Logistics has entered into a contractual agreement with recipient of supply, Rolly
Polly Manufacturers Ltd., to incur, on behalf of such recipient, the expenses mentioned in S. No. (ii) to
(vii) incurred in relation to clearance of the imported machine from the customs station and bringing the
same to the warehouse of the recipient. Further, Rudra Logistics does not hold any title to said services
and does not them use for his own interest.
Lastly, Rudra Logistics receives only the actual amount incurred to procure such services in addition to
agency charges. Thus, Rudra Logistics qualifies as a pure agent.
Further, rule 33 stipulates that notwithstanding anything contained in the provisions of Chapter IV –
Determination of Value of supply, the expenditure or costs incurred by a supplier as a pure agent of the
recipient of supply shall be excluded from the value of supply, if all the following conditions are satisfied,
namely-
(I) the supplier acts as a pure agent of the recipient of the supply, when he makes the payment to the
third party on authorisation by such recipient;
(II) the payment made by the pure agent on behalf of the recipient of supply has been separately
indicated in the invoice issued by the pure agent to the recipient of service; and
(III) the supplies procured by the pure agent from the third party as a pure agent of the recipient of
supply are in addition to the services he supplies on his own account.
Since conditions (I) to (III) mentioned above are satisfied in the given case, expenses (ii) to (vii) incurred
by Rudra Logistics as a pure agent of Rolly Polly Manufacturers Ltd. shall be excluded from the value of
supply.
Accordingly, value of supply made by Rudra Logistics is as follows:

Agency charges 5,00,000
Add: Unloading of machine at Kandla port, Gujarat Nil
Charges for transport of machine from Kandla port,Gujarat to its godown in Nil
Ahmedabad, Gujarat
Charges for transport of machine from Rudra Logistics’Ahmedabad godown to Nil
the warehouse of Rolly Polly Export Import House in Mumbai, Maharashtra
Customs duty Nil
Dock charges Nil
Port charges Nil

Page 7.11
Value of Supply
Hotel expenses 45,000

Travelling expenses 50,000
Telephone expenses 2,000
Yes, the answer would be different. If lump sum amount of ₹ 13,00,000 is paid then the value of supply
shall be ₹ 13,00,000 and tax shall be charged on value of supply since individual cost are not given.
Question 17
Rustagi & Co. manufactures customized products at its unit situated in Madhya Pradesh. Cost of
production for Rustagi & Co. for 1000 products is ₹ 20,00,000. These products require further processing
before sale, and for this purpose products are transferred from its Madhya Pradesh unit to its another
unit in Himanchal Pradesh. The value declared on the invoice for such transfer is the cost of production
of such products.
The Himanchal Pradesh unit, apart from processing its own products, engages in processing of similar
products of other persons who supply the products of the same kind and quality. Thereafter, the
Himanchal Pradesh unit sells these processed products to wholesalers. There are no other factories in
the neighbouring area which are engaged in the same business as that of Himanchal Pradesh unit.
1,000 units of the products of same kind and quality are supplied to Himanchal Pradesh unit, at the time
when goods are sent by Madhya Pradesh unit, by another manufacturer located in Himanchal Pradesh.
The ex-factory price of such goods is ₹ 19,00,000. The Himanchal Pradesh unit of Rustagi & Co. is eligible
for full ITC.
Determine the value of 1000 products supplied by Rustagi & Co. to its Himanchal Pradesh unit.
Answer
As per section 25(4), a person who has obtained or is required to obtain more than one registration,
whether in one State or Union territory or more than one State or Union territory shall, in respect of each
such registration, be treated as distinct persons for the purposes of this Act. Therefore, units of Rustagi
& Co. in Madhya Pradesh and Himanchal Pradesh are distinct persons under GST.
As per rule 28, the value of the supply of goods between distinct persons, other than where the supply is
made through an agent, shall –
(a) be the open market value of such supply;
(b) if open market value is not available, be the value of supply of goods of like kind and quality;
(c) if value cannot be determined under the above methods, be cost of the supply plus 10% mark-up
or be determined by other reasonable means, in that sequence.
Rule 28 also provides that where the goods are intended for further supply as such by the recipient, the
value shall, at the option of the supplier, be an amount equivalent to 90% of the price charged for the
supply of goods of like kind and quality by the recipient to his customer not being a related person.
Further, rule 28 provides that where the recipient is eligible for full input tax credit, the value declared
in the invoice shall be deemed to be the open market value of the goods or services.
In the given case, the option of valuing the goods @ 90% of the price charged by the recipient to his
unrelated customer is not available as the goods are not further supplied ‘as such’ but only after
processing at Himachal Pradesh unit. However, since the Himanchal Pradesh unit is eligible for full ITC,
the value declared by the Madhya Pradesh unit in the invoice for transfer of such products, i.e. ₹ 20,00,000
shall be deemed to be the open market value of the products.

Page 7.12
Value of Supply
Thus, the value of 1000 products supplied by Rustagi & Co. to its Himanchal Pradesh unit in terms of rule
28 is the open market value of such products which is ₹ 20,00,000.
Question 18
Dev Enterprises is the supplier of water coolers. Dev Enterprises supplied water coolers to an unrelated
party, Vimal Traders for consideration of ₹ 2,95,000 (inclusive of GST @ 18%). Vimal Traders also gave
some materials to Dev Enterprises [valuing ₹ 10,000 (exclusive of GST)] as consideration for such supply.
At the same time, Dev Enterprises has supplied the same goods to another unrelated person at price of ₹
2,97,360 (inclusive of GST@18%).
You are required to:
(1) Determine the value of goods supplied by Dev Enterprises to Vimal Traders.
(2) What would your answer be if price of ₹ 2,97,360 is not available at the time of supply of goods to
Vimal Traders? Explain briefly.
Answer
1. In the given case, price is not the sole consideration for the supply. Apart from monetary
consideration, the buyer has given some material to the supplier as consideration for such supply.
Hence, the value of the supply cannot be determined on the basis of the transaction value in terms
of section 15(1).
Here, the value will be determined with the help of rule 27 which specifies that where the
consideration for a supply is not wholly in money, the value will be the open market value.
Open market value of a supply means the full value in money, excluding the applicable GST, where
the supplier and the recipient of the supply are not related and the price is the sole consideration,
to obtain such supply at the same time when the supply being valued is made.
Therefore, in the given case, the open market value of the goods supplied is ₹ 2,52,000 (₹ 2,97,360
x 100/118) and is therefore, the value of such goods.
2. Rule 27 further provides that if open market value of the supply is not known, the value of the
supply will be the consideration in money plus the money equivalent to the non-monetary
consideration, if such amount is known at the time of supply.
Therefore, the value in the given case will be (₹ 2,95,000 x 100/118) + ₹ 10,000, which is ₹
2,60,000.
Question 19
Chirayu Life Insurance Company Limited (CLICL) has collected premium from policy subscribers. It does
not intimate the amount allocated for investment to subscribers of the policy at the time of collection of
premium. The company has provided the following details in relation to its receipts:
S. No. Particulars Amount

1. Premium for only risk cover 25,00,000
2. Premium from new policy subscribers 40,00,000
3. Renewal premium 80,00,000
4. Single premium on annuity policy 1,00,00,000
All amounts are exclusive of tax. You are required to compute the value of supply by CLICL in terms of
rule 32(4).

Page 7.13
Value of Supply
Answer
As per rule 32(4), the value of supply of services in relation to life insurance business, when the amount
allocated for investment/ savings on behalf of the policy holder is not intimated to the policy holder at
the time of supply of service, is-
(i) in case of single premium annuity policies,10% of single premium charged from the policy holder;
(ii) in all other cases, 25% of the premium charged from the policy holder in the first year and 12.5%
of the premium charged from the policy holder in subsequent years;
(iii) in case the entire premium paid by the policy holder is only towards the risk cover in life insurance,
the premium so paid.
Therefore, in the given case, the value of the services provided by CLICL will be computed as under:
Computation of value of supply for CLICL

Premium for only risk cover 25,00,000
Premium from new policy subscribers 25% of ₹ 40,00,000 10,00,000
Renewal premium 12.5% of ₹ 80,00,000 10,00,000
Single premium on annuity policy10% of ₹ 1,00,00,000 10,00,000
Total value of supply 55,00,000
Question 20
Aviant Ltd., registered in Noida (Uttar Pradesh), is a supplier of machinery used for making bottle caps.
The supply of machinery is effected as under:
 The wholesale price of the machinery (excluding all taxes and other expenses) at which it is
supplied in the ordinary course of the business to various customers is ₹ 42,00,000. However, the
actual price at which the machinery is supplied to an individual customer varies within a range of
± 10% depending upon the terms of contract of supply with the particular customer.
 Apart from the price of the machinery, Aviant Ltd. charges from the customer the following
incidental expenses:
• associated handling and loading charges of ₹ 10,000
• installation and commissioning charges of ₹ 1,00,000
 The machinery can be dismantled and erected at another site, if required. The above charges are
compulsorily levied in every case of supply of machinery.
 Transportation of machinery to the customer’s premises is arranged by Aviant Ltd. through a third-
party service provider [Goods Transport Agency (GTA)]. The customer enters into a separate
service contract with the GTA and pays the freight directly to it.
 A cash discount of 2% on the price of the machinery is offered at the time of supply, if the customer
agrees to make the payment within 15 days of the receipt of the machinery at his premises. In the
event of failure to make the payment within the stipulated time, the company-
• recovers the discount (no separate amount of GST is recovered) given; and
• charges simple interest @ 1% per month or part of the month (no separate amount of GST is
recovered) on the total amount due from the customer (towards the machinery supplied) from
the date of making the supply till the date of payment. However, no interest is charged on the
tax dues.
Page 7.14
Value of Supply
 For every machinery supplied, Aviant Ltd. receives a price linked subsidy of ₹ 2,00,000 from its
holding company Diligent Ltd.
Aviant Ltd. has supplied a machinery to an unrelated party, Daffodil Pvt. Ltd. on 1st August at a price of
₹ 40,00,000 (excluding all taxes). Invoice was issued on 1st August by Aviant Ltd. The corporate office
of Daffodil Ltd., which is at New Delhi, has entered into contract with Aviant Ltd. for supply of machinery.
However, the machinery has been installed at Daffodil Pvt. Ltd’s registered manufacturing unit located
in Gurugram (Haryana). Daffodil Pvt. Ltd. has paid the freight directly to the GTA. Discount @ 2% on the
price of machinery excluding taxes was given to Daffodil Pvt. Ltd. as it agreed to make the payment within
15 days. However, Daffodil Pvt. Ltd. paid the consideration on 31st October.
Assume the rates of taxes to be as under:
Bottle cap making machine

Service of transportation of goods
CGST – 2.5% SGST – 2.5% IGST – 5%
Other services involved in the above supply
Calculate the GST payable [CGST, SGST or IGST, as the case may be] on the machinery and support your
conclusions with legal provisions in the form of explanatory notes.
Make suitable assumptions, wherever needed.
Answer
Computation of GST liability of Aviant Ltd.
Particulars (₹)
Price of machine [Note 1] 40,00,000
Add: Handling and loading charges [Note 2] 10,000
Installation and commissioning charges [Note 3] 1,00,000
Transportation cost [Note 4] Nil
Price linked subsidy from Diligent Ltd. [Note 5] 2,00,000
Total price of the machine 43,10,000
Less: 2% cash discount on price of machinery = ₹ 40,00,000 × 2% [Note 6] (80,000)
Taxable value of supply 42,30,000
Tax liability for the month of August [Note 10]
IGST @ 12% [Note 8 and Note 7] – [A] 5,07,600
Tax liability for the month of October [Note 10]
Add: Interest collected @ 3% on ₹ 41,10,000 [Note 9] 1,23,300
Cash discount recovered [Note 9] 80,000
Value of interest and cash discount inclusive of tax 2,03,300
IGST = (₹ 2,03,300/112) x 12% - [B] 21,782
Total IGST payable on the machinery [A] + [B] 5,29,382
Notes:
(1) As per section 15(1), the value of a supply is the transaction value i.e., the price actually paid or
payable for the said supply when the supplier and the recipient of the supply are not related and
the price is the sole consideration for the supply.
Page 7.15
Value of Supply
(2) All incidental expenses charged by the supplier to the recipient of a supply are includible in the
value of supply in terms of section 15(2)(c).
(3) Any amount charged for anything done by the supplier in respect of the supply of goods at the time
of, or before delivery of goods is includible in the value of supply in terms of section 15(2)(c).
(4) Transportation cost has not been included in the value of supply of the machinery as it is a separate
service contract between the customer and the third-party service provider. The customer pays
the freight directly to the service provider.
The supplier (Aviant Ltd), in this case, merely arranges for the transport and does not provide the
transport service on its own account. Therefore, there will be no impact from valuation point of
view on transport expenses incurred for supply of machinery as the supplier is not the party to
such supply of services.
(5) Subsidies directly linked to the price excluding subsidies provided by the Central Government and
State Governments are includible in the value of supply in terms of section 15(2)(e).
(6) Cash discount was deducted by Aviant Ltd. upfront at the time of supply on 1st August, and hence,
the same is excluded from the value of supply as it did not form part of the transaction value.
• the location of the supplier is in Noida (UP); and
• the place of supply of machinery is the place of installation of the machinery i.e., Gurugram
(Haryana) in terms of section 10(1)(d) of the IGST Act, 2017.
Therefore, the given supply is an inter-State supply as the location of the supplier and the place of
supply are in two different States [Section 7(1)(a) of IGST Act, 2017]. Thus, the supply will be
leviable to IGST in terms of section 5(1) of the IGST Act, 2017.
(8) The given supply is a composite supply involving supply of goods (machinery) and services
(handling and loading and installation and commissioning) where the principal supply is the
supply of goods.
As per section 8(a), a composite supply is treated as a supply of the principal supply involved
therein and charged to tax accordingly. Thus, tax rate applicable to the goods (machinery) has been
considered.
(9) Interest for the delayed payment (which excludes subsidy related amount of Rs 2,00,000 as the
same was not recoverable from the recipient) of any consideration for any supply is includible in
the value of supply in terms of section 15(2)(d). Further, cash discount recovered will also be
includible in the value of supply as now the transaction value i.e., the price actually paid for the
machinery is devoid of any discount.
The cash discount not allowed and interest are inclusive of tax. Thus, tax payable thereon has to be
computed by making back calculations in terms of rule 35.
(10) Invoice for the supply has been issued on 1st August. Thus, the time of supply of goods is 1st August
in terms of section 12(1)(a).
As per section 12(6), the time of supply in case of addition in value by way of interest, late fee,
penalty etc. for delayed payment of consideration for goods is the date on which the supplier
receives such addition in value. Thus, the time of supply of interest received and cash discount
recovered on account of delayed payment of consideration is 31st October, the date when the full
payment was made. The supplier may issue a debit note for such interest and cash discount
recovered.

Page 7.16
Value of Supply

Question 21
Kaya Trade Links Pvt. Ltd. is a registered manufacturer of premium ceiling fans. It sells its fans exclusively
through distributors appointed across the country. The maximum retail price (MRP) printed on the
package of a fan is ₹ 10,000. The company sells the ceiling fans to distributors at ₹ 7,000 per fan (exclusive
of applicable taxes). The applicable rate of GST on ceiling fans is 18%.
The stock is dispatched to the distributors on quarterly basis - stock for a quarter being dispatched in the
second week of the month preceding the relevant quarter. However, additional stock is dispatched at any
point of the year if the company receives a requisition to that effect from any of its distributors. The
company charges ₹ 1,000 per fan from distributors towards packing expenses.
The company has a policy to offer a discount of 10% (per fan) on fans supplied to the distributors for a
quarter, if the distributors sell 500 fans in the preceding quarter. The discount is offered on the price at
which the fans are sold to the distributors (excluding all charges and taxes).
The company appoints Prakash Sales as a distributor on 1stApril and dispatches 750 fans on 8th April as
stock for the quarter April-June. Prakash Sales places a purchase order of 1,000 fans with the company
for the quarter July-September. The order is dispatched by the company on 10th June and the same is
received by the distributor on 18th June. The distributor makes the payment for the fans on 26th June
and avails applicable input tax credit. The distributor reports sales of 700 fans for the quarter April-June
and 850 fans for the quarter July- September.
Examine the scenario with reference to section 15 of the CGST Act, 2017 and compute the taxable value
of fans supplied by Kaya Trade Links Pvt. Ltd. to Prakash Sales during the quarter July-September.
Note: Make suitable assumptions, wherever necessary.
Answer
Section 15(3)(a) of the CGST Act allows discounts to be deducted from the value of taxable supply if the
same is given before or at the time of the supply and if such discount has been duly recorded in the invoice
issued in respect of such supply. In other words, pre-supply discounts recorded in invoices are allowed
as deduction.
Further, post supply discounts are also allowed as deduction from the value of supply under section
15(3)(b) of the CGST Act if-
(i) such discount is established in terms of an agreement entered into at or before the time of such
supply and specifically linked to relevant invoices; and
(ii) input tax credit as is attributable to the discount on the basis of document issued by the supplier
has been reversed by the recipient of the supply.
In the given case, Prakash Sales is entitled for 10% discount on fans supplied by Kaya Trade Links Pvt.
Ltd. for the quarter July-September as it has sold more than 500 fans in the preceding quarter April-June.
However, since the entire stock for the quarter July-September has already been dispatched by Kaya
Trade Links Pvt. Ltd. in the month of June, the discounts on the fans supplied to Prakash Sales for the
quarter July-September will be a post- supply discount.
Such post-supply discount will be allowed as a deduction from the value of supply since the discount
policy was known before the time of such supply and the discount can be specifically linked to relevant
invoices (invoices pertaining to fans supplied to Prakash Sales for the quarter July-September) provided
Prakash Sales reverses the input tax credit attributable to the discount on the basis of document issued
by Kaya Trade Links Pvt. Ltd.
The value of supply will thus, be computed as under:

Page 7.17
Value of Supply

Price at which the fans are supplied to Prakash Sales [Note 1] 7,000
Less: Discount [Note 3] (700)
Value of taxable supply of one unit of fan 7,300
Value of taxable supply of fans for the quarter July- September [₹ 7,300 x 1,000] 73,00,000
Notes:
said supply, in terms of section 15(1) of the CGST Act presuming that the supplier and the recipient
of supply are not related and price is the sole consideration for the supply.
(2) The value of supply includes incidental expenses like packing charges in terms of section 15(2)(c)
of the CGST Act.
(3) Since all the conditions specified in section 15(3)(b) of the CGST Act have been fulfilled, the post-
supply discount will be allowed as deduction from the value of supply presuming that Prakash
Sales has reversed the input tax credit attributable to such discount on the basis of document
issued by Kaya Trade Links Pvt. Ltd. The input tax credit to be reversed will work out to be ₹1.26
lakh [1,000 x (7,000 x 10%) x 18%].
Question 22
Laxmi Ltd. of Bhopal (Madhya Pradesh) is a supplier of machinery. Laxmi Ltd. has supplied machinery to
PQR Enterprises in Indore (Madhya Pradesh) on 1st October, 20XX. The invoice for supply has been
issued on 1st October, 20XX. Thus, the time of supply of machinery is 1st October, 20XX. Laxmi Ltd. and
PQR Enterprise are not related.
Following information is provided:
Basic price of machinery excluding all taxes but including design and engineering charges of ₹ 10,000
and loading charges of ₹ 20,000 - ₹ 20,00,000.
Laxmi Ltd. provides 2 years free warranty for the machinery. Laxmi Ltd. also provides an extended one
year warranty on payment of additional charges of ₹ 1,00,000. The extended warranty is given by the
manufacturer at the time of supply of goods to the buyer and that the same is not available separately.
PQR Enterprises opted for one year warranty.
Laxmi Ltd. has collected consultancy charges in relation to pre- installation planning of ₹ 10,000 and
freight and insurance charges from place of removal to buyer's premises of ₹ 20,000.
Laxmi Ltd. received subsidy of ₹ 50,000 from Central Government for supplying the machinery to
backward region since receiver was located in a backward region. Laxmi Ltd. also received ₹ 50,000 from
the joint venture partner of PQR Enterprises for making timely supply of machinery to the recipient.
A cash discount of 1% on the basic price of the machinery is offered at the time of supply, if PQR
Enterprises agrees to make the payment within 30 days of the receipt of the machinery at his premises.
Discount @ 1% was given to PQR Enterprises as it agreed to make the payment within 30 days.
The machinery attracts CGST and SGST @ 18% (9% + 9%) and IGST @18%.
Compute the CGST and SGST or IGST payable, as the case may be, on the machinery.
Answer
Computation of GST payable

Page 7.18
Value of Supply
Particulars ₹
Price of the machinery [Note 1] 20,00,000
Add: Extended warranty cost [Note 2] 1,00,000
Consultancy charges in relation to pre-installation planning [Note 3] 10,000
Freight and insurance charges [Note 4] 20,000
Subsidy received from Central Government [Note 5] Nil
Receipts from Joint Venture of PQR Enterprises [Note 5] 50,000
Less: 1% discount on basic price* = ₹ 20,00,000 x 1% [Note 6] (20,000)
CGST @ 9% [Note 7] 1,94,400
SGST @ 9% [Note 7] 1,94,400
Notes:
1. Laxmi Ltd. and PQR Enterprises are not related and price is assumed to be the sole consideration
for the supply. Therefore, in terms of section 15(1) of the CGST Act, 2017, the value of the supply
is the transaction value i.e., price actually paid or payable for the machinery by PQR Enterprises.
Design and engineering charges are includible in the value of supply as any amount charged for
anything done by the supplier in respect of the supply of goods at the time of, or before delivery of
goods is so includible in terms of section 15(2)(c) of CGST Act, 2017.
Further, loading charges being incidental expenses charged by the supplier to the recipient of
supply, are includible in the value as per section 15(2)(c) of the CGST Act, 2017.
2. Supply of machinery (goods) with supply of ancillary services like extended warranty, is a
composite supply, the principle supply of which is the supply of machinery. [Section 2(30) of the
CGST Act, 2017 read with section 2(90) of that Act]. Thus, value of such ancillary supply is
includible in the value of composite supply.
3. Any amount charged for anything done by the supplier in respect of the supply of goods at the time
of, or before delivery of goods is includible in the value of supply in terms of section 15(2)(c) of
CGST Act, 2017.
4. Supply of machinery (goods) with supply of ancillary services like freight and insurance is a
composite supply, the principle supply of which is the supply of machinery [Section 2(30) of the
CGST Act, 2017 read with section 2(90) of that Act]. Thus, value of such ancillary supply is
includible in the value of composite supply.
5. Subsidies provided by the Central Government and State Governments are not includible in the
value of supply in terms of section 15(2)(e) of the CGST Act, 2017. However, subsidy directly linked
to the price received from a non-Government body is includible in the value in terms of section
15(2)(e).
6. Cash discount has been given to PQR Enterprises upfront at the time of supply and thus, would
have been recorded in the invoice and hence, the same is excluded from the value of supply in terms
of section 15(3)(a) of the CGST Act, 2017.
7. In the given case-
• the location of the supplier is in Bhopal (Madhya Pradesh); and
• the place of supply of machinery is the location of the machinery at the time at which the
movement of the same terminates for delivery to the recipient i.e., Indore (Madhya Pradesh)
vide section 10(1)(a) of IGST Act, 2017.
Therefore, as per section 8(1) of IGST Act, 2017, the given supply is an intra-State supply as the

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Value of Supply
location of the supplier and the place of supply are in the same State. Thus, the supply will be
leviable to CGST and SGST.
*Note: It is also possible to take a view that the basic price of the machinery is ₹ 19,70,000 [₹ 20,00,000
– ₹ 10,000 – ₹ 20,000] and design and engineering charges and loading charges are added to such price.
In that case, 1% of discount amount will come out to be ₹ 19,700, value of supply would be ₹ 21,60,300
and CGST and SGST would be ₹ 1,94,427 each.
Question 23
M/s Jonty India Ltd. a manufacturer of heavy machines registered at Jaipur (Rajasthan) supplied one
machine to M/s. Dhanuka Ltd. of Udaipur (Rajasthan) on 05-02-20XX under an invoice of the same date.
Using the information given below, compute the value of the machine and the GST payable (CGST & SGST
or IGST as the case may be) in cash for the month of February, 20XX by M/s Jonty India Ltd. with
appropriate working notes.
Assume Rate of CGST, SGST and IGST on the machine to be 9%, 9% and 18% respectively.
S. No. Particulars Amount in ₹

(i) The Basic price of the machine (exclusive of taxes and discount). 28,50,000
(ii) Trade discount is allowed at 3% on the basic price and is shown in the 85,500
invoice.
(iii) Secondary packing (in iron sheets) charges for safe transportation of the 30,000
machine on the request of buyer.
(iv) Design and engineering charges of the machine 90,000
(v) Tax levied by Municipal Authority on the sale of themachine. 25,000
(vi) Subsidy received by the supplier from the State Government to encourage 80,000
manufacture of the machine.
(vii) Pre-delivery inspection charges paid to an independent agency in terms 22,000
of the agreement for supply. The amount was paid by M/s. Dhanuka Ltd.
(viii) Interest amount paid by M/s. Dhanuka Ltd. fordelay in payment for the 12,000
machine.
Inward Supplies
(i) IGST paid on food items for consumption by employees working in the 8,000
factory.
(ii) SGST and CGST (₹ 15,000 each) paid on Electrical transformer used in 30,000
the manufacturing process.
Note:
(i) M/s Jonty India Ltd. has no input tax credit balance at the beginning of February, 20XX. All the other
conditions necessary for availing the eligible input tax credit have been fulfilled.
(ii) There are no other transactions of supplies during the month of February, 20XX.
(iii) M/s Jonty India Ltd. and M/s. Dhanuka Ltd. are not related persons.
Answer
Computation of value of machine sold by M/s. Jonty India Ltd.
Particulars ₹
Basic price of machine 28,50,000

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Value of Supply
Add: Secondary packing [Note 1(i)] 30,000

Design and engineering charges [Note 1(ii)] 90,000
Tax levied by Municipal Authority [Note 1(iii)] 25,000
Pre-delivery inspection charges paid by M/s. Dhanuka Ltd. [Note 1(iv)] 22,000
Interest for delay in payment [₹ 12,000 x 100/118] [Note 1(v)] – (rounded off) 10,169
Less: 3% Trade discount on basic price of machinery = ₹ 28,50,000 × 3% [Note 2] (85,500)
Taxable value of supply 29,41,669
Computation of net GST payable (in cash) by M/s. Jonty India Ltd. for month of February, 20XX
Particulars CGST @ 9% (₹) SGST @ 9% (₹)

Tax on value of ₹ 29,41,669 (rounded off) [Note 4] 2,64,750 2,64,750
Less: Input tax credit [ITC] of tax paid on electrical 15,000 15,000
transformer used in the manufacturing process [Note 3]
Net GST payable 2,49,750 2,49,750
Notes:
(1) As per section 15(2) of the CGST Act, 2017-
(i) All incidental expenses, including packing, charged by the supplier to the recipient of a
supply are includible in the value of supply.
(ii) Any amount charged for anything done by the supplier in respect of the supply of goods at
the time of, or before delivery of goods is includible in the value of supply.
(iii) Any taxes levied under any law for the time being in force other than
CGST/SGST/UTGST/IGST, if charged separately by the supplier are includible in the value of
supply.
(iv) Any amount that the supplier is liable to pay in relation to such supply, but which has been
incurred by the recipient of the supply and not included in the price actually paid or payable
for the goods and/or services is includible in the value of supply.
(v) Interest for the delayed payment of any consideration for any supply is includible in the value
of supply. Further, it is assumed that such interest is inclusive of tax and that the same has
been received by M/s. Jonty India Ltd. in the month of February itself. Therefore, the time of
supply of such interest will be in February, 20XX and the same will be considered while
paying the tax liability of that month.
(vi) Subsidies directly linked to the price excluding subsidies provided by the Central
Government and State Governments are includible in the value of supply. Since in the given
case, subsidy is received from State Government, the same has not been included in the value
of supply presuming it to be directly linked to the price.*
(2) Trade discount has been shown in the invoice and hence, the same is excluded from the value of
supply in terms of section 15(3)(a) of the CGST Act, 2017.
(3) ITC on food or beverages is specifically disallowed unless the same is used for making outward
taxable supply of the same category or as an element of the taxable composite or mixed supply1
[Section 17(5)(b)(i)]. Further, since transformers are used in the course or furtherance of business,
ITC thereon is available in terms of section 16(1).
• the location of the supplier is in Jaipur (Rajasthan); and
• the place of supply of machinery is the location of the machinery at the time at which the

Page 7.21
Value of Supply
movement of the same terminates for delivery to the recipient i.e., Udaipur (Rajasthan) vide
section 10(1)(a) of IGST Act, 2017.
location of the supplier and the place of supply are in the same State. Thus, the supply will be
leviable to CGST and SGST
*Note: In the above answer, it has been assumed that the basic price of the machine has been arrived at
after adjusting the subsidy and that the basic price is the price charged from the customer. Consequently,
subsidy received from State Government has not been reduced from the basic price of the machine while
arriving at the taxable value of supply.
However, it is also possible to assume that the subsidy has yet not been adjusted in the basic price and
that the price which will be charged from the customer is ₹ 27,70,000 (₹ 28,50,000 – ₹ 80,000) i.e., after
excluding subsidy. In that case, the value of supply will be ₹ 28,61,669.
Question 24
Determine the value of supply and the GST liability, to be collected and paid by the owner, with the
following particulars:
₹
Rent of the commercial building 18,00,000
Maintenance charges collected by local society from the owner and reimbursed by 2,50,000
the tenant
Owner intends to charge GST on refundable advance, as GST is applicable on advance 6,00,000
Municipal taxes paid by the owner 3,00,000
GST rates applicable on renting of business premises are as follows:

CGST 9%, SGST 9%
Provide suitable explanations where required.
Answer
Computation of Value of Supply and GST liability:

Rent of the commercial building 18,00,000
Maintenance charges collected by the local society from the owner and reimbursed 2,50,000
by the tenant [Being reimbursed by the tenant, such charges ultimately form part
of the rent paid by the tenant to the owner and thus, will form part of the value]
Refundable advance [Being refundable, the advance is in the nature of security Nil
deposit which does not constitute consideration in terms of section 2(31) of the CGST
Act, 2017 and thus, is not includible in the value]
Municipal taxes paid by the owner [Being an expenditure incurred by the supplier, Nil
the same is not includible in the value, assuming that such taxes are not charged to
the recipient.]
CGST @ 9% 1,84,500
SGST @ 9% 1,84,500
Note: Rent and maintenance charges are assumed to be exclusive of GST.

Page 7.22
Value of Supply
Question 25
Royal Manufacturers, a registered supplier of machinery, supplied a special purpose machine to Dharam
Furnishers for which it charges a price of Rs. 9,00,000. Further, it charged the following additional
amounts in relation to said supply:
S.No. Particulars Rs.

(i) Transit insurance 16,500
(ii) Packing charges 13,500
(iii) Extra charges for designing the machine 30,000
(iv) Freight 18,000
Following additional information is also available -

(a) Cash discount @ 2% on price of machinery has been allowed to Dharam Furnishers at the time of
supply and also recorded in invoice.
(b) GST rate – 18%.
Calculate value of supply of the special purpose machine.
Answer
Computation of value of the special purpose machine
Particulars Rs.
Price of machinery 9,00,000
Add: Transit insurance [Note 1] 16,500
Packing charges [Note 2] 13,500
Extra design charges [Note 3] 30,000
Freight [Note 1] 18,000
Total 9,78,000
Less: 2% cash discount on price of machinery [Rs. 9,00,000 × 2%] [Note 4] 18,000
Notes:
(1) The given supply is a composite supply involving supply of goods (special machine) and services
(transit insurance and freight) where the principal supply is the supply of goods.
As per section 8(a) of the CGST Act, 2017, a composite supply is treated as a supply of the principal
supply involved therein and charged to tax accordingly.
(2) All incidental expenses including packing charged by the supplier to the recipient of a supply are
includible in the value of supply in terms of section 15(2)(c) of CGST Act, 2017.
(3) Any amount charged for anything done by the supplier in respect of the supply of goods at the time
of, or before delivery of goods is includible in the value of supply in terms of section 15(2)(c) of
CGST Act, 2017. Thus, extra designing charges are to be included in the value of supply.
(4) Cash discount was given at the time of supply and also recorded in invoice, so the same is not to be
included while computing value of supply in terms of section 15(3)(a) of CGST Act, 2017.
Question 26

Page 7.23
Value of Supply
Laxmi Ltd. of Bhopal (Madhya Pradesh) is a supplier of machinery. Laxmi Ltd. has supplied machinery to
PQR Enterprises in Indore (Madhya Pradesh) on 1st October, 2017. The invoice for supply has been
issued on 1st October, 2017. Thus, the time of supply of machinery is 1st October, 2017. Laxmi Ltd. and
PQR Enterprise are not related.
Following information is provided:
Basic price of machinery excluding all taxes but including design and engineering charges of ₹ 10,000
and loading charges of ₹ 20,000 - ₹ 20,00,000.
Laxmi Ltd. provides 2 years free warranty for the machinery. Laxmi Ltd. also provides an extended one
year warranty on payment of additional charges of ₹ 1,00,000. PQR Enterprises opted for one year
warranty.
Laxmi Ltd. has collected consultancy charges in relation to pre-installation planning of ₹ 10,000 and
freight and insurance charges from place of removal to buyer's premises of ₹ 20,000.
Laxmi Ltd. received subsidy of ₹ 50,000 from Central Government for supplying the machinery to
backward region since receiver was located in a backward region. Laxmi Ltd. also received ₹ 50,000 from
the joint venture partner of PQR Enterprises for making timely supply of machinery to the recipient.
A cash discount of 1% on the basic price of the machinery is offered at the time of supply, if PQR
Enterprises agrees to make the payment within 30 days of the receipt of the machinery at his premises.
Discount @ 1% was given to PQR Enterprises as it agreed to make the payment within 30 days.
The machinery attracts CGST and SGST @ 18% (9% + 9%) and IGST @18%.
Compute the CGST and SGST or IGST payable, as the case may be, on the machinery.
Answer
Computation of GST payable
Particulars ₹
Price of the machinery [Note 1] 20,00,000
Add: Extended warranty cost [Note 2] 1,00,000
Consultancy charges in relation to pre-installation planning [Note 4] 10,000
Freight and insurance charges [Note 3] 20,000
Subsidy received from Central Government [Note 5] Nil
Receipts from Joint Venture of PQR Enterprises [Note 5] 50,000
Less: 1% discount on basic price* = ₹ 20,00,000 x 1% [Note 6] (20,000)
CGST @ 9% [Note 7] 1,94,400
SGST @ 9% [Note 7] 1,94,400
Notes:
1. Laxmi Ltd. and PQR Enterprises are not related and price is assumed to be the sole consideration for
the supply. Therefore, in terms of section 15(1) of the CGST Act, 2017, the value of the supply is the
transaction value i.e., price actually paid or payable for the machinery by PQR Enterprises.
Design and engineering charges are includible in the value of supply as any amount charged for
anything done by the supplier in respect of the supply of goods at the time of, or before delivery of
goods is so includible in terms of section 15(2)(c) of CGST Act, 2017.
Further, loading charges being incidental expenses charged by the supplier to the recipient of supply,
are includible in the value as per section 15 (2)(c) of the CGST Act, 2017.
2. Supply of machinery (goods) with supply of ancillary services like extended warranty, is a composite

Page 7.24
Value of Supply
supply, the principle supply of which is the supply of machinery. [Section 2(30) of the CGST Act, 2017
read with section 2(90) of that Act]. Thus, value of such ancillary supply is includible in the value of
composite supply.
3. Supply of machinery (goods) with supply of ancillary services like freight and insurance is a
composite supply, the principle supply of which is the supply of machinery [Section 2(30) of the
CGST Act, 2017 read with section 2(90) of that Act]. Thus, value of such ancillary supply is includible
in the value of composite supply.
4. Any amount charged for anything done by the supplier in respect of the supply of goods at the time
of, or before delivery of goods is includible in the value of supply in terms of section 15(2)(c) of CGST
Act, 2017.
5. Subsidies provided by the Central Government and State Governments are not includible in the value
of supply in terms of section 15(2)(e) of the CGST Act, 2017. However, subsidy directly linked to the
price received from a non-Government body is includible in the value in terms of section 15.
6. Cash discount has been given to PQR Enterprises upfront at the time of supply and thus would have
been recorded in the invoice and hence, the same is excluded from the value of supply in terms of
section 15(3)(a) of the CGST Act, 2017.
7. In the given case-
 the location of the supplier is in Bhopal (Madhya Pradesh); and
 the place of supply of machinery is the location of the machinery at the time at which the
movement of the same terminates for delivery to the recipient i.e., Indore (Madhya Pradesh)
vide section 10(1)(a) of IGST Act, 2017.
location of the supplier and the place of supply are in the same State. Thus, the supply will be leviable
to CGST and SGST.
*Note: It is also possible to take a view that the basic price of the machinery is ₹ 19,70,000 [₹ 20,00,000
– ₹ 10,000 – ₹ 20,000] and design and engineering charges and loading charges are added to such price.
In that case, 1% of discount amount will come out to be ₹ 19,700, value of supply would be ₹ 21,60,300
and CGST and SGST would be ₹ 1,94,427 each.
Question 27
Surya Agencies has agreed to supply goods to customer’s premises. Goods valued ₹ 80,000 are taxable @
5% IGST as it is an inter-State supply. It also pays freight and transit insurance of ₹ 12,000. GTA is a
registered entity and has charged GST (6% CGST and 6% SGST) under forward charge.
(i) Compute the invoice value of supply including IGST.
(ii) What will be the invoice value of supply including IGST, if the supply was under ex-factory basis
instead of door-delivery basis?
Answer
Computation of invoice value of supply
(i) When supplier agrees to supply the goods at customer’s premises, i.e. freight and transit
insurance are paid by the supplier, invoice value of supply will be computed as follows:

Value of goods supplied 80,000
Add: Freight and transit insurance* 12,000

Page 7.25
Value of Supply
[Since the supplier has agreed to deliver the goods at the customer’s premises
and to pay for freight and insurance, the contract of supply becomes a composite
supply, the principal supply being the supply of goods.]
*It is assumed to be exclusive of 12% GST.
Total 92,000
Add: IGST @ 5% 4,600
[Being a composite supply, GST at the rate applicable for principal supply will be
charged]
Invoice value of supply 96,600
(ii) When supplier agrees to supply the goods on ex-factory basis, i.e. the buyer pays the freight
and transit insurance, invoice value of supply will be computed as follows:

Value of goods supplied 80,000
Add: IGST @ 5% of ₹ 80,000 4,000
Invoice value of supply 84,000
Note: The above answer is based on the view that part (ii) of the question is an independent case
and thus, the information provided in the first paragraph of the question regarding payment of
freight and transit insurance by Surya Agencies does not apply to it. Moreover, when the contract is
ex-factory, it implies that the freight and insurance will be the buyer’s responsibility and seller will
have no role, whatsoever, in delivering the goods to the customer’s premises.
Question 28
M/s Global Travels is providing money changer and air travel agent services to various clients. From the
information provided below, you are required to calculate the value of taxable supply for the month of
March 2020:
(i) It had converted US $ 6,000 into Singapore dollar 9,000. RBI reference rate at that time was ₹ 72
per US $ and for Singapore dollar, it was ₹ 52.
(ii) It had booked domestic ticket value of ₹ 7,00,000 and international ticket value of ₹ 15,00,000.
Additional information:
The concern has not opted to value the money change under rule 32(2)(b) of the CGST Rules, 2017. Basic
air fare component under both domestic and international ticket value is 70% and 60% respectively.
Answer
(i) Since in the given case, neither of the currencies exchanged is Indian Rupees, value of taxable
supply, in terms of rule 32(2)(a) of the CGST Rules, 2017, is 1% of lower of the following:
(A) US dollar converted into Indian rupees at RBI reference rate
= US $ 6,000 x ₹ 72 = ₹ 4,32,000
(B) Singapore dollar converted into Indian rupees at RBI reference rate
= Singapore dollar 9,000 x ₹ 52 = ₹ 4,68,000
Value of taxable service for the month of March 2020 = 1% of ₹ 4,32,000 = ₹ 4,320
(ii) Computation of value of taxable supply
Particulars ₹ ₹

Page 7.26
Value of Supply
Basic fare in case of domestic bookings [₹ 7,00,000 x 70%] 4,90,000

Value of taxable supply @ 5% [A] [Rule 32(3) of the CGST Rules, 2017] 24,500
Basic fare in case of international bookings [₹ 15,00,000 x 60%] 9,00,000
Value of taxable supply @ 10% [B] 90,000
[Rule 32(3) of the CGST Rules, 2017]
Value of taxable supply [A] + [B] 1,14,500
Question 29
X Ltd., a manufacturer of heavy machines registered at Mumbai (Maharashtra), supplied one machine to
Y Ltd. in Pune (Maharashtra) on 19.02.2020 under an invoice of the same date. Using the information
given below, compute the value of machine and the GST payable (CGST, SGST and IGST as the case may
be) in cash for the month of February 2020 by X Ltd. with appropriate working notes.
Assume rate of CGST, SGST and IGST on the machine to be 9%, 9% and 18% respectively.

1 The basic price of the machine (exclusive of taxes and discount) 18,00,000
2 Trade discount is allowed at 10% on the basic price and is shown in the 1,80,000
invoice.
3 Secondary packing (in iron sheets) charged for safe transportation of the 30,000
machine on the request of buyer
4 Design and engineering charges of the machine paid by Y Ltd. to X Ltd. 90,000
5 Pre-delivery inspection charges paid by Y Ltd. to an independent agency 22,000
"Inspection India". In terms of the agreement for supply, it was the discretion
of the buyer 'Y Ltd.' to appoint, if it so desires, any agency for pre-delivery
inspection, and also to itself pay to such agency.
6 Interest amount paid by Y Ltd. for delay in payment of the machine, said 12,000
interest was paid by Y Ltd. in April 2020
INWARD SUPPLY: 10,000
IGST paid on food items for consumption by employees working in the factory.
The said food items are provided as per the declared company policy which is
duly informed to the employees while they are recruited and forms part of
their appointment letter, though there is no such obligation in law.
X Ltd. has no input tax credit balance at the beginning of February 2020. All the other conditions
necessary for availing the eligible input tax credit have been fulfilled. There is no other transaction of
supplies during the month of February 2020. X Ltd. and Y Ltd. are not related persons.
Provide your answers with reasons and with reference to the provisions of law.
Answer
Computation of value of machine and GST payable in cash

Price of machine 18,00,000
Add: Secondary Incidental expenses including packing charged by the supplier to 30,000
packing the recipient of a supply and any amount charged for anything
Design and done by the supplier in respect of the supply of goods at the time 90,000

Page 7.27
Value of Supply
engineering of, or before delivery of goods are includible in the value of the
charges supply.
Pre-delivery The amount incurred by the recipient of the supply is added only Nil
inspection charges if the same was the liability of the supplier.
Add: - Interest for delayed payment [12000/118%] 10169
[Interest for delayed payment is includible in the value of the machine. Further, it has
been assumed to be inclusive of GST.]
Less: Discount @ 10% on basic price (1,80,000)
[Discount is allowed as the same is given at the time of supply and is shown in the
invoice]
Value of the machine 17,50,169
Less: Interest for delayed payment liable to tax only on date of receipt (10169)
Taxable value of the machine in February, 2020 17,40,000
Tax liability for the month of February 1,56,600
CGST @ 9% 1,56,600
SGST@ 9%
[Since the movement of goods terminates for delivery to the recipient in the same State,
it is an intra-State supply.]
Less: ITC Nil
[ITC on supply of, inter alia, food and beverages is blocked if the employer is not under
a statutory obligation to provide the same to its employees]
GST payable in cash
CGST @ 9% 1,56,600
SGST@ 9% 1,56,600
Question 30
Black and White Pvt. Ltd. has provided the following particulars relating to goods sold by it to Colourful
Pvt. Ltd.
Particulars Rs.
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods 5,000
Packing charges (not included in price above) 1,000
Black and White Pvt. Ltd. received Rs. 2000 as a subsidy from a NGO on sale of such goods. The price of
Rs. 50,000 of the goods is after considering such subsidy. Black and White Ltd. offers 2% discount on the
list price of the goods which is recorded in the invoice for the goods.
Determine the value of taxable supply made by Black and White Pvt. Ltd.
Answer
Particulars Rs.
List price of the goods (exclusive of taxes and discounts) 50,000
Tax levied by Municipal Authority on the sale of such goods [Includible in the value as
5,000
per section 15(2)(a)]
Page 7.28
Value of Supply
Packing charges [Includible in the value as per section 15(2)(c)] 1,000

Subsidy received from a non-Government body [Since subsidy is received from a non-
2,000
Government body, the same is included in the value in terms of section 15(2)(e)]
Total 58,000
Less: Discount @ 2% on Rs. 50,000 [Since discount is known at the time of supply and
1,000
recorded in the supply, it is deductible from the value in terms of section 15(3)(a)]
Question 31
Samriddhi Advertisers conceptualized and designed the advertising campaign for a new product
launched by New Moon Pvt Ltd. for a consideration of Rs. 5,00,000. Samriddhi Advertisers owed Rs.
20,000 to one of its vendors in relation to the advertising service provided by it to New Moon Pvt Ltd.
Such liability of Samriddhi Advertisers was discharged by New Moon Pvt Ltd. New Moon Pvt Ltd. delayed
the payment of consideration and thus, paid Rs. 15,000 as interest. Assume the rate of GST to be 18%.
Determine the value of taxable supply made by Samriddhi Advertisers.
Answer
Particulars Rs.
Service charges 5,00,000
Payment made by New Moon Pvt. Ltd to vendor of Samriddhi Advertisers [Liability of
the supplier being discharged by the recipient, is includible in the value in terms of 20,000
section 15(2)(b)]
Interest for delay in payment of consideration [Includible in the value in terms of section
12,712
15(2)(d) – Refer note below] (rounded off)
Note: The interest for delay in payment of consideration will be includible in the value of supply but the
time of supply of such interest will be the date when such interest is received in terms of section 13(6).
Such interest has been assumed to be inclusive of GST and thus, the value has been computed by making
back calculations [(Interest x 100)/(100 + tax rate)]
Question 32
Arihant Life Insurance Company Ltd. (ALICL) has charged gross premium of Rs. 180 lakh from policy
holders with respect to life insurance policies in the 2017-18; out of which Rs. 100 lakh have been
allocated for investment on behalf of the policy holders.
Compute the value of supply of life insurance services provided by ALICL:
(i) if the amount allocated for investment has been intimated by ALICL to policy holders at the time of
supply of service.
(ii) if the amount allocated for investment has not been intimated by ALICL to policy holders at the
time of providing of service.
(iii) if the gross premium charged by ALICL from policy holders is only towards risk cover.
Note: ALICL has started its operations in the year 2017-18. Thus, the entire gross premium of Rs. 180
lakh is the premium for the first year of all the policies. ALICL has not issued any single premium annuity

Page 7.29
Value of Supply
policy.
Answer
As per rule 32(4), of the CGST Rules, value of supply of services in relation to life insurance services is
a) the gross premium reduced by the amount allocated for investment on behalf of the policy holder,
if such an amount is intimated to the policy holder at the time of supply of service;
b) in all other cases, 25% of the premium in the 1st year and 12.5% of the premium in subsequent
years
However, where the entire premium paid by the policy holder is only towards risk cover, such gross
premium is the value of supply of life insurance services.
In the light of the aforesaid provisions, value of supply of life insurance services provided by ALICL in
financial year 2017-18 will be computed as follows:
(i) Amount allocated for investment intimated to policy holder at the time of supply of service
Value of service = Rs. (180-100) lakh = Rs. 80,00,000
(ii) Amount allocated for investment not intimated to policyholders at the time of supply of service
Value of service = 25% of Rs. 180 lakh = Rs. 45,00,000
(iii) Gross premium received is only towards risk cover Value of service = Rs. 180 lakh
Question 33
AKJ Foods Pvt. Ltd. gets an order for supply of processed food from a customer. The customer wants the
consignment tested for gluten or specified chemical residues. AKJ Foods Pvt. Ltd. does the testing and
charges a testing fee for the same from the customer. AKJ Foods Pvt. Ltd. argues that such testing fess
should not form part of the consideration for the sale as it is a separate activity.
Is his argument correct in the light of section 15?
Answer
Section 15(2) mandates the addition of certain elements to transaction value to arrive at taxable value.
Clause (c) of section 15(2) specifies that amount charged for anything done by the supplier in respect of
the supply at the time of or before delivery of goods or supply of services shall be included in taxable
value.
Since AKJ Foods Pvt. Ltd. does the testing before the delivery of goods, the charges there for will be
included in the taxable value. Therefore, AKJ Foods Pvt. Ltd.’s argument is not correct. The testing fee
should be added to the price to arrive at taxable value of the consignment.
Question 34
A philanthropic association makes a substantial donation each year to a reputed private management
institution to subsidize the education of low-income group students who have gained admission there.
The fee for these individuals is reduced thereby coming to Rs. 3 lakh a year compared to Rs. 5 lakh a year
for other students.
What would be the taxable value of the service of coaching and instruction provided by the institution?
Answer
As per section 15(2)(e), the value of a supply includes subsidies directly linked to the price, excluding
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Value of Supply
State Government and Central Government subsidies. In this case, the subsidy is not from the
Government but is from a philanthropic association. Therefore, the subsidy is to be added back to the
price to arrive at the taxable value, which comes to Rs. 5 lakh a year.
Question 35
Mezda Banners, an advertising firm, gives an interest-free credit period of 30 days for payment by the
customer. Its customer ABC paid for the supply 32 days after the supply of service. Mezda Banners
waived the interest payable for delay of two days.
The Department wants to add interest for two days as per contract. Should notional interest be added to
the taxable value?
Answer
This is a supply that is valued as per transaction value under section 15(1) as the price is the sole
consideration for the supply and the supply is made to unrelated person. The concept of transaction value
has been expanded to include certain elements like interest which are actually payable. Once waived, the
interest is not payable and is therefore, not to be added to transaction value.
Question 36
Crunch Bakery Products Ltd sells biscuits and cakes through its dealers, to whom it charges the list price
minus standard discount and pays GST accordingly. When goods remain unsold with the dealers, it
offered additional discounts on the stock as an incentive to push the sales.
Can this additional discount be reduced from the price at which the goods were sold and concomitant tax
adjustments made?
Answer
The discounts were not known or agreed for at the time of supply of goods to the dealers. Therefore, in
terms of section 15(3), such discounts cannot be reduced from the price on which tax had been paid.

Page 7.31
CHAPTER - 8
Input Tax Credit
Question 1
XYZ Ltd, having its head Office at Mumbai, is registered as ISD. It has three units in different cities
situated in different States namely ‘Mumbai’, ‘Jabalpur’and ‘Delhi’ which are operational in the current
year.
M/s XYZ Ltd furnishes the following information for the month of July:
(i) CGST paid on services used only for Mumbai Unit: ₹ 3,00,000.
(ii) IGST, CGST & SGST paid on services used for all units: ₹ 12,00,000. Total turnover of the units for
the previous financial year are as follows: -
Unit Turnover (₹)

Total Turnover of three units ₹ 10,00,00,000
Turnover of Mumbai unit ₹ 5,00,00,000
Turnover of Jabalpur unit ₹ 3,00,00,000
Determine the credit to be distributed by XYZ Ltd. to each of its three units.
Answer
Particulars Credit distributed to all units (₹)
Total credit
Mumbai Jabalpur Delhi
available
CGST paid on services used only for
300000 300000 0 0
Mumbai Unit
IGST, CGST & SGST paid on services
used for all units Distribution on pro rata
12,00,000 6,00,000 3,60,000 2,40,000
basis to all the units which are
operational in the current year
Total 15,00,000 9,00,000 3,60,000 2,40,000
Note 1: Credit distributed pro rata on the basis of the turnover of all the units is as under: -
(a) Unit Mumbai: (₹ 5,00,00,000/ ₹ 10,00,00,000) x ₹ 12,00,000 = ₹ 6,00,000
(b) Unit Jabalpur: (₹ 3,00,00,000/ ₹ 10,00,00,000) x ₹ 12,00,000 = ₹ 3,60,000
(c) Unit Delhi: (₹ 2,00,00,000/ ₹10,00,00,000) x ₹ 12,00,000 = ₹ 2,40,000
Question 2
PQR Company Ltd., a registered supplier of Bengaluru (Karnataka), is a manufacturer of goods. The
company provides the following information pertaining to GST paid on inward supplies during the month
of April (current financial year):
S. No. Items GST paid in (₹)

(i) Life Insurance premium paid by the company for the life insurance of 1,50,000
factory employees as per the policy of the company. There is no legal
obligation for such insurance for employees.

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Input Tax Credit
(ii) Raw materials purchased for which invoice is missing but delivery 38,000
challan is available
(iii) Raw materials purchased which are used for zero rated supply 50,000
(iv) Works contractor's service used for repair of factory building which is 30,000
debited in the profit and loss accountof company
(v) Company purchased the capital goods for ₹ 4,00,000 and claimed 48,000
depreciation of ₹ 44,800 (@ 10%) on the full amount of ₹ 4,48,000 under
Income Tax Act, 1961
Other information:
(1) In the month of September of previous financial year, PQR Company Ltd. availed ITC of ₹ 2,40,000
on purchase of raw material which was directly sent to job worker's premises under a challan on
25th September (previous financial year). The said raw material has not been received back from
the job worker up to 30th April (current financial year).
(2) All the above inward supplies except at S. No. (iii) above have been used in the manufacture of
taxable goods. Inward supplies at S. No. (iii) above have been used in the manufacture of exempt
goods.
Compute the amount of net ITC available with PQR Company Ltd. for the month of April with necessary
explanations for the treatment of various items as per the provisions of the CGST Act. Subject to the
information given above, assume that all the other conditions necessary for availing ITC have been
fulfilled.
Answer
Computation of ITC available with PQR Company Ltd. for the month of April
Particulars ITC (₹)

Life Insurance premium paid by the company on the life of factory employees [Note 1] Nil
Raw materials purchased [Note 2] Nil
Raw materials used for zero rated supply [Note 3] 50,000
Work contractor’s service [Note 4] 30,000
Capital goods purchased in respect of which depreciation is claimed on the tax Nil
component [Note 5]
Goods sent to job worker’s premises [Note 6] -
Total ITC available 80,000
Notes
(1) ITC on life insurance service is available only when it is obligatory for an employer to provide said
services to its employees under any law for the time being in force. Since it is not obligatory for the
employer in the instant case and thus, the ITC thereon is blocked [Second proviso to section 17(5)
(b)].
(2) ITC cannot be taken since invoice is missing and delivery challan is not a valid document to avail ITC
[Section 16(2) (a)].
(3) ITC can be availed for making zero-rated supplies, notwithstanding that such supply may be an
exempt supply [Section 16(2) of the IGST Act].
(4) ITC is blocked on works contract services when supplied for construction of an immovable property.
However, “construction” includes only that repairs which are capitalized along with the said
immovable property.

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Input Tax Credit
In this case, since repairs of building is debited to P & L Account, the same does not amount to
‘construction’ and hence ITC thereon is available [Section 17(5) (c)].
(5) ITC is not available when depreciation has been claimed on the tax component of the cost of capital
goods under the Income-tax Act [Section 16(3)].
(6) The principal is entitled to take ITC of inputs sent for job work even if the said inputs are directly
sent to job worker. However, where said inputs are not received back by the principal within a
period of 1 year of the date of receipt of inputs by the job worker, it shall be deemed that such inputs
had been supplied by the principal to the job worker on the day when the said inputs were received
by the job worker [Sub-sections (2) and (3) of section 19].
Hence, the ITC taken by PQR Company Ltd. in the month of September last year is valid and since
one year period has yet not lapsed in April, there will be no tax liability on such inputs
Question 3
Siddhi Ltd. is a registered manufacturer engaged in taxable supply of goods. Siddhi Ltd. purchased the
following goods during the month of January. The following particulars are provided by the company
S. No. Particulars GST (₹)

1. Capital goods purchased on which depreciation has beentaken on full value 15,000
including GST paid thereon
2. Goods purchased from Ravi Traders (Invoice of Ravi Tradersis received in 20,000
month of January but goods were received inmonth of March)
3. Car purchased for making further supply of such car. Such car is destroyed in 30,000
accident while being used for test drive by potential customers.
4. Goods used for setting up telecommunication towers 50,000
5. Truck purchased for delivery of finished products 80,000
Determine the amount of ITC available with Siddhi Ltd. for the month of January by giving necessary
explanations for treatment of various items as per the provisions of the CGST Act. Subject to the
fulfilled.
Answer
Computation of ITC available with Siddhi Ltd. for the month of January
Particulars GST (₹)

Capital goods [Note 1] Nil
Goods purchased from Ravi Traders [Note 2] Nil
Cars purchased for making further supply [Note 3] Nil
Goods used for setting telecommunication towers [Note 4] Nil
Trucks purchased for delivery of output goods [Note 5] 80,000
Total ITC available with Siddhi Ltd. 80,000
Notes
(1) Since depreciation has been claimed on the tax component of the value of the capital goods,
ITC of such tax cannot be availed in terms of section 16(3).
(2) ITC in respect of goods not received cannot be availed in terms of section16(2)(b).
Since the goods have been received in the month of March, ITC thereon can be availed in the
Page 8.3
Input Tax Credit
month of March and not in the month of January even though the invoice for the same has been
received in the month of January.
(3) Though ITC on motor vehicles used for further supply of such vehicles is not blocked, ITC on goods
destroyed for whatever reason is blocked [Clauses (a) and (h) of section 17(5)].
(4) ITC on goods used by a taxable person for construction of immovable property (other than plant
and machinery) on his own account is blocked even when such goods are used in the course or
furtherance of business [Section 17(5)(d)].
However, explanation to section 17 excludes telecommunication towers from the purview of plant
and machinery. Therefore, ITC thereon will not be allowed.
(5) Section 17(5)(a) blocks ITC in respect of only those motor vehicles which are used for
transportation of persons albeit with certain exceptions. Thus, ITC on motor vehicles used for
transportation of goods is allowed.
Question 4
Xenon Pvt. Ltd., Agra, is a registered supplier engaged in the manufacture of taxable goods. Goods valued
at 10,50,000 were supplied by the company to Freshbite Pvt. Ltd., a registered supplier located at
Ferozabad, without the cover of an invoice with a fraudulent intent. Since the company evaded tax by not
issuing the invoice for the supply, a show cause notice was issued by the proper officer under section 74
requiring the company to pay tax @ 12% [₹ 1,26,000] and applicable interest and penalty. The company
paid the tax, interest and penalty after the order was passed by the proper officer.
Examine the ITC entitlement of Freshbite Pvt. Ltd. in respect of tax of ₹ 1,26,000 paid by Xenon Pvt. Ltd.
Answer
As per section 17(5), tax paid under sections 74, 129 and 130 is not available as ITC. Further, rule 36(3)
also lays down that tax paid in pursuance of any order where any demand has been confirmed on account
of any fraud, willful misstatement or suppression of facts cannot be availed as ITC by a registered person.
In the given case, Xenon Pvt. Ltd. has paid tax in pursuance of an order issued under section 74. Therefore,
Freshbite Pvt. Ltd. cannot avail ITC of such tax.
Question 5
Flamingo Ltd. is an airline providing passenger transportation services by air. The company offers meals
of premium quality to passengers on board the aircraft. The value of such meals is compulsorily included
in the price of the air ticket. The company avails outdoor catering services of Dhaniaram Pvt. Ltd. for
providing such meals to its customers.
Examine whether Flamingo Ltd. can avail ITC on such outdoor catering service availed by it.
Answer
As per section 17(5)(i)(b), ITC on supply of inter alia food and beverages and outdoor catering is blocked.
However, ITC in respect of such goods or services or both shall be available where an inward supply of
such goods or services or both is used by a registered person for making an outward taxable supply of
the same category of goods or services or both or as an element of a taxable composite or mixed supply.
In the given case, Flamingo Ltd. is availing outdoor catering service to provide outdoor catering (meals)
to the passengers on board the aircraft. Since ITC in respect of outdoor catering is available if the same
is used for making an

Page 8.4
Input Tax Credit
outward taxable supply as an element of a taxable composite or mixed supply, Flamingo Ltd. can avail
ITC on outdoor catering service procured by it
Question 6
Jumbo Sales Pvt. Ltd., a supplier of readymade garments, announced ‘Buy One get Two free’ offer on
Men’s T-Shirts on Diwali to boost its sales.
You are required to advise the company on the availability of ITC in respect of inward supplies used in
relation to such supply.
Answer
It may appear at first glance that in case of offers like “Buy One, Get One Free”, one item is being “supplied
free of cost” without any consideration.
As per clause (a) of section 7(1) read with clause (c) thereof, goods or services which are supplied free
of cost (without any consideration) shall not be treated as supply except in case of activities mentioned
in Schedule I.
Circular No. 92/11/2019 GST dated 28.03.2019 has clarified the entitlement of ITC in the hands of
supplier in respect of sales promotional scheme like ‘buy one get one free’. Such promotional offers are
not individual supplies of free goods, but a case of two or more individual supplies where a single price
is being charged for the entire supply. It can at best be treated as supplying two goods for the price of
one.
Taxability of such supply will be dependent upon as to whether the supply is a composite supply or a
mixed supply and the rate of tax shall be determined as per the provisions of section 8.
ITC shall be available to the supplier for the inputs, input services and capital goods used in relation to
supply of goods or services or both as part of such offers.
Therefore, the given case is not the case of individual supplies of free goods, but a case of three individual
supplies where a single price is being charged for the entire supply. Thus, Jumbo Sales Pvt. Ltd. will be
entitled to avail ITC on inputs, input services and capital goods used in relation to supply of T- Shirts as
part of such offer
Question 7
A garment factory receives a Government order for making uniforms for a commando unit. This supply
is exempt from tax under a notification issued under section 11 of the CGST Act. The fabric is separately
procured for the supply, but thread and lining material for the collars are the ones which are used for
other taxable products of the factory.
The turnover (exclusive of taxes) of the other products of the factory and exempted uniforms in July is 4
crore and ₹ 1 crore respectively, the ITC on thread and lining material procured in July is ₹ 5,000 and ₹
15,000 respectively.
Calculate the eligible ITC on thread and lining material.
Answer
Thread and lining material are inputs which are used for making taxable as well as exempt supplies.
Therefore, credit on such items will be apportioned and credit attributable to exempt supplies will be
reversed in terms of rule 42.
Credit attributable to exempt supplies = Common credit x (Exempt turnover/ Total turnover)

Page 8.5
Input Tax Credit
Common credit = ₹ 15,000 + ₹ 5,000 = ₹ 20,000

Exempt turnover = ₹ 1 crore
Total turnover = ₹ 5 crore [₹ 1 crore + ₹ 4 crore]
Credit attributable to exempt supplies = (₹ 1 crore /₹ 5 crore) x ₹ 20,000 = 4,000.
Ineligible credit of ₹ 4,000 will be reversed in Form GSTR-3B. Credit of 16,000 will be eligible credit for
the month of July.
Question 8
Ceramity Ltd. has following units:
A: Factory in Tumkur, Karnataka; turnover of 27 crores in 2019-20;
B: Service centre in Hyderabad, Telangana; turnover of 1 crore in 2019-20;
C: Service centre in Chennai, Tamil Nadu; turnover of 2 crores in 2019-20;
Ceramity Ltd.’s corporate office functions as ISD. It has to distribute ITC of 9 lakh for May, 2020. Of this,
an invoice involving tax of 3 lakh pertains to technical consultancy for Tumkur unit.
Explain in brief how should the ITC be distributed?
Answer
As per rule 39(d) relating to ITC, -
 ₹ 3 lakh is attributable to Tumkur unit, and will be transferred to Tumkur unit only.
 6 lakh have to be distributed among Tumkur unit and the service centres in Hyderabad and Chennai
in proportion of their turnover in the previous FY, that is, in 2019-20.
o Tumkur unit will get (27 crore / 30 crore) x 6 lakh = ₹ 5.4 lakh;
o Hyderabad service centre will get (1 crore /30 crore) x 6 lakh = 20,000; and
o Chennai service centre will get (2 crore /30 crore) x 6 Lakh = 40,000.
Ceramity Ltd. should issue ISD invoices (from GSTN obtained separately for ISD) for distributing ITC (as
calculated above) to its units. It should be clearly indicated in the invoices that the same are issued only
for distribution of ITC.
Question 9
A registered supplier of taxable goods supplied goods valued at 2,24,000 (inclusive of CGST ₹ 12,000 and
SGST ₹ 12,000) to Mohan Ltd. under forward charge on 15th August for which tax invoice was also issued
on the same date. The inputs were received by Mohan Ltd. on 15th August. Mohan Ltd. availed credit of
₹ 24,000 on 20th September by filing Form GSTR-3B for August month. However, Mohan Ltd. did not
make any payment towards such supply along with tax thereon to the supplier. Is Mohan Ltd. eligible to
avail ITC on such supply?
Discuss ITC provisions if Mohan Ltd. Makes the payment of 2,24,000 to the supplier on 18th March of
next calendar year.
Answer
As per section 16, Mohan Ltd. is eligible to avail ITC of the tax paid on inputs received by it on the basis
of the invoice issued by the supplier provided other conditions for availing ITC are fulfilled.
Payment of value of the goods along with the tax to the supplier is not a pre- requisite at the time of

Page 8.6
Input Tax Credit
availing credit, but Mohan Ltd. has to pay the said amount within 180 days from the date of issue of
invoice. If Mohan Ltd, fails to do so the ITC of ₹ 24,000 will be added to its output tax liability with interest.
Such interest will be paid @ 18% p.a. from the date of availing credit till the date when the amount added
to the output tax liability is paid [Second proviso to section 16(2) read with rule 37].
If Mohan Ltd. makes the payment of ₹ 2,24,000 (Value + tax) to the supplier on 18th March of next
calendar year, i.e. after the expiry of 180 days from date of issue of invoice, Mohan Ltd. can avail the credit
of ₹ 24,000 while filing form GSTR-3B for the month of March.
Question 10
State the conditions that need to be followed by an input service distributor for distribution of credit.
Answer
The following conditions need to be followed by an input service distributor (ISD) for distribution of
credit:
(i) The ISD is required to obtain a separate registration for distribution of credit.
(ii) The credit can be distributed to the recipients of credit against an ISD invoice containing prescribed
details.
(iii) The amount of the credit distributed shall not exceed the amount of credit available for distribution.
(iv) The credit related to an input service must be distributed only to the particular recipient to whom
that input service is attributable.
(v) If the input service is attributable to more than one recipient, the relevant ITC is distributed pro
rata to such recipients in the ratio of turnover of the recipient in a State/ Union Territory to the
aggregate turnover of all the recipients to whom the input service is attributable and which are
operational during the current year.
(vi) ITC pertaining to input services which are common for all units, is distributed to all the recipients
in the ratio of turnover in the prescribed manner.
(vii) ITC available for distribution in a month shall be distributed in the same month and the details
thereof shall be furnished in the prescribed form.
(viii) Both ineligible and eligible ITC are to be distributed separately.
(ix) ITC of CGST, SGST/UTGST and IGST are to be distributed separately.
(x) ITC of CGST, SGST/UTGST in respect of recipient located in the same State/Union Territory is
distributed as CGST and SGST/UTGST respectively.
(xi) ITC of CGST and SGST/UTGST, in respect of a recipient located in a different State/Union territory,
is distributed as IGST (total of ITC of CGST and SGST/UTGST which were to be distributed to such
recipient).
(xii) ITC on account of IGST is distributed as IGST
Question 11
With reference to the provisions of section 17, examine the availability of ITC in the following
independent cases
(i) MBF Ltd., an automobile company, has availed works contract service for construction of a
foundation on which a machinery (to be used in the production process) is to be mounted
permanently.

Page 8.7
Input Tax Credit
(ii) Shah & Constructions procured cement, paint, iron rods and services of architects and interior
designers for construction of a commercial complex for one of its clients.
(iii) ABC Ltd. availed maintenance & repair services from “Jaggi Motors” for a truck used for
transporting its finished goods.
Answer
(i) Section 17(5)(c) blocks input tax credit in respect of works contract services when supplied for
construction of an immovable property (other than plant and machinery) except where it is an
input service for further supply of works contract service.
Further, the term “plant and machinery” means apparatus, equipment and machinery fixed to earth
by foundation or structural support that are used for making outward supply of goods and/or
services and includes such foundation or structural support but excludes land, building or
other civil structures, telecommunication towers, and pipelines laid outside the factory premises.
Thus, in view of the above-mentioned provisions, ITC is available in respect of works contract
service availed by MBF Ltd. as the same is used for construction of plant and machinery which is
not blocked under section 17(5)(c). It is assumed that the expenditure incurred towards works
contract service is capitalised in the books of MBF Ltd. and no depreciation has been claimed on
the tax component.
(ii) Section 17(5)(d) blocks ITC on goods and/or services received by a taxable person for construction
of an immovable property (other than plant and machinery) on his own account even though such
goods and/or services are used in the course or furtherance of business. Thus, ITC on goods and/or
services used in the construction of an immovable property is blocked only in those cases where
the taxable person constructs the immovable property for his own use even if the immovable
property being constructed is used in the course or furtherance of his business.
In the given case, Shah & Constructions has used the goods and services for construction of
immovable property for some other person and not on its own account. Hence, ITC in this case will
be allowed.
(iii) On a conjoint reading of section 17(5)(a) and 17(5)(ab), it can be concluded that ITC is allowed on
repair and maintenance services relating to motor vehicles, which are eligible for input tax credit.
Further, as per section 17(5)(a) ITC is allowed on motor vehicles which are used for transportation
of goods.
Thus, ITC on maintenance & repair services availed from “Jaggi Motors” for a truck used for
transporting its finished goods is allowed to ABC Ltd.
Question 12
On 25th August, M/s Agarwal & Agarwal, a registered supplier of taxable goods located in Bengaluru
(Karnataka), purchased one machine for 12,39,000 (including IGST) from one supplier of Maharashtra
who issued the invoice on the same date. M/s Agarwal & Agarwal put the machinery to use on the same
day and availed ITC for the eligible amount.
M/s Agarwal & Agarwal used the machine in the process of manufacture of taxable goods. However, M/s
Agarwal & Agarwal sold this machine to Mr. Suresh Kumar of Andhra Pradesh on 20th August of next
year for 7,50,000 (excluding lGST).
With reference to section 18(6), determine the amount payable, if any, by M/s Agarwal & Agarwal at the
time of sale of the machine.
Note: The applicable rate of IGST is 18%.

Page 8.8
Input Tax Credit
Answer
As per section 18(6), if capital goods/ plant and machinery on which ITC has been taken are supplied
(outward) by a registered person, he must pay an amount that is higher of the following
(a) ITC taken on such goods reduced by 5% per quarter of a year or partthereof from the date of
issue of invoice for such goods or
(b) tax on transaction value of such outward supply determined undersection 15.
Accordingly, the amount payable on supply of machinery by M/s Agarwal & Agarwal shall be computed
as follows
Particulars Rs.
ITC taken on the machinery (₹ 12,39,000 × 18/118) 1,89,000
Less: Input tax credit to be reversed @ 5% per quarter forthe period of use of machine
(i) For the previous year = (₹ 1,89,000 × 5%) × 3 quarters 28,350
(ii) For the current year = (₹ 1,89,000 × 5%) × 2 quarters 18,900
Amount required to be paid (A)** 1,41,750
Duty leviable on transaction value (₹ 7,50,000 × 18%) (B) 1,35,000
Amount payable towards disposal of machine is higher of (A) and (B) 1,41,750
Thus, M/s Agarwal & Agarwal is required to pay an amount of ₹ 1,41,750 at the time of sale of
machinery.
**In the above solution, amount payable towards disposal of machine has been computed on the basis of
rule 40(2), i.e. ITC to be reversed for the period of use of capital goods/machine has been computed @
5% for every quarter or part thereof from the date of the issue of invoice.
However, the said amount can also be computed in accordance with rule 44(6), i.e. ITC involved in the
remaining useful life (in months) of the capital goods/ machine can be reversed on pro-rata basis, taking
the useful life as 5 years.
Question 13
Krishna Motors is a car dealer selling cars of an international car company. It also provides maintenance
and repair services of the cars sold by it as also of other cars. It seeks your advice on availability of ITC in
respect of the following expenses incurred by it during the course of its business operations:
(i) Cars purchased from the manufacturer for making further supply of such cars. Two of such cars are
destroyed in accidents while being used for test drive by potential customers.
(ii) Works contract services availed for constructing a car parking shed in its premises.
Answer
As per section 16(1), every registered person can take credit of input tax charged on any supply of goods
or services or both to him which are used or intended to be used in the course or furtherance of his
business. However section 17(5) specifies certain goods and services on which the input tax credit is not
available.
In the light of the foregoing provisions, the availability of ITC in respect of the various expenses incurred
by Krishna Motors is discussed below:
(i) Section 17(5)(a) specifically blocks ITC on motor vehicles for transportation of passengers having
approved seating capacity of not more than thirteen persons. However, the same is allowed when the
motor vehicles are used, inter alia, for further supply of such vehicles. Thus, ITC on cars purchased

Page 8.9
Input Tax Credit
from the manufacturer for making further supply of such cars will be allowed.
However, ITC on the cars destroyed in accident will not be allowed as the ITC on goods destroyed for
whichever reason is specifically blocked under section 17(5)(h).
(ii) Section 17(5)(c) specifically blocks ITC on works contract services when supplied for construction of
an immovable property (other than plant and machinery) except where it is an input service for
further supply of works contract service. Since, in this case the car parking shed is not a plant and
machinery and the works contract service is not used for further supply of works contract service,
ITC thereon will not be allowed.
Question 14
With the help of information given below in respect of a manufacturer for the month of September,
compute the ITC credited to the Electronic Credit Ledger, for the month. Also, compute the amount of ITC
to be added to the output tax liability for the month of September. Ignore interest, if any
Outward supply of taxable goods (exclusive of taxes) 70,000
Outward supply of exempt goods 40,000
Total turnover 1,10,000
Inward supplies GST paid (₹)
Capital goods used exclusively for taxable outward supply 2,000
Capital goods used exclusively for exempt outward supply 1,800
Capital goods used for both taxable and exempt outward supply 4,200
Subject to the information given above, assume that all the other conditions necessary for availing ITC
have been fulfilled.
Answer
Computation of ITC credited to Electronic Credit Ledger and amount of ITC to be added to the
output tax liability for the month of September

Capital goods used exclusively for taxable supply [Since used exclusively for taxable 2,000
supply, full ITC isavailable under rule 43(1)(b)]
Capital goods used exclusively for exempt supply [Since used exclusively for exempt Nil
supply, ITC is notavailable under rule 43(1)(a)]
Capital goods used for both taxable and exemptsupply -Common credit (Tc)
[Commonly used for taxable and exempt supplies –Rule 43(1)(c)] 4200
Total ITC credited to Electronic Credit Ledger forthe month of September 6,200
Common credit for the month of September (Tm) 70
= Tc ÷ 60 = 4,200 ÷ 60 [Rule 43(1)(e)]
Common credit attributable to exempt supplies in a month (Te) = (E ÷ F) x Tr* 25.45
where,
‘E’ is the aggregate value of exempt supplies, made, during the tax period, and
‘F’ is the total turnover in the State of the registeredperson during the tax period
[Rule 43(1)(g)]
= (40,000/1,10,000) × ₹ 70 (rounded off)

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Input Tax Credit
Amount to be added to the output tax liability forthe month of September [Rule 25.45
43(1)(h)]
Note: *Prior to the amendment vide Notification No. 16/2020 CT dated 23.03.2020 clause (f) of rule 43(1)
provided that the amount of ITC, at the beginning of a tax period, on all common capital goods whose
useful life remains during the tax period, be denoted as ‘Tr’ and shall be the aggregate of ‘Tm’ for all such
capital goods. However, clause (f) has been omitted vide the said notification. Consequently, the term
“Tr” becomes redundant in the formula provided in rule 43(1)(g). However, for the sake of computation
of common credit attributable to exempt supply, value of ‘Tm’ has been used here. It may be noted that
as per the erstwhile clause (f) of rule 43(1) value of ‘Tr’ was the aggregate of ‘Tm’.
Question 15
X, a manufacturer of roofing sheets, has total ITC of 1,60,000 available with him on 01st June. He provides
the following information pertaining to the goods and services procured during the month of June:
(1) Input tax on raw materials is 40,000. The raw material is used for both taxable and exempt activity.
(2) Input tax on catering services procured from ‘Harvest Caterers’ in connection with his
housewarming ceremony is ₹ 10,000.
(3) Input tax on raw materials used in manufacture of exempt supplies of 2 lakh is 20,000.
(4) Input tax on cosmetic and plastic surgery of manager of the factory is 30,000.
Total turnover for the month of June is ₹ 60 lakh exclusive of tax.
Compute the ITC available for the month of June and net GST payable from Electronic Cash Ledger by X
for the month of June. Rate of GST is 18% (Ignore CGST, SGST or IGST for the sake of simplicity).
Subject to the information given above, assume that all the other conditions necessary for availing ITC
have been fulfilled. All the purchases are made from registered suppliers.
Answer
Computation of ITC available and net GST payable from Electronic Cash Ledger for the month of June

GST on taxable turnover for the month of June[₹ 60,00,000 × 18%] 10,80,000
Less: ITC available as on 30th June in terms of rule 42
ITC available in the Electronic Credit Ledgeron 1st June ₹ 1,60,000
Add: Total ITC credited to the Electronic Credit Ledger in the month of
₹ 40,000
June [Refer working note below]
Less: ITC out of common credit attributable to exempt supply [Refer
working note below] (₹ 1,290) 1,98,710
Working Note
Computation of ITC (out of common credit) attributable to exempt supplies
Input tax on raw materials [Note1] 40,000
Input tax on catering for housewarming [Note 2] Nil
Input tax on inputs contained in exempt supplies [Note 3] Nil
Input tax on cosmetic and plastic surgery of CEO of company[Note 4] Nil

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Input Tax Credit
Total ITC credited to the Electronic Credit Ledger in termsof rule 42 in the 40,000
month of June
Common credit [Note 5] 40,000
ITC attributable towards exempt supplies [Note 6] 1,290
Notes:
(1) Being used in the course or furtherance of business, input tax on raw materials is available as ITC
and is credited to the Electronic Credit Ledger [Section 16(1)]
(2) ITC on outdoor catering is blocked in terms of section 17(5) if the same is not used for making an
outward supply of outdoor catering or as an element of a taxable composite/mixed supply. Hence,
the same is not credited to the Electronic Credit Ledger [Rule 42].
(3) Input tax on inputs used for making exempt supplies is not available as ITC and thus, not credited to
the Electronic Credit Ledger in terms of rule 42.
(4) ITC on cosmetic and plastic surgery is blocked in terms of section 17(5) if the same are not used for
making the same category of outward supply or as an element of a taxable composite/ mixed supply.
Hence, the same is not credited to the Electronic Credit Ledger [Rule 42].
(5) Since there are no inputs and input services which are used exclusively for effecting taxable supplies,
the entire ITC credited to Electronic Credit Ledger, i.e. ₹ 40,000 will be the common credit [Rule 42].
(6) ITC attributable towards exempt supplies = Common credit x (Aggregate value of exempt supplies
during the tax period / Total turnover during the tax period)
= ₹ 40,000 × ₹ 2,00,000/ ₹ 62,00,000 - (rounded off)
= ₹ 1,290
Question 16
Sarani Weavers, at Pune, Maharashtra is a registered input service distributor and intends to distribute
ITC for the month of March. The following are the details available for such distribution
Branch Turnover of the ITC specifically applicableto

lastquarter (₹) the branch (₹)
IGST – ₹ 12,000
Ganganagar Branch(Rajasthan) 10,00,000 CGST – ₹ 3,000
SGST –₹ 3,000
Madhugiri Branch(Karnataka) 5,00,000 Nil
Kosala Branch (UP) 15,00,000 Nil
IGST – ₹ 1,50,000
Mumbai Branch(Maharashtra) 20,00,000 CGST– ₹ 15,000
SGST– ₹ 15,000
lTC available on input services used commonly by all branches is as under:

CGST - ₹ 60,000
SGST - ₹ 60,000
IGST – ₹ 1,20,000
lTC (IGST) of 10,000 pertaining to March (last year) was inadvertently not distributed. Whether the same
can be considered for distribution in March this year?
Madhugiri, Karnataka branch uses input services to manufacture exempted products. Turnover excludes

Page 8.12
Input Tax Credit
duties & taxes payable to Central and State Government.

Determine the manner of input tax distribution
Answer
As per section 20 read with rule 39:
(i) Total GST credit (CGST+ SGST + IGST) of ₹ 18,000 specifically attributable to Ganganagar Branch,
Rajasthan will be distributed as IGST credit of ₹ 18,000 only to Ganganagar Branch, Rajasthan [Since
recipient and ISD are located in different states].
(ii) IGST credit of ₹ 1,50,000, CGST credit of ₹ 15,000 and SGST credit of 15,000 specifically attributable
to Mumbai Branch, Maharashtra will be distributed as IGST credit of ₹ 1,50,000, CGST credit of
15,000 and SGST credit of ₹ 15,000 respectively, only to Mumbai Branch, Maharashtra [Since
recipient is located in the same State in which ISD is located].
(iii) CGST credit of ₹ 60,000, SGST credit of ₹ 60,000 and IGST credit of 1,20,000 have to be distributed
among the three branches and Mumbai Branch, Maharashtra in proportion of their turnover of the
last quarter.
- Ganganagar Branch, Rajasthan will get: ₹ 48,000 [₹2,40,000 x (10,00,000/ 50,00,000)] as IGST
credit.
- Madhugiri Branch, Karnataka will get: ₹ 24,000 [₹2,40,000 x (5,00,000/ 50,00,000)] as IGST credit.
- The credit attributable to a recipient is distributed even if such recipient is making exempt
supplies.
- Kosala Branch, UP will get: ₹ 72,000 [₹2,40,000 x (15,00,000/ 50,00,000)] as IGST credit.
- Mumbai Branch, Maharashtra will get:
24,000 [60,000 x (20,00,000/ 50,00,000)] as CGST credit,
24,000 [60,000 x (20,00,000/ 50,00,000)] as SGST credit and
48,000 [1,20,000 x (20,00,000/ 50,00,000)] as IGST credit.
(iv) ITC of ₹ 10,000 of March (last year) cannot be distributed in March this year as ITC available for
distribution in a month is to be distributed in the same month.
Question 17
George Pvt. Ltd., a registered supplier of goods at Kerala who pays GST under regular scheme, has made
the following transactions (exclusive of tax) during a tax period
Purchases (₹) Sales (₹) Tax Rate

5,00,000
10,00,000
[Purchases made from registered
[Sale made to registered person in New Delhi] IGST - 18%
person in New Delhi]
CGST – 9%
2,50,000
8,00,000 SGST- 9%
[Purchases made from Registered
[Sales made to registered person in Trivandrum]
person in Trivandrum, Kerala]
The company has complied with all the conditions for availing the ITC. The following further information
regarding various balances available with it on the first day of the tax period, is provided by the company:
Source Taxes (₹) Interest (₹) Penalty (₹)

CGST 50,000 1500 500

Page 8.13
Input Tax Credit
SGST 30,000 1500 500

IGST 1,00,000 2000 500
Compute the minimum net CGST, SGST and IGST payable from the Electronic Cash Ledger by George Pvt.
Ltd. for the tax period as also ITC to be carried forward to next tax period, if any
Answer
Computation of minimum net CGST, SGST and IGST payable from the electronic cash ledger by
George Pvt. Ltd. for the tax period
CGST SGST IGST

@9% (₹) @9% (₹) @18% (₹)
Sales made outside Kerala(New Delhi) –
[Being inter-State sale, thesame is liable to 10,00,000 1,80,000
IGST]
Sales made in Trivandrum [Being intra-
State sale, the same is liable to CGST & 8,00,000 72,000 72,000
SGST]
Less: ITC available duringthe tax period for (10,000)
set off [Refer Working NoteBelow] (72,000) IGST
(1,80,000)
CGST (52,500)
SGST
Net tax liability payable in cash Nil 9,500 Nil
ITC to be carried forward to next tax 500 Nil Nil
period (72,500 - (52,500 - (1,90,000 -
70,000) 52,500) 1,90,000
Working Note:
ITC available during the tax period is computed as under:
Opening balance of ITC 50,000 30,000 1,00,000
Purchases from New Delhi [Being inter-
State purchase, IGST would have been 5,00,000 90,000
paid on it.]
Purchases from Trivandrum 2,50,000 22,500 22,500
Total input tax credit 72,500 1,90,000
Note: Since sufficient balance of ITC of CGST is available for paying CGST liability and cross-utilization
of ITC of CGST and SGST is not allowed, ITC of IGST has been used to pay SGST (after paying IGST
liability) to minimize cash outflow. Interest and penalty paid are not available as credit for payment of
output tax liability under GST. It can be used only against corresponding interest/penalty under the
GST law.
Question 18
Quanto Enterprises is not required to register under CGST Act. However, it applied for voluntary
registration on 17th September. Registration certificate has been granted to the firm on 25th September.
The CGST and SGST liability of the firm for the month of September is ₹ 24,000 each. The firm is not
engaged in making inter-State outward taxable supplies.

Page 8.14
Input Tax Credit
Inputs procured on 2nd September lying in stock

- CGST @ 6% 4,500
- SGST @ 6% 4,500
Input received on 21st July contained in semi-finished goodsheld in stock:
- CGST @ 6% 7,500
- SGST @ 6% 7,500
Value of inputs contained in finished goods held in stock- 2,00,000 [Such inputs
were procured on 19th September last year. Invoice for the goods was also dated the
same day]
- IGST @ 18% 36,000
Inputs valued at 50,000 procured on 13th September lyingin stock:
- IGST @ 18% 9,000
Capital goods procured on 12th September
-CGST @ 6% 12,000
-SGST @ 6% 12,000
You are required to compute the net GST payable from Electronic Cash Ledger by Quanto Enterprises for
the month of September.
You are also required to mention reasons for treatment of all above items
Answer
Computation of net GST payable from Electronic Cash Ledger by Quanto Enterprises for the month
of September
Particulars CGST (Rs) SGST (Rs)

Output tax liability for the month 24,000 24,000
Less: ITC [Notes 1 & 2] 9,000 (IGST) 12,000 (SGST)
12,000 (CGST)
Net GST payable (from electronic cashledger) 3,000 12,000
Notes:
1. Credit of IGST is first utilized towards payment of IGST and thereafter for CGST and SGST in any order
and in any proportion. Credit of CGST and SGST can be utilized only after IGST credit has been fully
utilized [Rule 88A read with sections 49(5), 49A and 49B].
Since Quanto Enterprises does not make any inter-State supply, in the above answer, entire credit of
IGST has been utilized towards payment of CGST. Credit of IGST can also be utilised against SGST
liability or against both CGST and SGST liabilities in any proportion and thus, the final answer will
change accordingly.
2. As per section 18(1)(b) a person who takes voluntary registration is entitled to take credit of input
tax in respect of inputs held in stock and inputs contained in semi-finished/ finished goods held in
stock on the day immediately preceding the date of grant of registration.
However, he cannot take ITC in respect of capital goods held on the day immediately preceding the
date of grant of registration.
ITC on inputs needs to be availed within 1 year from the date of issue of the invoice by the supplier
[Section 18(2)].
In this case, since Quanto Enterprises has been granted voluntary registration on 25th September, it

Page 8.15
Input Tax Credit
will be entitled to ITC on inputs held in stock and inputs contained in semi-finished/ finished goods
held in stock, on 24th September. In view of the said provisions, eligible ITC for Quanto Enterprises is
computed as follows:

Inputs held in stock since 2nd September 4,500 4,500
Inputs received on 21st July contained in semi-finished 7,500 7,500
goods held in stock
Inputs contained in finished goods held in stock which Nil
were procured on 19th September last year [Procured
prior to one year, hence ITC cannot be availed]
Inputs held 13th September in stock since 13th September 9,000
Capital goods procured on 12th September Nil Nil
Total ITC 12,000 12,000 9,000
Question 19
B & D Company, a partnership firm, in Nagpur, Maharashtra is a wholesaler of taxable product ‘P’ and
product ‘Q’ exempted by way of a notification. The firm supplies these products only in the eastern part
of Maharashtra. All the procurements (both goods and services) of the firm are from the suppliers
registered under regular scheme in the State of Maharashtra. The firm pays tax under composition
scheme.
stock (exclusive of taxes)
Particulars Turnover for the quarter ended Turnover for the quarter ended
30th June (₹) 30th September (₹)
‘P’ 60,00,000 50,00,000
‘Q’ 17,65,000 17,00,000
Particulars Stock as on 30th Stock as on 30th Stock as on 31st

June (₹) September (₹) October (₹)
‘P’ 25,00,000 10,00,000 3,60,000
‘Q’ 10,00,000 2,00,000 1,20,000
The entire stock of the products ‘P’ and ‘Q’ available with the firm as on 30th September is purchased
during the said half year except a consignment of product ‘P’ valuing ₹ 3,00,000, which was purchased in
the April month of the preceding financial year. The said stock could not be sold during the month of
October. In the current financial year, in the month of October, no purchases were made, and the products
were sold with a profit margin of 20% on sales [exclusive of taxes]
The extract of the only bill book maintained by the firm showed the following details

‘P’ (₹) ‘Q’ (₹) Total (₹)
2306 1st October 2,00,000 3,000 2,03,000
2307 1st October 1,33,000 5,250 1,38,250
2308 2nd October 67000 39,250 1,06,250
2309 3rd October 58,750 33,750 92,500

Page 8.16
Input Tax Credit
2310 5th October 1,00,000 - 1,00,000

2311 6th October 94,000 6,000 1,00,000
2312 6th October - 17,000 17,000
2313 8th October 50,000 6,000 56,000
2314 9th October 60,000 9,000 69,000
2315 …………….. …………….. …………….. ……………..
………. …………….. …………….. …………….. ……………..
All the above amounts are exclusive of taxes, wherever applicable

Compute the ITC credited to the Electronic Credit Ledger of the B & D Company, when it exits composition
scheme and becomes liable to pay tax under regular scheme, in accordance with the provisions of section
18(1)(c).
Note: Make suitable assumptions wherever required. Stock is valued at cost price
Answer
As per section 10(3) read with Notification No.14/2019 CT dated 07.03.2019 as amended, the option
availed of by a registered person to pay tax under composition scheme shall lapse with effect from the
day on which his aggregate turnover during a financial year exceeds 1.5 crore [₹ 75 lakh in case of Special
Category States except Assam, Himachal Pradesh and Jammu and Kashmir]
As per section 2(6), aggregate turnover means the aggregate value of all taxable supplies (excluding the
value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies,
exports of goods or services or both and inter-State supplies of persons having the same PAN, to be
computed on all India basis but excludes CGST, SGST/UTGST, IGST and GST Compensation Cess.
In the given case, the firm is registered under the composition scheme in the State of Maharashtra.
The aggregate turnover of the firm exceeds
1.5 crore on 3rd October [aggregate of both taxable and exempt turnover from 1st April to 3rd
October, i.e. 1,50,05,000 (1,44,65,000 + 2,03,000 + 1,38,250 + 1,06,250 + 92,500)].
Thus, the firm will pay tax under regular scheme (Section 9) from 3rd October.
As per section 18(1)(c) read with rule 40, where any registered person ceases to pay tax under section
10, he shall be entitled to take credit of input tax in respect of inputs held in stock, inputs contained in
semi-finished or finished goods held in stock and on capital goods on the day immediately preceding the
date from which he becomes liable to pay tax under section 9.
Further, ITC on supplies of inputs and capital goods shall not be available after the expiry of one year
from the date of issue of tax invoice [Section 18(2)].
In the light of the above-mentioned provisions, the ITC credited to the Electronic Credit Ledger of the B
& D Company on inputs held in on 2nd October will be computed as under:
Stock of taxable inputs as on 30th September 10,00,000
[Since no tax is paid on exempt purchases, there does not arise any question of availing
ITC on the same. Hence, stock of only taxable inputs is considered]
Add: Purchases Nil
[No purchases are made in October]
Less: Cost of taxable goods sold from 1st October to 2nd October 3,20,000
[(2,00,000 + 1,33,000 + 67,000]) x 80%]
Stock of taxable inputs as on 2nd October 6,80,000

Page 8.17
Input Tax Credit
[Since the bill numbers are in continuation, it can be concluded that no sales are
missing from the extract]
Less: More than one year old stock 3,00,000
Stock of inputs on which ITC can be claimed 3,80,000
ITC of CGST @ 9% [Since all purchases are intra-State and from 34,200
the suppliers registered under regular
ITC of SGST @ 9% scheme] 34,200
Question 20
XYZ Pvt. Ltd. is a manufacturing company registered under GST in the State of Uttar Pradesh. It
manufactures two taxable products ‘Alpha’ and ‘Beta’ and one exempt product ‘Gama’. On 1st October,
while product ‘Beta’ got exempted through an exemption notification, exemption available on ‘Gama’ got
withdrawn on the same date. The turnover (exclusive of taxes) of ‘Alpha’, ‘Beta’ and ‘Gama’ in the month
of October was ₹ 9,00,000, ₹ 10,00,000 and 6,00,000.
XYZ Pvt. Ltd. has furnished the following details
S. No. Particulars Price (₹) GST (₹)

(a) Machinery ‘U’ purchased on 1st October for being used in 2,00,000 36,000
manufacturing all the three products
(b) Machinery ‘V’ purchased on 1st October for being used in 1,00,000 18,000
manufacturing product ‘Alpha’ and ‘Gama’
(c) Machinery ‘W’ purchased on 1st October for being exclusively used 3,00,000 54,000
in manufacturing product ‘Beta’
(d) Machinery ‘Y’ purchased on 1st October four years ago for being 4,00,000 72,000
exclusively used in manufacturing product ‘Beta’. From 1st
October, such machinery will also be used for manufacturing
product ‘Gama’
(e) Machinery ‘Z’ purchased on 1 st October two years ago for being 3,00,000 54,000
used in manufacturing all the three products
(f) Raw Material used for manufacturing ‘Alpha’purchased on 5th 1,50,000 27,000
October
(g) Raw Material used for manufacturing ‘Beta’ purchased on 10th 2,00,000 36,000
October
(h) Raw Material used for manufacturing ‘Gama’purchased on 15th 1,00,000 18,000
October
Compute the following
(i) Amount of ITC credited to Electronic Credit Ledger, for the month of October
(ii) Amount of aggregate value of common credit (Tc)
(iii) Common credit attributable to exempt supplies, for the month of October
(iv) GST liability of the company payable through Electronic Cash Ledger, for the month of October
Note: Assume that all the procurements made by the company are from States other than Uttar Pradesh.
Similarly, the company sells all its products in States other than Uttar Pradesh. Rate of IGST is 18%.
Subject to the information given above, assume that all the other conditions necessary for availing
ITC have been fulfilled. Ignore interest, if any and make suitable assumptions wherever required.

Page 8.18
Input Tax Credit
Answer
S. No. Particulars ITC (₹)

(i) Amount of ITC credited to Electronic Credit Ledger, for the month of
October
Machinery ‘U’ - ‘A’ [Note 1] 36,000
Machinery ‘V’ [Note 2] 18,000
Machinery ‘W’ [Note 3] -
Machinery ‘Y’ [Note 4] -
Machinery ‘Z’ [Note 5] -
Raw Material used for manufacturing ‘Alpha’ [Note 6] 27,000
Raw Material used for manufacturing ‘Beta’ [Note 6] -
Raw Material used for manufacturing ‘Gama’ [Note 6] 18,000
Amount of ITC credited to Electronic Credit Ledger, for the month of 99,000
October
(ii) Aggregate value of common credit (Tc) – Note 7
Value of ‘A’ for Machinery ‘U’ purchased on 1st October 36,000
Value of ‘A’ for Machinery ‘Z’ purchased on 1stOctober 54,000
2 years ago for effecting both taxable and exempt supplies
Input tax claimed on Machinery ‘Y’ purchased on 1st October 4 years ago for
effecting taxable supplies but used for effecting both taxable and exempt
supplies from 1st October in the current year [Note 8] 72,000
Aggregate value of common credit (Tc) 1,62,000
(iii) Common credit attributable to exempt supplies, for the month of
October
Common credit for the month of October (Tm) [Note9] 2,700
Common credit attributable to exempt supplies, for the month of
October (Te) – Note 10 1,080
(iv) Computation of GST liability of the company for
October payable through Electronic Cash Ledger
IGST payable on ‘Alpha’ [₹ 9,00,000 x 18%] 1,62,000
IGST payable on ‘Beta’ [Exempt] Nil
IGST payable on ‘Gama’ [₹ 6,00,000 x 18%] 1,08,000
Total IGST payable on outward supply 2,70,000
Common credit attributable to exempt supplies for the month of October [Note
11] 1,080
Total output tax liability of October 2,71,080
Less: ITC available in the Electronic Credit Ledger 99,000
IGST payable from Electronic Cash Ledger 1,72,080
Notes:
(1) ITC in respect of capital goods used commonly for effecting taxable supplies and exempt supplies
denoted as ‘A’ shall be credited to the electronic credit ledger [Rule 43(1)(c)].
(2) ITC in respect of capital goods used or intended to be used exclusively for effecting supplies other
than exempted supplies but including zero rated supplies shall be credited to the electronic credit

Page 8.19
Input Tax Credit
ledger [Rule 43(1)(b)].

(3) ITC in respect of capital goods used or intended to be used exclusively for effecting exempt supplies
shall not be credited to electronic credit ledger [Rule 43(1)(a)].
(4) Machinery ‘Y’ is being used for effecting both taxable and exempt supplies from 1st October. Prior
to that it was exclusively used for effecting taxable supplies. Therefore, ITC in respect of such
machinery would have already been credited to the electronic credit ledger.
(5) Machinery ‘Z’ is being used for effecting both taxable and exempt supplies from 1st October two
years ago. Therefore, ITC in respect of such machinery would have already been credited to the
electronic credit ledger.
(6) ITC in respect of inputs used for effecting taxable supplies will be credited in Electronic Credit
Ledger. ITC in respect of inputs used for effecting exempt supplies will not be credited in the
electronic credit ledger [Rule 42].
(7) The aggregate of the amounts of ‘A’ credited to the electronic credit ledger in respect of common
capital goods whose useful life remains during the tax period, to be denoted as ‘Tc’, shall be the
common credit in respect of such capital goods [Rule 43(1)(d)]
(8) Where any capital goods which were used exclusively for effecting taxable supplies are
subsequently also used for effecting exempt supplies, the ITC claimed in respect of such capital
goods shall be added to arrive at the aggregate value of common credit ‘Tc’ [Proviso to rule
43(1)(d)].
(9) ITC attributable to a month on common capital goods during their useful life (Tm) shall be computed
in accordance with rule 43(1)(e) as under:
= Tc ÷ 60
= ₹ 1,62,000 ÷ 60
= ₹ 2,700
The useful life of any capital goods shall be considered as five years from the date of invoice and the
said formula shall be applicable during the useful life of the said capital goods
(10) The amount of common credit attributable towards exempted supplies, be denoted as ‘Te’, and shall
be calculated as:
Te= (E÷ F) x Tr* where,
‘E’ is the aggregate value of exempt supplies, made, during the tax period, and
‘F’ is the total turnover in the State of the registered person during the tax period [Rule 43(1)(g)].
Turnover of exempt supplies during the month of October
= Tr х
Total turnover of XYZ Pvt. Ltd. during the month of October
₹ 10,00,000
= ₹ 2,700 х = ₹ 1,080
₹ 25,00,000
(11) Common credit attributable to the exempt supplies (Te) along with the applicable interest (which
is to be ignored in this case) shall, during every tax period of the useful life of the concerned capital
goods, be added to the output tax liability of the person making such claim of credit [Rule 43(1)(h)].
*Prior to the amendment vide Notification No. 16/2020 CT dated 23.03.2020 clause (f) of rule
43(1) provided that the amount of ITC, at the beginning of a tax period, on all common capital goods
whose useful life remains during the tax period, be denoted as ‘Tr’ and shall be the aggregate of
Tm‘ for all such capital goods. However, clause (f) has been omitted vide the said notification.
Consequently, the term “Tr” becomes redundant in the formula provided in rule 43(1)(g). However,
for the sake of computation of common credit attributable to exempt supply, value of ‘Tm’ has been

Page 8.20
Input Tax Credit
used here. It may be noted that as per the erstwhile clause (f) of rule 43(1) value of ‘Tr’ was the
aggregate of ‘Tm’
Question 21
‘All-in-One Store’ is a retail chain of departmental store having presence in almost all metro cities across
India. Both exempted as well as taxable goods are sold in such Stores. The Stores operate in rented
properties. All-in-One Stores pay GST under regular scheme.
In Mumbai, the Store operates in a rented complex, a part of which is used by the owner of the Store for
personal residential purpose.
All-in-One Store, Mumbai furnishes following details for a month:
(i) Aggregate value of various items sold in the Store: Taxable items – 42,00,000 Items exempted vide
a notification – 12,00,000 Items not leviable to GST – 3,00,000
(ii) Mumbai Store transfers to another All-in-One Store located in Goa certain taxable items for the
purpose of distributing the same as free samples. The value declared in the invoice for such items
is 5,00,000. Such items are sold in the Mumbai Store at 8,00,000.
(iii) Aggregate value of various items procured for being sold in the Store:
Taxable items – ₹ 55,00,000
Items exempted vide a notification – ₹ 15,00,000
Items not leviable to GST – ₹ 5,00,000
(iv) Freight paid to goods transport agency (GTA) for inward transportation of taxable items - 1,00,000
(v) Freight paid to GTA for inward transportation of exempted items – 80,000
(vi) Freight paid to GTA for inward transportation of non-taxable items - 20,000
(vii) Monthly rent payable for the complex – ₹ 5,50,000 (one third of total space available is used for
personal residential purpose).
(viii) Activity of packing the items and putting the label of the Store along with the sale price has been
outsourced. Amount paid for packing of all the items – ₹ 2,50,000
(ix) Salary paid to the regular staff at the Store – ₹ 2,00,000
(x) GST paid on inputs used for personal purpose – ₹ 5,000
(xi) GST paid on rent a cab services availed for transportation of employees, which is not obligatory
under any law – ₹ 4,000
(xii) GST paid on items given as free samples – ₹ 4,000
Given the above available facts, you are required to compute the following:
A. Input tax credit (ITC) credited to the Electronic Credit Ledger
B. Common Credit
C. ITC attributable towards exempt supplies out of common credit
D. Eligible ITC out of common credit
E. Net GST payable from Electronic Cash Ledger for the month
Note:
(1) Wherever applicable, GST under reverse charge is payable @ 5% by All- in-One Stores. Rate of GST
in all other cases is 18% (Ignore CGST, SGST or IGST for the sake of simplicity).
(2) All the purchases are made from registered suppliers.

Page 8.21
Input Tax Credit
(3) Wherever applicable, the amounts given are exclusive of taxes.

(4) Subject to the information given above, assume that all the other conditions necessary for availing
ITC have been fulfilled.
Answer
A. Computation of ITC credited to Electronic Credit Ledger
As per rule 42, the ITC in respect of inputs or input services being partly used for the purposes of
business and partly for other purposes, or partly used for effecting taxable supplies and partly
for effecting exempt supplies, shall be attributed to the purposes of business or for effecting
taxable supplies.
ITC credited to the electronic credit ledger of registered person [‘C 1’] is calculated as under-
C1 = T - (T1+T2+T3)
where
T = Total input tax involved on inputs and input services in a taxperiod.

T1 = Input tax attributable to inputs and input services intendedto be used exclusively
for non-business purposes
T2 = Input tax attributable to inputs and input services intendedto be used exclusively
for effecting exempt supplies
T3 = Input tax in respect of inputs and input services on whichcredit is blocked under
section 17(5)
Computation of total input tax involved [T]
Particulars (₹)
GST paid on taxable items [₹ 55,00,000 x 18%] 9,90,000
Items exempted vide a notification [Since exempted,no GST is paid] Nil
Items not leviable to tax [Since non-taxable, no GST ispaid] Nil
GST paid under reverse charge on freight paid to GTA for inward transportation 5,000
of taxable items - [₹ 1,00,000x 5%]
of exempted items - [₹ 80,000 x 5%]
of non-taxable items - [₹ 20,000 x 5%]
GST paid on monthly rent - [₹ 5,50,000 x 18%] 99,000
GST paid on packing charges [₹ 2,50,000 x 18%] 45,000
Salary paid to staff at the Store Nil
[Services by an employee to the employer in the course of or in relation to his
employment is not a supply in terms of para 1 of the Schedule III and hence, no
GST is payable thereon].
GST paid on inputs used for personal purpose 5,000
GST paid on rent a cab services availed for business purpose 4,000
GST paid on items given as free samples 4,000
Total input tax involved during the month [T] 11,57,000
Computation of T1, T2, T3

Page 8.22
Input Tax Credit
Particulars (₹)
GST paid on monthly rent attributable to personalpurposes [1/3 of ₹ 99,000] 33,000
GST paid on inputs used for personal purpose 5,000
Input tax exclusively attributable to non-businesspurposes [T1] 38,000
of exempted items
[As per section 2(47), exempt supply means, inter alia, supply which may be
wholly exempt from tax by wayof a notification issued under section 11.
Hence, input service of inward transportation of exempt items is exclusively
used for effecting exempt supplies.]
GST paid under reverse charge on freight paid to GTAfor inward transportation
of non-taxable items [Exempt supply includes non-taxable supply in termsof
section 2(47). Hence, input service of inward transportation of non-taxable
items is exclusively used for effecting exempt supplies.] 1,000
Input tax exclusively attributable to exempt supplies [T2] 5,000
GST paid on rent a cab services availed for business purpose 4,000
[ITC on rent a cab service is blocked under section 17(5)(b)(i) as the same is not
used by All-in-One Store for providing the rent a cab service or as part of a taxable
composite or mixed supply.
GST paid on items given as free samples
[ITC on goods inter alia, disposed of by way of freesamples is blocked under
section 17(5)(h)]. 4,000
Input tax for which credit is blocked undersection 17(5) [T3] ** 8,000
**Since GST paid on inputs used for personal purposes has been considered while computing T1,
the same has not been considered again in computing T3
ITC credited to the electronic credit ledger
C1 = T - (T1+T2+T3)
= ₹ 11,57,000 – (₹ 38,000 + ₹ 5,000 + ₹ 8,000) = ₹ 11,06,000
B. Computation of Common Credit
C2 = C1 - T4
where
C2 = Common Credit
T4 = Input tax credit attributable to inputs and input services intended to be used exclusively for
effecting taxable supplies
Computation of T4
Particulars (₹)
GST paid on taxable items 9,90,000
GST paid under reverse charge on freight paid to GTA forinward transportation
of taxable items 5,000
Input tax exclusively attributable to taxable supplies [T4] 9,95,000
Common Credit
C2 = C1 - T4

Page 8.23
Input Tax Credit
= ₹ 11,06,000 – ₹ 9,95,000
= ₹ 1,11,000
C. Computation of ITC attributable towards exempt supplies out of common credit
ITC attributable towards exempt supplies is denoted as ‘D1’ and calculated as-
D1 = (E ÷ F) x C2
where,
‘E’ is the aggregate value of exempt supplies during the tax period, and
‘F’ is the total turnover in the State of the registered person during the tax period
Aggregate value of exempt supplies during the month
= ₹ 15,00,000 (₹ 12,00,000 + ₹3,00,000)
Total turnover in the State during the tax period
= ₹ 65,00,000 (₹ 42,00,000 + ₹ 12,00,000 + ₹3,00,000 + ₹ 8,00,000)
Note: Transfer of items to Store located in Goa is inter-State supply in terms of section 7 of the IGST
Act, 2017 and hence includible in the total turnover. Such supply is to be valued as per rule 28.
However, the value declared in the invoice cannot be adopted as the value since the recipient Store
at Goa is not entitled for full credit because the goods are to be distributed as free samples, ITC on
which is blocked. Therefore, open market value of such goods, which is the value of such goods sold
in Mumbai Store, is taken as the value of items transferred to Goa Store.
D1 = (15,00,000 ÷ 65,00,000) x 1,11,000
= ₹ 25,615 (rounded off)
D. Computation of Eligible ITC out of common credit
Eligible ITC attributed for effecting taxable supplies is denoted as ‘C3’, where-
C3 = C2 - D1
= ₹ 1,11,000 - ₹ 25,615
= ₹ 85,385
E. Computation of Net GST liability for the month

GST liability under forward charge
Taxable items sold in the store [₹ 42,00,000 x 18%] 7,56,000
Taxable items transferred to Goa Store [₹ 8,00,000 x18%] 1,44,000
Total output tax liability under forward charge 9,00,000
Less: ITC credited to the electronic ledger 10,80,385
ITC carried forward to the next month (1,80,385)
Net GST payable [A] Nil
GST liability under reverse charge
Freight paid to GTA for inward transportation of taxable items [₹ 1,00,000 x 5,000
5%]
Freight paid to GTA for inward transportation of exempted items [₹ 80,000 x 5%] 4,000
Freight paid to GTA for inward transportation of non-taxable items [₹ 20,000 1,000
x 5%]
Total tax liability under reverse charge [B] 10,000

Page 8.24
Input Tax Credit
Net GST liability to be paid in cash [A] + [B] 10,000

As per section 49(4), amount available in the electronic credit ledger may be used
for making payment towards output tax. However, tax payable under reverse
charge is not an output tax in terms of section 2(82). Therefore, tax payable under
reverse charge cannot be set off against the ITC and thus, will have to be paid in
cash.
Note:
While computing net GST liability, ITC credited to the electronic ledger can alternatively be
computed as follows
Particulars (₹)
GST paid on taxable items [₹ 55,00,000 x 18%] 9,90,000
Items exempted vide a notification [Since exempted,no GST is paid] Nil
Items not leviable to tax [Since non-taxable, no GSTis paid] Nil
of taxable items [₹ 1,00,000 x 5%]
GST paid under reverse charge on freight paid to GTA for inward transportation Nil
of exempted items [₹80,000 x 5%]
[As per section 2(47), exempt supply means, inter alia, supply which may be
wholly exempt from tax by way of a notification issued under section 11. Hence,
input service of inward transportation of exempt items is exclusively used for
effecting exempt supplies. Input tax exclusively attributable to exempt supplies
is to be excluded]
GST paid under reverse charge on freight paid to GTA for inward transportation Nil
of non-taxable items[₹ 20,000 x 5%]
[Exempt supply includes non-taxable supply in terms of section 2(47). Hence,
input service of inward transportation of non-taxable items is exclusively used
for effecting exempt supplies. Input tax exclusively attributable to exempt
supplies is to be excluded]
GST paid on monthly rent – for business purposes[(₹ 5,50,000 x 18%) – 1/3 of 66,000
[(₹ 5,50,000 x 18%)]
GST paid on packing charges [₹ 2,50,000 x 18%] 45,000
Salary paid to staff at the Store Nil
[Services by an employee to the employer in the course of or in relation to his
employment is not a supply in terms of para 1 of the Schedule III to CGST Act and
hence, no GST is payable thereon]
GST paid on inputs used for personal purpose Nil
[ITC on goods or services or both used for personalconsumption is blocked
under section 17(5)(g)]
GST paid on rent a cab services availed for business purpose Nil
[ITC on rent a cab service is blocked under section 17(5)(b)(i) as the same is not
used by All-in-One Store for providing the rent a cab service or as partof a
taxable composite or mixed supply.]
GST paid on items given as free samples [ITC on goods inter alia, disposed of Nil
by way of freesamples is blocked under section 17(5)(h)]
Total ITC credited to the electronic ledger 11,06,000

Page 8.25
Input Tax Credit
Less: ITC reversal [ITC of common credit,attributable to exempt (25,615)

supplies]
Net ITC available for credit 10,80,385
Question 22
Vansh Shoppe is a registered supplier of both taxable and exempted goods, registered under GST in the
State of Rajasthan. Vansh Shoppe has furnished the following details for a month:
(₹)
(1) Details of sales
Supply of taxable goods 50,00,000
Supply of goods not leviable to GST 10,00,000
(2) Details of goods purchased for being sold in the shop:
Taxable goods 45,00,000
Goods not leviable to GST 4,00,000
Details of expenses:
(3) Monthly rent payable for the shop 3,50,000
Telephone expenses paid 50,000
(₹ 30,000 for land line phone installed at the shop and ₹ 20,000 towards mobile
phone bills of the employees –Mobile phones are given to employees for official
use)
Audit fees paid to a Chartered Accountant 60,000
(₹ 35,000 for filing of income tax return & the statutory audit of preceding
financial year and ₹ 25,000 for filing of GST return)
Premium paid on health insurance policies taken for specified employees of the 10,000
shop as per company policy.
Freight paid to goods transport agency (GTA) for inward transportation of goods 50,000
not leviable to GST
Freight paid to goods transport agency (GTA) for inward transportation of 1,50,000
taxable goods
Goods given as free samples (Not included in Taxable goods value of 45,00,000) 5,000
All the above amounts are exclusive of all kind of taxes, wherever applicable.
All the purchases and sales made by Vansh Shoppe are within Rajasthan. All the purchases are made from
registered suppliers. All the other expenses incurred are also within Rajasthan.
Assume, wherever applicable, for purpose of reverse charge payable by Vansh Shoppe, the CGST, SGST
and IGST rates as 2.5%, 2.5% and 5% respectively. CGST, SGST and IGST rates to be 6%, 6% and 12%
respectively in all other cases.
There is no opening balance in the electronic cash ledger or electronic credit ledger. Subject to the
fulfilled.
You are required to compute the following:
(1) Input Tax Credit (ITC) credited to Electronic Credit Ledger
(2) Common credit available for apportionment
(3) ITC attributable towards exempt supplies out of common credit
Page 8.26
Input Tax Credit
(4) Net GST payable from Electronic Cash Ledger for the month
Answer
(1) Computation of ITC credited to Electronic Credit Ledger
ITC of input tax attributable to inputs and input services intended to be used for business purposes
is credited to the electronic credit ledger. Input tax attributable to inputs and input services
intended to be used exclusively for non-business purposes, for effecting exclusively exempt
supplies and on which credit is blocked under section 17(5) is not credited to electronic credit
ledger [Sections 16 and 17].
In the light of the aforementioned provisions, the ITC credited to electronic credit ledger of Vansh
Shoppe is calculated as under
Particulars Amount CGST @6% SGST @6%

(₹) (₹) (₹)
GST paid on taxable goods 45,00,000 2,70,000 2,70,000
Goods not leviable to GST [Since non-taxable, no 4,00,000 Nil Nil
GST is paid]
GST paid on monthly rent forshop 3,50,000 21,000 21,000
GST paid on telephoneexpenses 50,000 3,000 3,000
GST paid on audit fees 60,000 3,600 3,600
GST paid on premium of health insurance policies 10,000 Nil Nil
as per company policy
[ITC on health insurance service is allowed only if
it is obligatory for employers to provide such
services to its employees under any law for the
time being in force-Proviso to section17(5)(b)].
Goods given as free samples [ITC on goods 5,000 Nil Nil
disposed of byway of free samples is blocked
under section 17(5)(h)]
Particulars Amount CGST @ SGST @
(₹) 2.5% (₹) 2.5% (₹)
Freight paid to GTA for inwardtransportation of 50,000 Nil Nil
non-taxable goods under reverse charge [Since
definition of exempt supply under section 2(47)
specifically includes non-taxable supply, the input
service of inward transportation of on-taxable
goods is being exclusively used for effecting
exempt supplies.]
Freight paid to GTA for inward transportation of 1,50,000 3,750 3,750
taxable goods under reverse charge
ITC credited to the electronic ledger 3,01,350 3,01,350
Less: ITC reversal [ITC out of common credit, (4,600) (4,600)
attributable to exempt supplies] (Refer point no. 2
& 3 below)
Net ITC available 2,96,750 2,96,750
(2) Computation of common credit available for apportionment

Page 8.27
Input Tax Credit
Common Credit = ITC credited to Electronic Credit Ledger – ITC attributable to inputs and input
services intended to be used exclusively for effecting taxable supplies [Section 17 read with rule
42]
Particulars CGST (₹) SGST (₹)

ITC credited to Electronic Credit Ledger 3,01,350 3,01,350
Less: ITC on taxable goods 2,70,000 2,70,000
Less: ITC on freight paid to GTA for inwardtransportation of taxable 3,750 3,750
goods
Common credit 27,600 27,600
(3) Computation of ITC attributable towards exempt supplies out of common credit
ITC attributable towards exempt supplies = Common credit x (Aggregate value of exempt supplies
during the tax period/ Total turnover during the tax period) [Section 17 read with rule 42

ITC attributable towards exempt supplies 4,600 4,600
[₹ 27,600 x (₹ 10,00,000/₹ 60,00,000)]
(4) Computation of net GST liability for the month

GST liability under forward charge
Supply of taxable goods [₹ 50,00,000 x 6%] 3,00,000 3,00,000
Total output tax liability under forwardcharge 3,00,000 3,00,000
Less: ITC credited to the electronic creditledger 2,96,750 2,96,750
Net GST payable [A] 3,250 3,250
GST liability under reverse charge
Freight paid to GTA for inwardtransportation of taxable goods 3,750 3,750
[₹ 1,50,000 x 2.5%]
Freight paid to GTA for inwardtransportation of non-taxable goods 1,250 1,250
[₹ 50,000 x 2.5%]
Total tax liability under reverse charge [B] 5,000 5,000
Net GST liability [A] + [B] 8,250 8,250
Note: Amount available in the electronic credit ledger may be used for making payment towards
output tax [Section 49]. However, tax payable under reverse charge is not an output tax in terms
of definition of output tax provided under section 2(82). Therefore,tax payable under reverse
charge cannot be set off against theinput tax credit and thus, will have to be paid in cash.
Question 23
Mr. Rajesh Surana has a proprietorship firm in the name of Surana & Sons in Jaipur. The firm, registered
under GST in the State of Rajasthan, manufactures three taxable products ‘M’, ‘N’ and ‘O’. Tax on ‘N’ is
payable under reverse charge. The firm also provides taxable consultancy services.
The firm has provided the following details for a tax period:
Particulars (₹)
Turnover of ‘M’ (excluding export sales) 14,00,000

Page 8.28
Input Tax Credit
Turnover of ‘N’ 6,00,000

Turnover of ‘O’ (excluding export sales) 10,00,000
Export of ‘M’ with payment of IGST (not eligible to avail benefitof merchant exports 2,50,000
under Notification No. 41/2017)
Export of ‘O’ under letter of undertaking 10,00,000
Consultancy services provided to unrelated clients located in foreign countries. In all 20,00,000
cases, the consideration has beenreceived in convertible foreign exchange
Sale of building (excluding stamp duty of ₹ 2.50 lakh, being2% of value) [Entire 1,20,00,000
consideration is received post issuance of completion certificate; building was
occupied thereafter]
Interest received on investment in fixed deposits with a bank 4,00,000
Sale of shares (Purchase price ₹ 2,40,00,000/-) 2,50,00,000
Legal services received from an advocate in relation to product‘M’ 3,50,000
Common inputs and input services used for supply of goodsand services mentioned 50,00,000
above [Inputs - ₹ 35,00,000; Input services - ₹ 15,00,000]
With the help of the above-mentioned information, compute the net GST liability of Surana & Sons,
payable from Electronic Credit Ledger and/or Electronic Cash Ledger, as the case may be, for the tax
period
Note: Assume that rate of GST on goods and services are 12% and 18% respectively (Ignore CGST, SGST
or IGST for the sake of simplicity). Subject to the information given above, assume that all the other
conditions necessary for availing ITC have been fulfilled. Turnover of Surana & Sons was ₹
85,00,000 in the previous financial year
Answer
Computation of net GST liability of Surana & Sons for the tax period
Particulars (₹)
GST payable on outward supply [Refer Working Note 1] 3,18,000
Less: Input tax credit (ITC) [Refer Working Note 3] 2,78,180
GST payable from Electronic Cash Ledger [A] 39,820
Add: GST payable on legal services under reverse charge[₹ 3,50,000 X 18%] [B] 63,000
[Tax on legal services provided by an advocate to a business entity, is payable under
reverse charge by the business entityin terms of Notification No. 13/2017 CT (R)
dated 28.06.2017. Further, such services are not eligible for exemption provided
under Notification No. 12/2017 CT (R) dated 28.06.2017 as the turnover of the
business entity (Surana & Sons) in the preceding financial year exceeds ₹ 20 lakh.]
Total GST paid from Electronic Cash Ledger [A] + [B] 1,02,820
[As per section 49(4) amount available in the electronic credit ledger may be used for
making payment towards output tax. However, tax payable under reverse charge is
not an output tax in terms of section 2(82). Therefore, input tax credit cannot be used
to pay tax payable under reverse charge and thus, tax payable under reverse charge
will have to be paid in cash.]
Working Note 1
Computation of GST payable on outward supply
Particulars Value (₹) GST (₹)

Page 8.29
Input Tax Credit
Turnover of ‘M’ [liable to GST @ 12%] 14,00,000 1,68,000

Turnover of ‘N’ [Tax on ‘N’ is payable underreverse charge by the 6,00,000 Nil
recipient of such goods]
Turnover of ‘O’ [liable to GST @ 12%] 10,00,000 1,20,000
Export of ‘M’ with payment of IGST @ 12% 2,50,000 30,000
Export of ‘O’ under letter of undertaking (LUT) [Export of goods is a 10,00,000 Nil
zero rated supply in termsof section 16(1)(a) of the IGST Act, 2017.
A zerorated supply can be supplied without payment of tax under a
LUT in terms of section 16(3)(a) of thatAct.]
Consultancy services provided to independent clients located in 20,00,000 Nil
foreign countries.
[The activity is an export of service in terms of section 2(6) of the IGST
Act, 2017 as-
• the supplier of service is located in India;
• the recipient of service is located outside India;
• place of supply of service is outside India (in terms of section 13(2) of
the IGST Act, 2017);
• payment for the service has been received in convertible foreign
exchange or in Indian rupees wherever permitted by the Reserve
Bank of India; and supplier of service and recipient of service are not
merely establishments of distinct person. [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 supplied without payment of tax under a LUT in
terms of section 16(3)(a) of that Act.]
It is assumed that export has been made under LUT
Sale of building 1,20,00,000 Nil
[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, 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]
Interest received on investment in fixed depositswith a bank 4,00,000 Nil
[Exempt vide Notification No. 12/2017 CT (R) dated 28.06.2017]
Sale of shares 2,50,00,000 Nil
[Shares are neither goods nor services in terms ofsection 2(52) and
2(102). Hence, sale of shares is neither a supply of goods nor a
supply of servicesand hence, is not liable to any tax.]
Total GST payable on outward supply 3,18,000
Working Note 2
Computation of common credit attributable to exempt supplies during the tax period
Particulars (₹)
Common credit on inputs and input services 6,90,000
[Tax on inputs - ₹ 4,20,000 (₹ 35,00,000 x 12%) + Tax on input services – ₹ 2,70,000
(₹ 15,00,000 x 18%)]
Common credit attributable to exempt supplies (rounded off) 4,74,820
= Common credit on inputs and input services x (Exempt turnover during the period
Page 8.30
Input Tax Credit
/ Total turnover during the period)

= ₹ 6,90,000 x ₹ 1,33,50,000/ ₹ 1,94,00,000
Exempt turnover = 1,33,50,000 and total turnover
= 1,94,00,000 [Refer note below]
Note:
As per section 17(3), value of exempt supply includes supplies on which the recipient is liable to pay tax
on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5
of Schedule II, sale of building. As per explanation to Chapter V of the CGST Rules, the value of exempt
supply in respect of land and building is the value adopted for paying stamp duty and for security is 1%
of the sale value of such security.
Further, as per explanation to rule 42, the aggregate value of exempt supplies inter alia excludes the value
of services by way of accepting deposits, extending loans or advances in so far as the consideration is
represented by way of interest or discount, except in case of a banking company or a financial institution
including a non-banking financial company, engaged in supplying services by way of accepting deposits,
extending loans or advances.
Therefore, value of exempt supply in the given case will be the sum of value of output supply on which
tax is payable under reverse charge (₹ 6,00,000), value of sale of building (₹ 2,50,000 / 2 x 100 = ₹
1,25,00,000) and value of sale of shares (1% of ₹ 2,50,00,000 = ₹ 2,50,000), which comes out to be ₹
1,33,50,000.
Total turnover = ₹ 1,94,00,000 (₹ 14,00,000 + ₹ 6,00,000 + ₹ 10,00,000 + ₹ 2,50,000 + ₹ 10,00,000 + ₹
20,00,000 + ₹ 1,25,00,000 + ₹ 4,00,000 + ₹ 2,50,000)
Working Note 3
Computation of ITC available in the Electronic Credit Ledger of the Surana & Sons for the tax
period
Particulars (₹)
Common credit on inputs and input services 6,90,000
Legal services used in the manufacture of taxable product ‘M’ 63,000
ITC available in the Electronic Credit Ledger 7,53,000
Less: Common credit attributable to exempt supplies duringthe tax period [Refer 4,74,820
Working Note 2]
Net ITC available 2,78,180
Question 24
M/s XYZ, a registered supplier, supplies the following goods and services for construction of buildings
and complexes -
- excavators for required period at a per hour rate
- manpower for operation of the excavators at a per day rate
- soil-testing and seismic evaluation at a per sample rate.
The excavators are invariably hired out along with operators. Similarly, excavator operators are supplied
only when the excavator is hired out.
M/s XYZ receives the following services:
- Maintenance services for excavators;
- Health insurance for operators of the excavators;
Page 8.31
Input Tax Credit
- Scientific and technical consultancy for soil testing and seismic evaluation.
For a given month, the receipts (exclusive of GST) of M/s XYZ are as follows:
- Hire charges for excavators - ₹ 18,00,000
- Service charges for supply of manpower for operation of the excavator - 20,000
- Service charges for soil testing and seismic evaluation at three sites - 2,50,000
The GST paid during the said month on services received by M/s XYZ is as follows:
- Maintenance for excavators - ₹ 1,00,000
- Health insurance for excavator operators - ₹ 11,000
- Scientific and technical consultancy for soil testing and seismic evaluation - ₹ 1,00,000
Compute the net GST payable by M/s XYZ from Electronic Cash Ledger for the given month.
Assume the rates of GST to be as under:
Hiring out of excavators – 12%
Supply of manpower services and soil-testing and seismic evaluation services – 18%
(Ignore CGST, SGST or IGST for the sake of simplicity).
Note: - Opening balance of ITC of GST is nil.
Answer
Computation of net GST payable by M/s XYZ
Particulars GST payable (₹)

Gross GST liability [Refer Working Note 1 below] 2,63,400
Less: ITC [Refer Working Note 2 below] 2,00,000
Net GST payable from Electronic Cash Ledger 63,400
Working Notes
(1) Computation of gross GST liability
Particulars Value received Rate of GST Payable

(₹) GST (₹)
Hiring charges for excavators 18,00,000 12% 2,16,000
Service charges for supply of manpower for 20,000 12% 2,400
operation of excavators [Refer Note (i)]
Service charges for soil testing and seismic 2,50,000 18% 45,000
evaluation [Refer Note (ii)]
Gross GST liability 2,63,400
Notes:
(i) Since the excavators are invariably hired out along with operators and excavator operators
are supplied only when the excavator is hired out, it is a case of composite supply under
section 2(30) wherein the principal supply is the hiring out of the excavator.
As per section 8(a), the composite supply is treated as the supply of the principal supply.
Therefore, the supply of manpower for operation of the excavators will also be taxed at the
rate applicable for hiring out of the excavator (principal supply), which is 12%.
(ii) Soil testing and seismic evaluation services being independent of the hiring out of excavator
will be taxed at the rate applicable to them, which is 18%.

Page 8.32
Input Tax Credit
(2) Computation of ITC available for set off
Particulars GST paid (₹) ITC available (₹)

Maintenance services for excavators[Refer Note 1] 1,00,000 1,00,000
Health insurance for excavatoroperators [Refer Note 2] 11,000 -
Scientific and technical consultancy[Refer Note 1] 1,00,000 1,00,000
Total ITC available 2,00,000
Notes:
(i) Section 17(5)(d) blocks credit on goods/ or services received by a taxable person for
construction of an immovable property on his own account. Here, though the excavators are
used for building projects, the same are not used by M/s. XYZ on its own account for
construction of immovable property instead they are used for outward taxable supply of
hiring out of machinery. Further, excavators are special purpose vehicles whose credit is not
restricted under section 17(5)(a), therefore, ITC on maintenance service for excavators shall
be allowed.
Therefore, the maintenance service for the excavators does not get covered by the bar under
section 17 and the credit thereon will be available. The same applies for scientific & technical
consultancy for construction projects because in this case also, the service is used for
providing the outward taxable supply of soil testing and seismic evaluation service and not
for construction of immovable property.
(ii) Section 17(5)(b)(i) allows input tax credit on health insurance only where an inward supply
of such services is used by a registered person for making an outward taxable supply of the
same category of goods or services or both or as an element of a taxable composite or mixed
supply or where it is obligatory for an employer to provide the same to its employees under
any law for the time being in force.
In the given case, it is assumed that it is not obligatory for employer to provide health
insurance to its employees under any law for the time being in force, therefore the credit
thereon will not be allowed.
Question 25
V-Supply Pvt. Ltd. is a registered manufacturer of auto parts in Kolkata, West Bengal. The company has
a manufacturing facility registered under Factories Act, 1948 in Kolkata. It procures its inputs
indigenously from both registered and unregistered suppliers located within as well as outside West
Bengal as also imports some raw material from China
The company reports the following details for a tax period:
Payments (₹) Receipts (₹)

(in lakh) (in lakh)
Raw material 3.5 Sales 15
Consumables 1.25
Transportation charges for bringingthe raw material to factory 0.70
Salary paid to employees on rolls 5.0
Premium paid on life insurance policies taken for specified 1.60
employees
Audit fee 0.50

Page 8.33
Input Tax Credit
Telephone expenses 0.30

Bank charges 0.10
All the above amounts are exclusive of all kinds of taxes, wherever applicable. However, the applicable
taxes have also been paid by the company.
Further, following additional details are furnished by the company in respect of the payments and
receipts reported by it:
(i) Raw material amounting to ₹ 0.80 lakh is procured from Bihar and 1.5 lakh is imported from China.
Basic customs duty of ₹ 0.15 lakh, social welfare surcharge of ₹ 0.015 lakh and integrated tax of ₹
0.2997 lakh are paid on the imported raw material.
Remaining raw material is procured from suppliers located in West Bengal. Out of such raw
material, raw material worth ₹ 0.30 lakh is procured from unregistered suppliers; the remaining
raw material is procured from registered suppliers.
Further, raw material worth ₹ 0.05 lakh purchased from registered supplier located in West Bengal
has been destroyed due to seepage problem in the factory and thus, could not be used in the
manufacturing process.
(ii) Consumables are procured from registered suppliers located in Kolkata and include diesel worth
₹ 0.25 lakh for running the generator in the factory.
(iii) Transportation charges comprise of 0.60 lakh paid to Goods Transport Agency (GTA) in Kolkata
and 0.10 lakh paid to horse pulled carts. GST applicable on the services of GTA is 5%.
(iv) Life insurance policies for specified employees have been taken by the company to fulfill a statutory
obligation in this regard. The life insurance service provider is registered in West Bengal.
(v) Audit fee is paid to M/s Goyal & Co., a firm of Chartered Accountants registered in West Bengal, for
the statutory audit of the preceding financial year.
(vi) Telephone expenses pertain to bills for landline phone installed at the factory and mobile phones
given to employees for official use. The telecom service provider is registered in West Bengal.
(vii) Bank charges are towards company’s current account maintained with a Private Sector Bank
registered in West Bengal.
(viii) The breakup of sales is as under:
Sales in West Bengal – ₹ 7 lakh
Sales in States other than West Bengal – ₹ 3 lakh
Export under LUT – ₹ 5 lakh
(ix) The opening balance of ITC with the company for the tax period is:
CGST - ₹ 0.15 lakh
SGST - ₹ 0.08 lakh
IGST - ₹ 0.09 lakh
Compute (i) ITC available with V-Supply Pvt. Ltd. for the tax period; and (ii) Net GST payable [CGST, SGST
or IGST, as the case may be] from Electronic Cash Ledger by V-Supply Pvt. Ltd. for the tax period.
Note-
(i) CGST, SGST & IGST rates to be 9%, 9% and 18% respectively, wherever applicable.
(ii) The necessary conditions for availing ITC have been complied with by V- Supply Pvt. Ltd., wherever
applicable.
You are required to make suitable assumptions, wherever necessary

Page 8.34
Input Tax Credit
Answer
Computation of ITC available with V-Supply Pvt. Ltd. for the tax period
S. Particulars ITC
No. CGST* SGST* IGST* Total
1. Opening balance of ITC 15,000 8,000 9,000 32,000

2. Raw material purchased from Bihar [Refer 14,400 14,400
Note 1(i)]
Raw material imported from China [Refer 29,970 29,970
Note 1(ii)]
Raw material purchased from unregistered Nil Nil Nil
suppliers within West Bengal [Refer Note
1(iii)]
Raw material destroyed due to seepage [Refer Nil Nil Nil
Note 1(iv)]
Remaining raw material Purchased from West 7,650 7,650 15,300
Bengal [Refer Note 1(i)]
[₹ 3.5 - ₹ 1.5 – ₹ 0.80 – ₹ 0.30 – ₹ 0.05] = ₹ 0.85]
Total ITC for raw material 7,650 7,650 44,370 59,670
3. Consumables [Refer Note 2] 9,000 9,000 18,000
4. Transportation charges for Bringing the raw 1,500 1,500 3,000
material to factory [Refer Note 3]
5. Salary paid to employees on rolls [Refer Note Nil Nil Nil Nil
4]
6. Premium paid on life Insurance policies taken 14,400 14,400 28,800
for specified employees [Refer Note 5]
7. Audit fee [Refer Note 6] 4,500 4,500 9,000
8. Telephone expenses [Refer Note 6] 2,700 2,700 5,400
9. Bank charges [ReferNote 6] 900 900 1,800
Total ITC available for the tax period 55,650 48,650 53,370 1,57,670
Computation of net GST payable
Particulars CGST* SGST* IGST* Total

₹ ₹ ₹ ₹
On Intra-state sales in WestBengal 63,000 63,000 1,26,000
On Inter-state sales otherthan West Bengal 54,000 54,000
On exports under LUT[Note 7] Nil Nil Nil Nil
Total output tax liability 63,000 63,000 54,000 1,80,000
Less: ITC available for being set off [Note 8 (55,650) (48,650) (53,370) (1,57,670)
and Note 9]
Net GST payable from Electronic Cash 7,350 14,350 630 22,330
Ledger [A]
GST payable on inward supply of GTA services 1,500 1,500 3,000
under reverse charge throughElectronic Cash
Ledger [Note 3 and 10] [B]

Page 8.35
Input Tax Credit
Net GST payable through Electronic Cash 8,850 15,850 630 25,330
Ledger [A] + [B]
Notes:
1 (i) Credit of input tax (CGST & SGST/ IGST) paid on raw materials used in the course or furtherance
of business is available in terms of section 16(1).
(ii) IGST paid on imported goods qualifies as input tax in terms of section 2(62)(a). Therefore, credit
of IGST paid on imported raw materials used in the course or furtherance of business is available
in terms of section 16(1).
(iii) Tax on intra-State procurements made by a registered person from an unregistered supplier is
levied only on notified categories of goods and services. [Section 9(4)].
(iv) ITC is not available on destroyed inputs in terms of section 17(5)(h).
2. Consumables, being inputs used in the course or furtherance of business, input tax credit is available
on the same in terms of section 16(1). However, levy of CGST on diesel has been deferred till such
date as may be notified by the Government on recommendations of the GST Council [Section 9(2)].
Hence, there being no levy of GST on diesel, there cannot be any ITC.
3. In respect of intra-State road transportation of goods undertaken by a GTA, who has not paid CGST
@ 6%, for any person registered under the GST law, CGST is payable under reverse charge by the
recipient of service. The person who pays or is liable to pay freight for the transportation of goods is
treated as the person who receives the service [Notification No. 13/2017 CT (R) dated 28.06.2017].
Thus, V- Supply Pvt. Ltd. will pay GST under reverse charge on transportation service received from
GTA.
Further, tax payable under section 9(3) of the CGST/SGST Act qualifies as input tax in terms of
clauses (b) and (d) of section 2(62). Thus, input tax paid under reverse charge on GTA service will
be available as ITC in terms of section 16(1) as the said service is used in course or furtherance of
business.
Furthermore, intra-State services by way of transportation of goods by road except the services of a
GTA and a courier agency are exempt from CGST vide Notification No. 12/2017 CT (R) dated
28.06.2017. Therefore, since no GST is paid on such services, there cannot be any ITC on such
services.
4. Services by employees to employer in the course of or in relation to his employment is not a supply
in terms of section 7 read with para 1 of Schedule III to the CGST Act. Therefore, since no GST is paid
on such services, there cannot be any ITC on such services
5. ITC on supply of life insurance service is not blocked if it is obligatory for an employer to provide
such service to its employees under any law for the time being in force. [Proviso to section 17(5)(b)].
Therefore, GST paid on premium for life insurance policies will be available as ITC in terms of section
16(1) as the said service is used in the course or furtherance of business.
6. Audit fee, telephone expenses and bank charges are all services used in the course or furtherance of
business and thus, credit of input tax paid on such service will be available in terms of section 16(1).
7. Export of goods is a zero rated supply in terms of section 16(1)(a) of the IGST Act. A zero rated
supply under LUT is made without payment of integrated tax [Section 16(3)(a) of the IGST Act].
8. Since export of goods is a zero rated supply, there will be no apportionment of ITC and full credit
will be available [Section 16 of the IGST Act read with section 17(2) of the CGST Act].
9. As per section 49(5) read with rule 88A, ITC of-
(i) IGST is utilised towards payment of IGST first and then CGST and SGST in any proportion and
in any order.

Page 8.36
Input Tax Credit
(ii) CGST is utilised towards payment of CGST and IGST in that order. ITC of CGST shall be utilized
only after ITC of IGST has been utilised fully.
(iii) SGST is utilised towards payment of SGST and IGST in that order. ITC of SGST shall be utilized
only after ITC of IGST has been utilised fully.
10. Section 49(4) lays down that the amount available in the electronic credit ledger may be used for
making payment towards output tax. However, tax payable under reverse charge is not an output
tax in terms of section 2(82). Therefore, tax payable under reverse charge cannot be set off against
the ITC and thus, will have to be paid in cash.
11. CGST and SGST are chargeable on intra-State inward and outward supplies and IGST is chargeable on
inter-State inward and outward supplies.
Question 26
ABC Company Ltd. of Bengaluru is a manufacturer and registered supplier of machineries. It has provided
the following details for a tax period:
Inward supplies GST paid(₹)

Health insurance of factory employees as required by theFactories Act, 1948 20,000
Raw materials for which invoice has been received and GSThas also been paid 18,000
for full amount but only 50% of material has been received, remaining 50% will
be received in next month
Work contractor’s service used for installation of plant andmachinery 12,000
Purchase of manufacturing machine sent directly to jobworker’s premises 50,000
under delivery challan
Purchase of car used by director exclusively for the purpose of 25,000
business meetings
Outdoor catering service availed for business meetings 8,000
ABC Company Ltd. also provides service of hiring of machines along with manpower for operation. As
per trade practice, machines are always hired out along with operators and also operators are supplied
only when machines are hired out.
Outward supply (exclusive of GST) for the tax period are as follows
Particulars Value (₹)

Hiring receipts for machine 5,25,000
Service charges for supply of manpower operators 2,35,000
Assume the rates of GST to be as under:

(i) Service of hiring of machine 12%
(ii) Supply of manpower operator service 18%
(Ignore CGST, SGST or IGST for the sake of simplicity)
Compute the amount of ITC available as also the net GST payable from the Electronic Cash Ledger for the
tax period by giving necessary explanations for treatment of various items.
Note: Opening balance of ITC is Nil.
Answer
Computation of net GST payable by ABC Company Ltd

Page 8.37
Input Tax Credit
Particulars GST payable (₹)

Gross GST liability [Refer working note (2) below] 91,200
Less: Input tax credit [Refer working note (1) below] 82,000
Net GST payable from Electronic Cash Ledger 9,200
Working Notes:
(1) Computation of ITC available with ABC Company Ltd

Health insurance of factory employees [Note – 1] 20,000
Raw material received in factory [Note – 2] Nil
Work’s contractor’s service used for installation of plantand machinery [Note -3] 12,000
Manufacturing machinery directly sent to job worker’spremises under challan 50,000
[Note -4]
Purchase of car used by director for business meetingsonly [Note -5] Nil
Outdoor catering service availed for business meetings[Note -6] Nil
Total ITC available 82,000
Notes:
1. ITC of health insurance is available in the given case in terms of proviso to section 17(5)(b)
since it is obligatory for employer to provide health insurance to its employees under the
Factories Act, 1948.
2. Where the goods against an invoice are received in lots/ instalments, ITC is allowed upon
receipt of the last lot/ instalment vide first proviso to section 16(2). Therefore, ABC
Company Ltd. will be entitled to ITC of raw materials on receipt of second instalment in next
month.
3. Section 17(5)(c) provides that ITC on works contract services is blocked when supplied for
construction of immovable property (other than plant and machinery) except when the same
is used for further supply of works contract service.
Though in this case, the works contract service is not used for supply of works contract
service, ITC thereon will be allowed since such services are being used for installation of
plant and machinery.
4. ITC on capital goods directly sent to job worker’s premises under challan is allowed in terms
of section 19(5) read with rule 45(1).
5. Section 17(5)(a) provides that motor vehicle for transportation of persons having approved
seating capacity of not more than 13 persons (including the driver), except when they are
used for making taxable supply of-
(i) further supply of such vehicles,
(ii) transportation of passengers,
(iii) imparting training on driving, flying, navigating such vehicles and
Since ABC Company Ltd is a supplier of machine and it does not use the car for transportation
of passengers or any other use as specified, ITC thereon will not be available.
6. Section 17(5)(b)(i) provides that ITC on outdoor catering is blocked except where the same
is used for making further supply of outdoor catering or as an element of a taxable composite
or mixed supply.

Page 8.38
Input Tax Credit
Since ABC Company Ltd is a supplier of machine, ITC thereon will not be available.
(2) Computation of gross GST liability
Value Rate of GST GST

received(₹) payable(₹)
Hiring receipts for machine 5,25,000 12% 63,000
Service charges for supply of manpower
operators 2,35,000 12% 28,200
Gross GST liability 91,200
Note:
Since machine is always hired out along with operators and operators are supplied only when the
machines are hired out, it is a case of composite supply, wherein the principal supply is the hiring
out of machines [Section 2(30) read with section 2(90)]. Therefore, service of supply of manpower
operators will also be taxed at the rate applicable for hiring out of machines (principal supply),
which is 12%, in terms of section 8(a).
Question 27
Pari Ltd. of Jodhpur (Rajasthan) is a registered manufacturer of cosmetic products. Pari Ltd. has
furnished following details for a tax period:
Particulars (₹)
Details of Outward supplies
(i) Supplies in Rajasthan 8,75,000
(ii) Supplies in States other than Rajasthan 3,75,000
(iii) Export under LUT 6,25,000
Details of expenses
(i) Raw materials purchased from registered supplierslocated in Rajasthan 1,06,250
(ii) Raw materials purchased from unregistered supplierslocated in Rajasthan 37,500
(iii) Raw materials purchased from Punjab from registeredsupplier 1,00,000
(iv) Integrated tax paid on raw materials imported fromUSA 22,732
(v) Consumables purchased from registered suppliers located in Rajasthan 1,56,250
including high speed diesel (Excise and VAT paid) valuing ₹ 31,250 for running
the machinery in the factory
(vi) Monthly rent for the factory building to the owner inRajasthan 1,00,000
(vii) Salary paid to employees on rolls 6,25,000
(viii) Premium paid on life insurance policies taken for specified employees. Life 2,00,000
insurance policies for specified employees have been taken by Pari Ltd. to fulfill
a statutory obligation in this regard. The life insurance service provider is
registered in Rajasthan.
All the above amounts are exclusive of all kinds of taxes, wherever applicable. However, the applicable
taxes have also been paid by Pari Ltd.
The opening balance of ITC with Pari Ltd. for the given tax period is-
CGST 20,000
SGST 15,000
IGST 15,000

Page 8.39
Input Tax Credit
Assume CGST, SGST and lGST rates to be 9%, 9% and 18% respectively, wherever applicable
Assume that all the other necessary conditions to avail the ITC have been complied with by Pari Ltd.,
wherever applicable.
Compute (i) ITC available with Pari Ltd. for the tax period; and (ii) Net GST payable [CGST, SGST or IGST,
as the case may be] from Electronic Cash Ledger by Pari Ltd. for the tax period
Answer
Computation of ITC available with Pari Ltd
S. Particulars Eligible input tax credit

No. CGST SGST IGST
(₹) (₹) (₹)
1. Raw Material
Purchased from localregistered suppliers [Note 9,562.50 9,562.50
1(i)] (₹ 1,06,250 x 9%)
Purchased from local unregistered suppliers Nil Nil
[Note 1(ii)]
Purchased from Punjab from registered supplier 18,000
[Note 1(i)] (₹ 1,00,000 x 18%)
Raw material imported fromUSA [Note 1(iii)] 22,732
2. Consumables [Note 2] 11,250 11,250
(₹ 1,56,250- ₹ 31,250) x 9%]
3. Monthly rent for the factory building to the 9,000 9,000
owner in Rajasthan [Note 3]
4 Salary paid to employees onrolls [Note 4] Nil Nil Nil
5. Premium paid on life insurance policies taken for 18,000 18,000
specified employees[Note 5] (₹ 2,00,000 x 9%)
Total 47,812.50 47,812.50 40,732
Add: Opening balance of ITC 20,000 15,000 15,000
Total ITC [Note 7] 67,812.50 62,812.50 55,732
Computation of net GST payable

Intra-State supply 78,750 78,750
Inter-State supply 67,500
Exports under LUT [Note 6] Nil Nil Nil
Total output tax liability 78,750 78,750 67,500
Less: ITC 67,812.50 62,812.50 55,732
Net GST payable 10,937.50 15,937.50 11,768
Notes:
1. (i) Credit of input tax (CGST & SGST/ IGST) paid on raw materials used in the course or furtherance
of business is available in terms of section 16.
(ii) Tax on procurements made by a registered person from an unregistered supplier is levied only
in case of notified goods and services in terms of section 9(4). Therefore, since no GST is paid
on such raw material purchased, there does not arise any question of ITC on such raw material.

Page 8.40
Input Tax Credit
(iii) IGST paid on imported goods qualifies as input tax in terms of section 2(62). Therefore, credit
of IGST paid on imported raw materials used in the course or furtherance of business is available
in terms of section 16.
2. ITC on consumables, being inputs used in the course or furtherance of business, is available.
However, since levy of GST on high speed diesel has been deferred till a date to be notified by
Government, there cannot be any ITC of the same.
3. ITC on monthly rent is available as the said service is used in the course or furtherance of business.
4. Services by employees to employer in the course of or in relation to his employment is not a supply
in terms of section 7 read with Schedule III to the CGST Act. Therefore, since no GST is paid on such
services, there cannot be any ITC on such services.
5. ITC on life insurance service is available if the same is obligatory for an employer to provide to its
employees under any law for the time being in force as per proviso to section 17(5)(b).
6. Export of goods is a zero rated supply in terms of section 16(1)(a) of the IGST Act. A zero rated
supply under bond is made without payment of IGST in terms of section 16(3)(a).
7. Since export of goods is a zero rated supply, there will be no apportionment of ITC and full credit
will be available as per section 17(2).
Question 28
Flowchem Palanpur (Gujarat) has entered into a contract with R Refinery, Abu Road (Rajasthan) on
1stJuly to supply 10 valves on FOR basis. The following information is provided in this regard:
(1) List price per valve is₹ 1,00,000, exclusive of taxes.
(2) One of the conditions of the contract is that Flowchem should ensure a two stage third party
inspection for the valves during the manufacturing process. Cost of inspection of ₹ 15,000 (for 10
valves) is directly paid by R Refinery to testing agency.
(3) R Refinery requires a special packing for the valves. Cost of special packing is 10,000 (for 10 valves).
(4) Flowchem arranges for erection and testing of the valves supplied by it at R Refinery’s site. Cost of
erection etc. is ₹ 15,000 (for 10 valves).
(5) Goods are dispatched with tax invoice on 20thJuly and they reach the destination at Abu-Road on
21stJuly. Lorry freight of ₹ 5,000 has been paid by R Refinery directly to the lorry driver.
Assume CGST and SGST rates to be 9% each and IGST rate to be 18%. Opening balance of ITC of IGST is
Nil, CGST is 20,000 and SGST is 20,000. All the given amounts are exclusive of GST, wherever applicable
Flowchem has also undertaken following local transactions during the month of July on which it has paid
CGST and SGST as under
S. Particulars Amount Amount

No. paid CGST paid SGST
(₹) (₹)
1. Availed services of works contractor to erect foundation for 5,000 5,000
fixing the machinery to earth,in the factory.
2. Laid pipelines (from the water source outside the factory) upto 10,000 10,000
the gate of the factory for the purpose of production facility.
3. For the purpose of smooth and convenient mobile 5,000 5,000
communication in its factory, it has installed telecommunication
tower of a mobile company (with due permission)

Page 8.41
Input Tax Credit
4. It has entered into an agreement with a travel company to 2,500 2,500

provide home travel facility to its employees when they are on
leave
5. It has entered into an agreement with a fitness center to provide 2,000 2,000
wellness services to its employees after office hours
Work out the net GST [CGST, SGST or IGST, as the case may be] payable from Electronic Cash Ledger of
Flowchem, Palanpur (Gujarat) for the month of July after making suitable assumptions, if any.
Answer
Computation of net GST payable by Flowchem for the month of July
Particulars CGST @ SGST @ IGST @

9% (₹) 9% (₹) 18% (₹)
Output tax liability [Working Note 1] 1,88,100
Less: ITC of CGST [Working Note 2] (25,000)
Less: ITC of SGST has been utilized only after ITC of (25,000)
CGST has been utilized fully in terms of proviso to
section 49(5)(c) [Working Note 2]
Working Note 1
Computation of output tax liability of Flowchem for the month of July

List price of 10 valves (₹ 1,00,000 x 10) 10,00,000
Add: Amount paid by R Refinery to testing agency [Note 1] 15,000
Add: Special packing [Note 2] 10,000
Add: Erection and testing at site [Note 2] 15,000
Add: Freight [Note 3] 5,000
IGST @ 18% [Note 4] 1,88,100
Notes:
(1) As per section 15(2), any amount that the supplier is liable to pay in relation to a supply but which
has been incurred by the recipient of the supply and not included in the price actually paid or payable
for the goods shall be included in the value of supply.
Since, in the given case, arranging inspection was the liability of the supplier, the same should be
included in the value of supply charges for the same, however, have been paid directly to the third
party service provider by the recipient. Therefore, the value shall be included in taxable value.
(2) As per section 15(2), any amount charged for anything done by the supplier in respect of the supply
of goods at the time of, or before delivery of goods shall be included in the value of supply.
(3) As per section 15(2), any amount that the supplier is liable to pay in relation to a supply but which
has been incurred by the recipient of the supply and not included in the price actually paid or payable
Since, in the given case, the supply contract is on FOR basis, payment of freight is the liability of
supplier but the same has been paid by the recipient and thus, should be included in the value of
supply.

Page 8.42
Input Tax Credit
(4) As per section 10(1) of the IGST Act, 2017, where the supply involves movement of goods, the place
of supply is the location of the goods at the time at which the movement of goods terminates for
delivery to the recipient, which in the given case is Abu Road (Rajasthan). Since the location of the
supplier (Gujarat) and the place of supply (Rajasthan) are in two different States, the supply is an
inter-State supply liable to IGST.
Working Note 2
Computation of ITC available with Flowchem for the month of July

Opening ITC 20,000 20,000
Wok contract services availed for erecting foundation for fixing the 5,000 5,000
machinery to the earth in the factory [Note 1]
Laying of pipeline up to the gate of factory from water source located Nil Nil
outside the factory [Note 2]
Installation of telecommunication towers [Note 2] Nil Nil
Services of travel company to provide home travelfacility to employees Nil Nil
Note 3]
Services of fitness center to provide wellness services to employees [Note
3] Nil Nil
Total ITC 25,000 25,000
Notes:
(1) As per section 17(5), ITC on works contract services when supplied for construction of an
immovable property (other than plant and machinery) except where it is an input service for further
supply of works contract service, is blocked. Further, plant and machinery includes foundation and
structural supports used to fix the machinery to earth.
(2) As per section 17(5), ITC on goods and/ or services received by a taxable person for construction of
an immovable property (other than plant or machinery) on his own account including when such
and/ or services are used in course/ furtherance of business, is blocked. However, plant and
machinery excludes pipelines laid outside the factory premises and telecommunication towers.
(3) As per section 17(5), ITC on travel benefits extended to employees on home travel concession and
membership of health and fitness center is blocked unless it is obligatory for an employer to provide
the same to its employees under any law for the time being in force.

Page 8.43
Input Tax Credit

Question 29
B & D Company, a partnership firm, in Nagpur, Maharashtra is a wholesaler of a taxable product ‘P’ and
an exempt product ‘Q’. The firm supplies these products only in the eastern part of Maharashtra. All the
procurements (both goods and services) of the firm are from the suppliers registered under regular
scheme in the State of Maharashtra. The firm pays tax under composition scheme.
stock (exclusive of taxes):
Particulars Turnover for the quarter ended Turnover for the quarter ended
30.06.20XX (₹) 30.09.20XX (₹)
‘P’ 60,00,000 50,00,000
‘Q’ 17,65,000 17,00,000
Particulars Stock as on 30.06.20XX Stock as on 30.09.20XX Stock as on 31.10.20XX

(₹) (₹) (₹)
‘P’ 25,00,000 10,00,000 3,60,000
‘Q’ 10,00,000 2,00,000 1,20,000
The entire stock of the products ‘P’ and ‘Q’ available with the firm as on 30.09.20XX is purchased during
the said half year except a consignment of product ‘P’ valuing ₹ 3,00,000, which was purchased in the
April month of the preceding financial year. In the current financial year, in the month of October, no
purchases were made, and the products were sold with a profit margin of 20% on sales [exclusive of
taxes].
The extract of the only bill book maintained by the firm showed the following details-

‘P’ (₹) ‘Q’ (₹) Total (₹)
2306 01.10.20XX 2,00,000 3,000 2,03,000
2307 01.10.20XX 1,33,000 5,250 1,38,250
2308 02.10.20XX 67000 39,250 1,06,250
2309 03.10.20XX 58,750 33,750 92,500
2310 05.10.20XX 1,00,000 - 1,00,000
2311 06.10.20XX 94,000 6,000 1,00,000
2312 06.10.20XX - 17,000 17,000
2313 08.10.20XX 50,000 6,000 56,000
2314 09.10.20XX 60,000 9,000 69,000
2315 …………….. …………….. …………….. ……………..
…………….. …………….. …………….. …………….. ……………..
The details of services availed by B & D Company is as follows:
S. No. Particulars (₹)

(i) Freight paid to Goods Transport Agency during the period April 20XX to 1,40,000
October 20XX. Assume equal amount of freight is paid each month on the
10th day of each month. Also, assume that the goods for which the freight

Page 8.44
Input Tax Credit
is paid on 10th day of the month are transported between 11th to 20thday
of the month.
(ii) Special packing charges paid to a Packing Company, having expertise in 3,00,000
such specialized packing, during the period January 20XX to October
20XX. The packing charges are paid for the goods which are transported
between 11th to 20thday of the month (as mentioned in point (i) above).
The goods are packed on 10th day and then transported from 11th day
onwards. Assume equal amount of packing charges are paid each month
on the 9th day of each month.
All the above amounts are exclusive of taxes, wherever applicable

(i) Compute the ITC credited to the Electronic Credit Ledger of the B & D Company, when it exits
composition scheme and becomes liable to pay tax under regular scheme, in accordance with the
provisions of section 18(1)(c) of the CGST Act, 2017.
Following additional information is also available:
Particulars relating to capital

Date of purchase Value (₹) GST (₹)
goods owned by the firm
Computers 01.02.20XX 2,00,000 36,000
January 1, two
Printers years prior to 80,000 14,400
01.01.20XX
Motor cycle used by the staff for
23.09.20XX 85,000 15,300
collecting payments from the debtors
Furniture & fixtures 12.06.20XX 4,00,000 72,000
Air conditioner used in the office 15.10.20XX 2,00,000 36,000
Exhaust fan used in the godown 10.03.20XX 50,000 9,000
Note: Make suitable assumptions wherever required. Rate of CGST and SGST on service of
transportation of goods by GTA is 2.5% each. Stock is valued at cost price.
Note: The Company has not claimed depreciation on the tax component of any of the capital goods
(mentioned above) under the Income-tax Act, 1961. All the conditions necessary for availing the
ITC have been complied with. Rate of CGST and SGST is 9% each.
(ii) Compute the GST liability of B & D Company payable from Electronic Credit Ledger and/or
Electronic Cash Ledger, as the case may be, for the period covered under regular scheme.
Answer
(i) As per section 18(1)(c) of the CGST Act, 2017 read with rule 40 of CGST Rules, 2017, where any
registered person ceases to pay tax under section 10, he shall be entitled to take credit of input tax
in respect of inputs held in stock, inputs contained in semi-finished or finished goods held in stock
and on capital goods on the day immediately preceding the date from which he becomes liable to
pay tax under section 9. However, the credit on input services is not allowed and credit on capital
goods shall be reduced by 5% per quarter of a year or part thereof from the date of invoice.
Further, ITC on supplies of inputs and capital goods shall not be available after the expiry of one
year from the date of issue of tax invoice [Section 18(2) of the CGST Act, 2017].
In the light of the above-mentioned provisions, the ITC credited to the Electronic Credit Ledger of
the B & D Company on inputs held in stock and capital goods on 02.10.20XX will be computed as
under:

Page 8.45
Input Tax Credit
A. ITC on inputs

Stock of taxable inputs as on 30.09.20XX 10,00,000
[Since no tax is paid on exempt purchases, there does not arise any
question of availing ITC on the same. Hence, stock of only taxable inputs
are considered]
Add: Purchases Nil
[No purchases are made in October, 20XX]
Less: Cost of taxable goods sold from 01.10.20XX to 02.10.20XX 3,20,000
[(2,00,000 + 1,33,000 + 67,000]) x 80%]
Stock of taxable inputs as on 02.10.20XX 6,80,000
[Since the bill numbers are in continuation, it can be concluded that no
sales are missing from the extract]
Less: More than one year old stock 3,00,000
Stock of inputs on which ITC can be claimed 3,80,000
ITC of CGST @ 9% [Since all purchases are intra-State and from the 34,200
suppliers registered under regular scheme]
ITC of SGST @ 9% [Since all purchases are intra-State and from the 34,200
suppliers registered under regular scheme]
B. ITC on capital goods

Computers 14,400 14,400
[₹ 36,000 – (5% x 4 quarters)] ÷ 2
Printers - -
[Being more than one year old, no ITC is
available]
Motor cycle - -
[Section 17(5)(a) of CGST Act, 2017 allows ITC on
motor vehicles for transportation of persons
having approved seating capacity of not more
than thirteen persons only when they are 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 B & D Company is a trader and it does not
use the motor cycle for transportation of goods,
ITC thereon will not be available]
Furniture and Fixtures 30,600 30,600
[₹ 72,000 – (5% x 3 quarters)] ÷ 2
Air conditioner used in the office - -
[Since purchased after 03.10.20XX, full ITC will be
available and will be computed separately]
Exhaust fan used in the godown 3,600 3,600

Page 8.46
Input Tax Credit
[₹ 9,000 – (5% x 4 quarters)] ÷ 2

ITC to be claimed on capital goods 48,600 48,600
Total ITC on inputs and capital goods credited 82,800 82,800
to Electronic Credit Ledger on 02.10.20XX [34,200+48,600] [34,200+48,600]
(ii) Output tax liability of B & D Company under regular scheme

From 03.10.20XX, firm will pay tax under regular scheme on monthly basis in terms of sub-sections
(1) and (7) of section 39 of the CGST Act, 2017 and will be eligible to avail ITC on inputs held in
stock and capital goods as on 02.10.20XX in terms of section 18 of the CGST Act, 2017 as also on
goods and services procured on or after 03.10.20XX and used in the course or furtherance of
business in accordance with section 16 of the CGST Act, 2017. However, since common input
services and capital goods are used in effecting taxable supplies as well as exempt supplies, ITC
attributable to the exempt supplies will need to be added to the output tax liability of the month of
October, 20XX in terms of section 17(2) read with rules 42 and 43 of the CGST Rules, 2017
respectively. Further, since all the sales are made within the State (eastern part of Maharashtra),
CGST and SGST @ 9% each will be payable on the outward supplies.
The tax liability for the month of October, 20XX under regular scheme will be computed as under-
Particulars Value (₹) CGST (₹) SGST (₹)

Tax on outward supply of ‘P’ 4,00,000 36,000 36,000
Taxable supplies from 03.10.20XX to 31.10.20XX
chargeable to CGST and SGST 9% each [₹ 8,00,000
(Refer Working Note 4)]
Tax on inward supplies attracting reverse charge 20,000 500 500
GTA services availed chargeable to CGST and SGST
@ 2.5% each (₹ 1,40,000 / 7)
ITC reversal on input services [Refer Working Note 371 371

1 below]
ITC reversal on capital goods [Refer Working Note 129 129
2 below]
Total GST liability 37,000 37,000
Less: ITC [Refer Working Note 3 below] 37,000 37,000
Tax paid in cash 500 500
As per section 49(4) of the CGST Act, 2017 amount
available in the electronic credit ledger may be
used for making payment towards output tax.
However, tax payable under reverse charge is not
an output tax in terms of section 2(82) of the CGST
Act, 2017. Therefore, tax payable under reverse
charge cannot be set off against the input tax credit
and thus, will have to be paid in cash.
Working Note 1
Particulars Value (₹) CGST (₹) SGST (₹)

CGST & SGST @ 2.5% each paid under reverse 20,000 500 500
charge on freight paid to GTA on 10.10.20XX (for
the goods transported between 11.10.20XX &

Page 8.47
Input Tax Credit
20.10.20XX) will be available as ITC under regular

scheme
CGST & SGST @ 9% each paid to Packing Agency on 30,000 2,700 2,700
09.10.20XX (for specialized packing to be carried
out on 10.10.20XX on goods to be transported
between 11.10.20XX & 20.10.20XX) will be
available as ITC under regular scheme.
Total common credit 3,200 3,200
Common credit on input services attributable 371 371
to exempt supplies (rounded off)
Common credit on input services availed during
the period under regular scheme x (Exempt
turnover made during the period under regular
scheme / Total turnover during the period under
regular scheme) = ₹ 3,200 x 52,500/ 4,52,500
Turnover of ‘Q’ (exempt turnover) from 03.10.20XX
to 31.10.20XX is Rs. 52,500 [Refer Working Note
4]
Total turnover from 03.10.20XX to 31.10.20XX is
Rs. 4,52,000 [Refer Working Note 4]
Working Note 2

ITC claimed on capital goods on 02.10.20XX [Refer (i)] 48,600 48,600
Air conditioner used in the office purchased on 18,000 18,000
15.10.20XX
Common ITC 66,600 66,600
[Since all the capital goods are used for effecting both
taxable and exempt supplies, the entire ITC on capital
goods is common]
Common credit for a tax period [Common credit ÷ 60] 1,110 1,110
(rounded off)
Common credit on capital goods attributable to 129 129
exempt supplies (rounded off)
Common credit on capital goods during the period under
regular scheme x (Exempt turnover made during the
period under regular scheme / Total turnover during the
period under regular scheme) = ₹ 1,110 x 52,500/
4,52,500
Working Note 3

ITC on inputs and capital goods claimed on 02.10.20XX [Refer (i)] 82,800 82,800
ITC on air conditioner used in the office purchased on 15.10.20XX 18,000 18,000
ITC on freight paid to GTA 500 500
ITC on packing charges 2,700 2,700
Total ITC available with the firm 1,04,000 1,04,000

Page 8.48
Input Tax Credit
Working Note 4
Particulars Total turnover for the month of Turnover in month of October

October, 20XX* (₹) under regular scheme (₹)
[03.10.20XX - 31.10.20XX]
‘P’ 8,00,000 4,00,000
[(10,00,000 – 3,60,000) x 125%] [8,00,000 – 2,00,000 – 1,33,000 –
67,000]
‘Q’ 1,00,000 52,500
[(2,00,000 – 1,20,000) x 125%] [1,00,000 – 3,000 – 5,250 – 39,250]
Aggregate turnover 9,00,000 4,52,500
Note - Turnover for October, 20XX will be computed as under:

*Turnover = Cost of goods sold** × 125% (20% margin on sales = 25% margin on cost)
**Cost of goods sold = Stock as on 30.09.20XX less stock as on 31.10.20XX (since no purchases are
made after September, 20XX)
Question 30
Oberoi Industries is a manufacturing company registered under GST. It manufactures two taxable
products ‘X’ and ‘Y’ and one exempt product ‘Z’. The turnover of ‘X’, ‘Y’ and ‘Z’ in the month of April, 20XX
was ₹ 2,00,000, ₹ 10,00,000 and ₹ 12,00,000. Oberoi Industries is in possession of certain machines and
purchases more of them. Useful life of all the machines is considered as 5 years.
From the following particulars furnished by it, compute the amount to be credited to the electronic credit
ledger of Oberoi Industries and amount of common credit attributable towards exempted supplies, if any,
for the month of April, 20XX.
Particulars GST paid (₹)

Machine ‘A’ purchased on 01.04.20XX for being exclusively used for non-business
19,200
purposes
Machine ‘B’ purchased on 01.04.20XX for being exclusively used in manufacturing
38,400
zero-rated supplies
Machine ‘C’ purchased on 01.04.20XX for being used in manufacturing all the three
96,000
products – X, Y and Z
Machine ‘D’ purchased on April 1, 2 years before 01.04.20XX for being exclusively
used in manufacturing product Z. From 01.04.20XX, such machine will also be used 1,92,000
for manufacturing products X and Y.
Machine ‘E’ purchased on April 1, 3 years before 01.04.20XX for being exclusively
used in manufacturing products X and Y. From 01.04.20XX, such machine will also be 2,88,000
used for manufacturing product Z.
Answer
Amount to be
Common Ineligible
Particulars credited to
credit (₹) credit (₹)
ECrL (₹)
Machine ‘A’ 19,200
[Since exclusively used for non-business
purposes, ITC is not available under rule

Page 8.49
Input Tax Credit
43(1)(a) of CGST Rules, 2017]

Machine ‘B’ 38,400
[For ITC purposes, taxable supplies include
zero-rated supplies under rule 43(1)(b) of CGST
Rules, 2017. Hence, full ITC is available]
Machine ‘C’ 96,000 96,000
[Commonly used for taxable and exempt
supplies – Rule 43(1)(c) of the CGST Rules,
2017]
Machine ‘D’ 1,92,000 1,92,000
[Owing to change in use from exclusively
exempt to both taxable and exempt, full amount
of credit to be added to common ITC during the
month as per proviso to rule 43(1)(c) of CGST
Rules, 2017]
Further, 5% per quarter or part thereof of credit
relating to Machine D shall be added to the
output tax liability for the month in terms of
first proviso to rule 43(1)(c) of CGST Rules,
2017] = ₹ 76,800 (₹ 1,92,000 × 5% × 8 quarters)
Machine ‘E’ 2,88,000
[Owing to change in use from exclusively
taxable to both taxable and exempt, full amount
of credit to be added to common ITC as per
proviso to rule 43(1)(d) of CGST Rules, 2017]
Further, the credit relating to Machine E would
have been credited to electronic credit ledger
three years back when the machine was used
exclusively for taxable supplies. Therefore, no
amount will be credited to the electronic credit
ledger again on change of in use of machine.
Total common credit 5,76,000
Common credit for the tax period (in the 9,600
given case, a month) under rule 43(1)(e) of
CGST Rules, 2017
= ₹ 5,76,000÷ 60
Common credit attributable to exempt 4,800
supplies in April, 20XX under rule 43(1)(g)
of the CGST Rules, 2017
= (Turnover of exempt supplies/Total turnover)
x Common credit
= (12,00,000/24,00,000) x ₹ 9,600
[Such credit, along with the applicable interest,
shall be added to the output tax liability of
Oberoi Industries]
Amount to be credited to the electronic 3,21,600
3,26,400
credit ledger of Oberoi Industries for the

Page 8.50
Input Tax Credit
month of April, 20XX
Question 31
Soren Enterprises is in possession of certain capital goods and purchases more of them as per the
following particulars:
Input tax on capital

Particulars Status of its use
goods (₹)
Exclusively used for non-business
Capital Goods A 12,000
purpose.
Exclusively used for zero-rated
Capital Goods B 24,000
supplies.
Used both for taxable and exempt
Capital Goods C 60,000
supplies.
Capital goods D (has been
Now there is change in use, both for
exclusively used for 2 years for 1,20,000
taxable and exempt supplies.
exempted supplies)
Capital goods E (has been
Now there is change in use, both for
exclusively used for 3 years for 1,80,000
taxable and exempt supplies.
taxable supplies).
Useful life of all the above capital goods is considered as 5 years.

Compute the input tax credit to be reversed for each tax period (monthly) on account of common credit
attributable to exempted use of such machines, while being informed that aggregate value of exempt
supplies during the tax period being ₹ 6,00,000 and total turnover during the tax period being ₹
12,00,000.
Answer
Apportionment of common credit pertaining to capital goods:

Capital goods ‘A’ Nil
[Since exclusively used for non-business purposes, ITC is not available under rule
43(1)(a) of CGST Rules, 2017]
Capital goods ‘B’ -
[For ITC purposes, taxable supplies include zero-rated supplies under rule 43(1)(b) of
CGST Rules, 2017. Hence, full ITC of ₹ 24,000 is available]
Capital goods ‘C’ 60,000
[Commonly used for taxable and exempt supplies]
Capital goods ‘D’ 1,20,000
[Owing to change in use from exclusively exempt to both taxable and exempt, full amount
of credit to be added to common ITC during the month as per proviso to rule 43(1)(c) of
CGST Rules, 2017]
Further, 5% per quarter or part thereof of credit relating to Capital goods D shall be added
to the output tax liability for the month in terms of first proviso to rule 43(1)(c) of CGST
Rules, 2017] = ₹ 48,000 (₹ 1,20,000 × 5% × 8 quarters)
Capital goods ‘E’ 1,80,000

Page 8.51
Input Tax Credit
[Owing to change in use from exclusively taxable to both taxable and exempt, full amount
of credit to be added to common ITC as per proviso to rule 43(1)(d) of CGST Rules, 2017]
Total common credit 3,60,000
Common credit for the tax period under rule 43(1)(e) of CGST Rules, 2017 6,000
= 3,60,000 ÷ 60
Common credit attributable to exempt supplies in a tax period in terms of rule 3,000
43(1)(g) of CGST Rules, 2017
= (Turnover of exempt supplies/Total turnover) x Common credit
= (6,00,000/12,00,000) x ₹ 6,000
Question 32
Arise India Pvt. Ltd., a company engaged in manufacturing of various goods, has its corporate office at
Mumbai and manufacturing units in Pune and Chennai and service centres in Kolkata and Bengaluru. The
manufacturing units at Pune and Chennai and service centres at Kolkata and Bengaluru are registered in
Maharashtra, Tamil Nadu, West Bengal and Karnataka respectively. The corporate office is registered as
an input service distributor. All the units and centres of Arise India Pvt. Ltd. are operational in the current
year. The corporate office intends to distribute input tax credit (ITC) for the month of October 20XX. The
following details are available for such distribution:
Table 1
Unit/centre Turnover for the quarter Eligible ITC on input services attributable to a
ending September 20XX* (₹) specific unit/centre, for month of October 20XX (₹)
Pune 20,00,000 IGST – ₹ 3,00,000; CGST – ₹ 30,000; SGST– ₹ 30,000
Chennai 30,00,000 IGST – ₹ 24,000; CGST – ₹ 6,000; SGST – ₹ 6,000
Kolkata 10,00,000 Nil
Bengaluru 40,00,000 Nil
*Note: Turnover excludes all taxes and duties
Table 2
S. No. Particulars CGST SGST IGST
(i) Input services used by all units and centres

(a) Eligible ITC under the provisions of the GST 1,20,000 1,20,000 2,40,000
law
(b) Ineligible ITC in terms of section 17(5) of the 40,000 40,000 80,000
CGST Act, 2017
(ii) Inputs used by Pune unit and Kolkata centre 60,000 60,000
(iii) Input services used by Chennai unit and Bengaluru 30,000 30,000 10,000
centre (ITC pertaining to such invoices is eligible ITC
under the provisions of the GST law)
Chennai unit manufactures exempted products.

Compute the amount of ITC to be distributed to each of the units and centres.
Answer
Computation of ITC to be distributed by ISD

Page 8.52
Input Tax Credit
S. Particulars Pune unit (₹) Chennai unit Kolkata Bengaluru

No. (₹) centre (₹) centre (₹)
(i) IGST credit of ₹ 3,00,000, 3,00,000 (IGST)
CGST credit of ₹ 30,000 & 30,000 (CGST)
SGST credit of ₹ 30,000 30,000 (SGST)
specifically attributable to
Pune unit [Note 1]
(ii) IGST credit of ₹ 24,000, CGST 36,000 (IGST)
credit of ₹ 6,000 and SGST
credit of ₹ 6,000 specifically
attributable to Chennai unit
[Note 2]
(iii) Eligible ITC pertaining to 24,000 (CGST) 1,44,000 (IGST) 48,000 (IGST) 1,92,000 (IGST)
input services used by all 24,000 (SGST)
units and centres [Note 3] 48,000 (IGST)
(iv) Ineligible ITC pertaining to 8,000 (CGST) 48,000 (IGST) 16,000 (IGST) 64,000 (IGST)
input services used by all 8,000 (SGST)
units and centres [Note 4] 16,000 (IGST)
(v) Inputs used by Pune unit and Nil Nil Nil Nil
Kolkata centre [Note 5]
(vi) Input services used by 30,000 (IGST) 40,000 (IGST)
Chennai unit and Bengaluru
centre [Note 6]
Notes:
(1) IGST credit of ₹ 3,00,000, CGST credit of ₹ 30,000 and SGST credit of ₹ 30,000 specifically
attributable to Pune unit will be distributed as IGST credit of ₹ 3,00,000, CGST credit of ₹ 30,000
and SGST credit of ₹ 30,000 respectively, only to Pune unit, since recipient is located in the same
State in which ISD is located [Section 20(2)(c) of the CGST Act, 2017 read with clauses (e) & (f)(i)
of sub-rule (1) of rule 39 of the CGST Rules, 2017].
(2) Total GST credit (CGST+ SGST + IGST) of ₹ 36,000 specifically attributable to Chennai unit will be
distributed as IGST credit of ₹ 36,000, only to Chennai unit, since recipient and ISD are located in
different States [Section 20(2)(c) of the CGST Act, 2017 read with clauses (e) & (f)(ii) of sub-rule
(1) of rule 39 of the CGST Rules, 2017].
(3) Eligible ITC of CGST [₹ 1,20,000], SGST [₹ 1,20,000] and IGST [₹ 2,40,000] will be distributed among
the units and centres in the ratio of their turnover of the last quarter [Section 20(2)(e) of the CGST
Act, 2017 read with clause (a)(ii) of the explanation to the said section and rule 39(1)(b) of the
CGST Rules, 2017].
Ratio of the turnover of the units and centres in last quarter, previous to the month during which
ITC is to be distributed:
= 20 lakh : 30 lakh : 10 lakh : 40 lakh
= 2: 3: 1: 4
Therefore,
Pune unit will get = ₹ 24,000 [1,20,000 x (2/10)] as CGST credit, ₹ 24,000 [1,20,000 x (2/10)] as
SGST credit and ₹ 48,000 [2,40,000 x (2/10)] as eligible IGST credit [Clauses (e) & (f)(i) of sub-rule
(1) of rule 39 of the CGST Rules, 2017].

Page 8.53
Input Tax Credit
Chennai unit will get = ₹ 1,44,000 [₹ 4,80,0001 x (3/10)] as IGST credit [Clauses (e) & (f)(ii) of sub-
rule (1) of rule 39 of the CGST Rules, 2017]. The credit attributable to a recipient is distributed
even if such recipient is making exempt supplies [Clause (d) of sub-rule (1) of rule 39 of the CGST
Rules, 2017].
Kolkata centre will get = ₹ 48,000 [₹ 4,80,000 x (1/10)] as IGST credit [Clauses (e) & (f)(ii) of sub-
rule (1) of rule 39 of the CGST Rules, 2017].
Bengaluru will get = ₹ 1,92,000 [₹ 4,80,000 x (4/10)] as IGST credit [Clauses (e) & (f)(ii) of sub-
rule (1) of rule 39 of the CGST Rules, 2017].
(4) Ineligible ITC of CGST [₹ 40,000], SGST [₹ 40,000] and IGST [₹ 80,000] will also be distributed
among the units and centres in the ratio of their turnover of the last quarter [Section 20(2)(e) of
the CGST Act, 2017 read with clause (a)(ii) of the explanation to the said section and rule 39(1)(b)
of the CGST Rules, 2017].
Ratio of the turnover of the units and centres in last quarter, previous to the month during which
ITC is to be distributed:
= 20 lakh : 30 lakh : 10 lakh : 40 lakh
= 2: 3: 1: 4
Therefore,
Pune unit will get = ₹ 8,000 [40,000 x (2/10)] as CGST credit, ₹ 8,000 [40,000 x (2/10)] as SGST
credit and ₹ 16,000 [80,000 x (2/10)] as eligible IGST credit.
Chennai unit will get = ₹ 48,000 [₹ 1,60,000 x (3/10)] as IGST credit.
Kolkata centre will get = ₹ 16,000 [₹ 1,60,000 x (1/10)] as IGST credit.
Bengaluru will get = ₹ 64,000 [₹ 1,60,000 x (4/10)] as IGST credit.
(5) ISD mechanism is meant only for distributing the credit on common invoices pertaining to input
services only and not goods (inputs or capital goods).
(6) Eligible ITC of CGST [₹ 30,000], SGST [₹ 30,000] and IGST [₹ 10,000] will be distributed among the
Chennai unit and Bengaluru centre in the ratio of their turnover of the last quarter [Section
20(2)(d) of the CGST Act, 2017 read with clause (a)(ii) of the explanation to the said section and
rule 39(1)(b) of the CGST Rules, 2017].
Ratio of the turnover of the Chennai unit and Bengaluru centre in last quarter, previous to the
month during which ITC is to be distributed:
= 30 lakh : 40 lakh
=3:4
Therefore,
Chennai unit will get = ₹ 30,000 [₹ 70,000 x (3/7)] as IGST credit.
Bengaluru unit will get = ₹ 40,000 [₹ 70,000 x (4/7)] as IGST credit.
Question 33
KPI Ltd., registered in the State of Himachal Pradesh (HP), has a manufacturing unit at Baddi (HP). The
company manufactures two products: ‘Xt’ and ‘St’. While ‘Xt’ is taxable, ‘St’ is exempt from GST.
KPI Ltd. has furnished the following details:
S. No. Particulars IGST (₹)

(a) Machinery 1 purchased on 1st July for being used in manufacturing Xt and St 72,000

Page 8.54
Input Tax Credit
(b) Machinery 2 purchased on 1st July for being exclusively used in manufacturing 36,000
product Xt
(c) Machinery 3 purchased on 1st July for being exclusively used in manufacturing 1,08,000
product St
(d) Machinery 4 purchased on 1st October last year for being exclusively used in 1,44,000
manufacturing product St. From 1st July, such machinery will also be used for
manufacturing product Xt.
(e) Machinery 5 purchased on 1st January for being exclusively used in 18,000
manufacturing product Xt. From 1st July, such machinery will also be used for
manufacturing
product St.
(f) Machinery 6 purchased on 1st July two years ago for being used in 1,08,000
manufacturing Xt and St
Compute the following:

(i) Amount of input tax credit (ITC) credited to Electronic Credit Ledger for the month of July
(ii) Amount of ineligible credit (Tie) for the month of July
(iii) Amount of aggregate value of common credit (Tc)
(iv) Common credit for the month of July (Tm)
Note: All the conditions necessary for availing the ITC have been complied with. Make suitable
assumptions wherever required.
Answer
S. No. Particulars ITC (₹)
(i) Amount of ITC credited to Electronic Credit Ledger, for the month of July
Machinery 1 – ‘A’ [Note 1] 72,000
Machinery 2 [Note 2] 36,000
Machinery 3 [Note 3] -
Machinery 4 – ‘A’ [Note 4] 1,44,000
Machinery 5 [Note 5] -
Machinery 6 – ‘A’ [Note 6] -
ITC credited to Electronic Credit Ledger, for the month of July 2,52,000
(ii) Amount of ineligible credit (Tie) for the month of July [Note 7] 21,600
(iii) Aggregate value of common credit (Tc) [Note 8]
Value of ‘A’ for Machinery 1 purchased on 1st July and used for effecting both 72,000
taxable and exempt supplies
Value of ‘A’ for Machinery 4 purchased on 1st 1,44,000
October last year for being used for effecting exclusively exempt supplies and
used for effecting both taxable and exempt supplies from 1st July
Value of ‘A’ for Machinery 6 purchased on 1st July two years ago and used for 1,08,000
effecting both taxable and exempt supplies
Input tax claimed on Machinery 5 purchased on 1st January for being used for 18,000
effecting exclusively taxable supplies and used for effecting both taxable and
exempt supplies from 1st July [Note 9]

Page 8.55
Input Tax Credit
Aggregate value of common credit (Tc) for the month of July – Tc [Note 9] 3,42,000
(iv) Common credit for the month of July (Tm) [Note 10] 5,700
Notes:
(1) ITC in respect of capital goods used commonly for effecting taxable supplies and exempt supplies
denoted as ‘A’ shall be credited to the electronic credi t ledger [Rule 43(1)(c) of the CGST Rules,
2017].
(2) ITC in respect of capital goods used or intended to be used exclusively for effecting supplies other
than exempted supplies but including zero rated supplies shall be credited to the electronic credit
ledger [Rule 43(1)(b) of the CGST Rules, 2017].
(3) ITC in respect of capital goods used or intended to be used exclusively for effecting exempt supplies
shall not be credited to electronic credit ledger [Rule 43(1)(a) of the CGST Rules, 2017].
(4) When capital goods which were initially used exclusively for exempt supplies are subsequently used
commonly for exempt supplies as well as taxable supplies, input tax in respect of the same denoted
as ‘A’ shall be credited to the electronic credit ledger [Rule 43(1)(c) of the CGST Rules, 2017].
(5) Machinery 5 is used for effecting both taxable and exempt supplies since 1 st July. Prior to that, it
was exclusively used for effecting taxable supplies. Therefore, ITC in respect of such machinery
would have already been credited to the electronic credit ledger.
(6) Machinery 6 is being used for effecting both taxable and exempt supplies from 1 st July two years
ago. Therefore, ITC in respect of such machinery would have already been credited to the electronic
credit ledger.
(7) When capital goods which were used exclusively for exempt supplies are subsequently used
commonly for exempt supplies as well as taxable supplies, input tax in respect of the same is credited
in the electronic credit ledger. The ineligible credit ‘Tie’ attributable to the period during which such
capital goods were used for making exempt supplies is computed @ 5% per quarter or part thereof
and added to the output tax liability of the tax period in which such credit is claimed [Rule 43(1)(c)
of the CGST Rules, 2017].
Thus, ‘Tie’ shall be computed as under-
= ₹ 1,44,000 × 5% × 3 quarters
= ₹ 21,600
(8) The aggregate of the amounts of ‘A’ credited to the electronic credit ledger in respect of common
capital goods whose useful life remains during the tax period, to be denoted as ‘Tc’, shall be the
common credit in respect of such capital goods [Rule 43(1)(d) of the CGST Rules, 2017].
(9) Where any capital goods which were used exclusively for effecting taxable supplies are subsequently
also used for effecting exempt supplies, the input tax credit claimed in respect of such capital goods
shall be added to arrive at the aggregate value of common credit ‘Tc’ [Proviso to rule 43(1)(d) of the
CGST Rules, 2017].
(10) ITC attributable to a month on common capital goods during their useful life (Tm) shall be
computed in accordance with rule 43(1)(e) of CGST Rules, 2017 as under:
= Tc ÷ 60
= ₹ 3,42,000 ÷ 60
= ₹ 5,700
The useful life of any capital goods shall be considered as five years from the date of invoice and the
said formula shall be applicable during the useful life of the said capital goods.

Page 8.56
Input Tax Credit
Question 34
Sunshine Pvt. Ltd. manufactures taxable goods. The company is registered under GST in the State of West
Bengal. The company has provided following information in relation to inward supplies received by it in
the month of October:
S. No. Invoices received for inward supplies IGST (₹)

1. Raw material - X 2,00,000
2. Rent of the factory building 1,50,000
3. Raw material - Y 1,30,000
4. Car purchased for the use of the director 1,20,000
5. Consumables 80,000
6. Machinery for being used in the manufacturing process 1,50,000
7. Raw material - Z 1,10,000
8. Technical consultancy for improvement in the manufacturing process 60,000
9. Raw material – W (imported from China) 50,000
Total 10,50,000

(i) Balance in Form GSTR-2A on 28th October (Invoices at S. Nos. 1, 2 and 3 4,80,000
uploaded by the respective suppliers in their Form GSTR-1s)
(ii) Balance in Form GSTR-2A on 11th November 6,00,000
(Invoices at S. Nos. 1, 2, 3 and 4 uploaded by the respective suppliers in
their Form GSTR-1s)
(iii) Balance in Form GSTR-2A on 20th November 6,80,000
(Invoices at S. Nos. 1, 2, 3, 4 and 5 uploaded by the respective suppliers in
their Form GSTR-1s)
Compute the ITC that can be claimed by Sunshine Pvt. Ltd. in its Form GSTR-3B for the month of October
to be filed by 20th November.
Note: The due date of filing of Form GSTR-1 and Form GSTR-3B for the month of October are 11th
November and 20th November respectively. Subject to the information given above, all the other
conditions for availing ITC have been complied with.
Answer
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-
Invoices Amount of input tax Amount of ITC that

involved in the invoices (₹) can be availed (₹)
Balance in GSTR-2A on 11th November [Note 1] 6,00,000 4,80,000
(Invoices at S. Nos. 1, 2, 3 and 4 uploaded by the [Note 2]
respective suppliers in their GSTR-1s)
Invoices at S. Nos. 5, 6 7 and 8 not uploaded in 4,00,000 48,000
GSTR-1 [Note 3]
Invoice at S. No. 9 50,000 50,000
[Note 4]

Page 8.57
Input Tax Credit
Total 10,50,000 5,78,000
Notes:
(1) ITC in respect of the invoices whose details have not been uploaded by the suppliers shall not
exceed 10% of the 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 section 37(1) of the CGST
Act, 2017 as on the due date of filing of the returns in Form GSTR-1 of the suppliers for the said tax
period. The taxpayer can ascertain the same from his auto populated Form GSTR 2A as available
on the due date of filing of Form GSTR-1 under section 37(1) [Rule 36(4) of the CGST Rules, 2017
read with Circular No. 123/42/2019 GST dated 11.11.2019].
(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:
(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.
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, the ITC has been
restricted to 10% of eligible ITC in respect of invoices uploaded in Form GSTR-1s, i.e. 10% of ₹
4,80,000 in terms of rule 36(4) of the CGST Rules, 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].
Question 35
Paridhi Ltd. is a registered manufacturer engaged in taxable supply of goods. Paridhi Ltd. purchased the
following goods during the month of January and provided the following information:
S. No. Particulars GST paid (₹)

1. Capital goods purchased on which depreciation has been taken on full value 15,000
including input tax thereon
2. Goods purchased from Rupesh Enterprises 20,000
(Rupesh Enterprises sent the invoice in the month of January, but goods were
received in month of April)
3. Car purchased for making further supply of such car. Such car is destroyed in 30,000
accident while being used for test drive by potential customers
4. Goods used for setting up telecommunication towers being immovable 50,000
property
5. Goods purchased from Sumo Ltd. 10,000
(Full payment has been made by Paridhi Ltd. to Sumo Ltd. against such
supply, but tax has been deposited by Sumo Ltd. in April)

Page 8.58
Input Tax Credit
6. Truck purchased for delivery of output goods 80,000
Determine the amount of input tax credit (ITC) available to Paridhi Ltd. while filing GSTR-3B for the
month of January by giving necessary explanations for treatment of various items as per the provisions
of the CGST Act, 2017. You may assume that all the necessary conditions for availing the ITC have been
complied with by Paridhi Ltd.
Answer
Computation of ITC available with Paridhi Ltd. in January

1. Capital goods Nil
[Since depreciation has been claimed on the tax component of the value of the
capital goods, ITC of such tax cannot be availed in terms of section 16 of the
CGST Act, 2017.]
2. Goods purchased from Rupesh Enterprises Nil
[ITC in respect of goods not received cannot be availed (Section 16 of the CGST
Act, 2017). Since the goods have been received in the month of April, ITC
thereon can be availed in April and not January even though the invoice for the
same has been received in January.]
3. Cars purchased for making further supply Nil
[Though ITC on motor vehicles used for further supply of such vehicles is not
blocked, ITC on goods destroyed for whichever reason is blocked (Section
17(5) of the CGST Act, 2017).]
4. Goods used for setting telecommunication towers Nil
[ITC on goods used by a taxable person for construction of immovable property
on his own account is blocked even when such goods are used in the course or
furtherance of business (Section 17 of the CGST Act, 2017).]
5. Goods purchased from Sumo Ltd. 10,000
[ITC can be claimed provisionally in January since all the conditions necessary
for availing the same have been complied with (Section 16 of the CGST Act,
2017). However, the claim will get confirmed only when the tax charged in
respect of such supply has been actually paid to the Government.]
6. Trucks purchased for delivery of output goods 80,000
[ITC on motor vehicles used for transportation of goods is not blocked (Section
17(5) of the CGST Act, 2017).]
Total ITC available with Paridhi Ltd. 90,000
Question 36
Enumerate the taxes which constitute ‘input tax’ as defined under section 2(62) of the CGST Act., 2017.
Answer
‘Input tax’ in relation to a registered person, means CGST, SGST, IGST or UTGST charged on any supply of
goods or services or both made to him and includes —
(a) IGST charged on import of goods;
(b) CGST, IGST, SGST or UTSGT payable under reverse charge but does not include tax paid under the
composition levy.
Page 8.59
Input Tax Credit
Question 37
Sahu Parivar, pumps manufacturer in Vadodara (Gujarat) has provided following details for the month
of May: -
1. As a staff welfare measure, Sahu Parivar has entered into an agreement with PNS Insurance
Company to provide life insurance to its employees. PNS charged Rs. 35,00,000 for the same.
2. It has entered into an agreement with a travel company to provide home travel facility to its
employees when they are on leave. Travel company charged Rs. 1,00,000 for such facility.
3. It has entered into an agreement with a fitness center to provide wellness services to its employees
after office hours for a consideration amounting to Rs.80,000.
4. It has availed services of the works contractor to erect foundation for fixing the machinery to earth,
in the factory. It paid Rs. 50,000 for the same.
5. It laid pipelines (from the water source outside the factory) upto the gate of the factory for the
purpose of production facility. The cost incurred for the same is Rs. 4,00,000.
6. For the purpose of smooth and convenient mobile communication in its factory, It has installed
telecommunication tower of a mobile company (with due permission) by incurring Rs. 2,00,000.
Note: All the above transactions are intra-State in nature.
Sahu Parivar has also entered into a contract with AP Refinery, Sambhra (Rajasthan) on 1st May to supply
and install 16 pumps on FOR basis. The following information is provided in this regard:
List price per pump is Rs. 1,60,000, exclusive of taxes. One of the conditions of the contract is that Sahu
Parivar should ensure a two stage third party inspection for the pumps during the manufacturing
process. Cost of inspection of Rs. 24,000 (for 16 pumps) is directly paid by AP Refinery to testing agency.
AP Refinery requires a special packing for the pumps and the cost of such special packing is Rs. 86,000
(for 16 pumps). Sahu Parivar arranges for erection and testing of the pumps supplied by it at AP
Refinery’s site. Cost of erection etc. is Rs. 24,000 (for 16 pumps). Goods are dispatched with tax invoice
on 20th May and they reach the destination at Sambhra on 21st May. Lorry freight (for 16 pumps) of Rs.
16,000 has been paid by AP Refinery directly to the lorry driver.
Assume CGST, SGST and IGST rates to be 9%, 9% and 18% respectively. For the relevant month, the
opening balance of ITC of IGST is Nil, CGST is Rs. 32,500 and SGST is Rs. 32,500. All the given amounts
are exclusive of GST, wherever applicable.
You are required to work out the net GST [CGST and SGST or IGST, as the case may be] payable from
Electronic Cash Ledger of Sahu Parivar for the month of May after making suitable assumptions, if any.
Answer
Computation of net GST payable by Sahu Parivar for the month of May
Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)

Output tax liability [Working Note 1] 4,87,800
Less: ITC of CGST [Working Note 2] (37,000)
Less: ITC of SGST has been utilized only after ITC of (37,000)
CGST has been utilized fully in terms of proviso to
section 49(5)(c) [Working Note 2]
Working Note 1

Page 8.60
Input Tax Credit
Computation of output tax liability of Sahu Parivar for the month of May
Particulars Amount (Rs.)

List price of 16 pumps (Rs. 1,60,000 x 16) 25,60,000
Add: Amount paid by AP Refinery to testing agency [Note 1(i)] 24,000
Add: Special packing [Note 1(ii)] 86,000
Add: Erection and testing at site [Note 1(ii)] 24,000
Add: Freight [Note 1(iii)] 16,000
IGST @ 18% [Note 2] 4,87,800
Notes:
(1) As per section 15(2) of the CGST Act, 2017:
(i) Any amount that the supplier is liable to pay in relation to a supply but which has been
Since, in the given case, arranging inspection was the liability of the supplier, the same should
be included in the value of supply, charges for the same, however, have been paid directly to
the third party service provider by the recipient. Therefore, the value shall be included in
taxable value.
(ii) Any amount charged for anything done by the supplier in respect of the supply of goods at the
time of, or before delivery of goods shall be included in the value of supply.
(iii) Any amount that the supplier is liable to pay in relation to a supply but which has been
Since, in the given case, the supply contract is on FOR basis, payment of freight is the liability
of supplier but the same has been paid by the recipient and thus, should be included in the
value of supply.
(2) As per section 10(1) of the IGST Act, 2017, where the supply involves movement of goods, the place
of supply is the location of the goods at the time at which the movement of goods terminates for
delivery to the recipient, which in the given case is Sambhra (Rajasthan). Since the location of the
supplier (Gujarat) and the place of supply (Rajasthan) are in two different States, the supply is an
inter-State supply liable to IGST.
Working Note 2
Computation of ITC available with Sahu Parivar for the month of May
Particulars CGST @ 2.5% SGST @ 2.5%

(Rs.) (Rs.)
Opening ITC 32,500 32,500
Services of PNS Insurance company to provide life insurance to Nil Nil
employees [Note 1]
Services of travel company to provide home travel facility to Nil Nil
employees Note 1]
Services of fitness center to provide wellness services to employees
[Note 1] Nil Nil
Wok contract services availed for erecting foundation for fixing the 4,500 4,500

Page 8.61
Input Tax Credit
machinery to the earth in the factory [Note 2]

Laying of pipeline up to the gate of factory from water source Nil Nil
located outside the factory [Note 3]
Installation of telecommunication towers [Note 3] Nil Nil
Total ITC 37,000 37,000
Notes:
As per section 17(5) of the CGST Act, 2017
(1) ITC on life insurance is blocked unless it is used in case of sub-contracting or the same is provided
under any statutory obligation. ITC on travel benefits extended to employees on home travel
concession and membership of health and fitness center is blocked unless it is obligatory for an
employer to provide the same to its employees under any law for the time being in force.
(2) ITC on works contract services when supplied for construction of an immovable property (other
than plant and machinery) except where it is an input service for further supply of works contract
service, is blocked. Hence, ITC on works contract services for construction of plant and machinery
is allowed. Further, plant and machinery includes foundation and structural supports used to fix
the machinery to earth.
(3) ITC on goods and/ or services received by a taxable person for construction of an immovable
property (other than plant or machinery) on his own account including when such and/ or services
are used in course/ furtherance of business, is blocked. However, plant and machinery excludes
pipelines laid outside the factory premises and telecommunication towers.
Question 38
On 25th August, 2017, M/s Agarwal & Agarwal Ltd., a registered supplier of textile products located in
Bengaluru (Karnataka) purchased one machine for ₹ 12,39,000 including IGST, from one supplier of
Maharashtra who issued invoice on the same date. M/s Agarwal & Agarwal Ltd. put the machinery to use
on the same day and availed input tax credit for the eligible amount.
M/s Agarwal & Agarwal Ltd. sold this machine after using the machine in the process of manufacture of
taxable goods for ₹ 7,50,000 excluding lGST, to Mr. Suresh Kumar of Andhra Pradesh on 20th August
2018.
During purchase as well as sale of the machinery, the lGST rate applicable was 18%.
Is M/s Agarwal & Agarwal Ltd., required to pay GST? If yes, calculate the amount of tax payable under
GST Laws at the time of sale of the machine. Also briefly state the relevant statutory provisions.
Note: Assume that there was no change in legal position after August, 2017.
Answer
As per section 18 of the CGST Act, 2017, if capital goods/ plant and machinery on which input tax credit
(ITC) has been taken are supplied outward by a registered person, he must pay an amount that is higher
of the following:
(a) ITC taken on such goods reduced by 5% per quarter of a year or part thereof from the date of issue
of invoice for such goods or
(b) tax on transaction value.
Accordingly, the amount payable on supply of machinery by M/s Agarwal & Agarwal Ltd. shall be
computed as follows:

Page 8.62
Input Tax Credit
Particulars ₹
ITC taken on the machinery (₹ 12,39,000 × 18/118) 1,89,000
Less: Input tax credit to be reversed @ 5% per quarter for the period of use of
machine
(i) For the year 2017-18 = (₹ 1,89,000 × 5%) × 3 quarters 28,350
(ii) For the year 2018-19 = (₹ 1,89,000 × 5%) × 2 quarters 18,900
Amount required to be paid (A) ** 1,41,750
Duty leviable on transaction value (₹ 7,50,000 × 18%) (B) 1,35,000
Amount payable towards disposal of machine is higher of (A) and (B) 1,41,750
Thus, M/s Agarwal & Agarwal Ltd. is required to pay GST amounting to ₹ 1,41,750 at the time of sale of
machinery.
* In the above solution, amount payable towards disposal of machine has been computed on the basis of
provisions of section 18(6) of the CGST Act, 2017 read with rule 40(2) of the CGST Rules, 2017 [wherein
ITC to be reversed for the period of use of capital goods/machine has been computed @ 5% for every
quarter or part thereof from the date of the issue of invoice].
However, the said amount can also be computed in accordance with the provisions of section 18(6) of
the CGST Act, 2017 read with rule 44(6) of the CGST Rules, 2017 [wherein ITC involved in the remaining
useful life (in months) of the capital goods/machine will be reversed on pro-rata basis, taking the useful
life as 5 years].
Question 39
A company has entered to an agreement with a customer for the manufacture and supply of cement pipes
for their exclusive use. A company manufactured the product but before receiving the inspection
certificate, their customer rejected some quantity of goods on the grounds of quality. As per agreement,
the rejected quantity will be destroyed in front of the customer and shall not be sold. Examine the issue
in the light of statutory provisions and suggest future course of action to the assessee as to whether any
liability arises as per the provisions of GST law.
Answer
Section 17 of the CGST Act, 2017 blocks ITC in respect of destroyed goods.
Accordingly, since in the given case the cement pipes have been destroyed, ITC attributable to such pipes
will not be allowed [Section 17(5)(h) of the CGST Act, 2017].
Thus, in the given case, if the credit has already been availed, the same will need to be reversed.
Question 40
Sukhdev is a mining engineer. He has crossed the threshold limit for registration under the GST law and
is duly registered in the State of Maharashtra. He effects the following transactions in the month of March,
2019 and wants you to compute the tax payable in cash. He has filed bond/ LUT to claim benefits from
zero-rated supplies. The following are the particulars furnished by him.
S. No. Particulars Value of

supply in ₹
(a) Sukhdev, being an operating member in mining and exploration services at 12,00,000
Mumbai High, has provided certain services to the Joint Venture (JV) in which he

Page 8.63
Input Tax Credit
is also a participant. He believes that the consideration received from the JV is

‘Cost Petroleum’ and not taxable.
(b) He has purchased certain machinery from outside the State, to render services to 6,00,000
the JV at Mumbai High.
(c) He has obtained legal opinion from a local firm of advocates to enter into the 1,00,000
contract with the JV, for providing services to it.
(d) He has obtained accommodation from the State Government to locate his office 2,00,000
close to the sea shore.
(e) He gets a portion of the petroleum silt as part of the compensation while 6,00,000
exploring the petroleum reserves in the Bombay High- which as per the contract
with the Government is part of 'Cost Petroleum'.
(f) He sells the petroleum silt to a SEZ Developer in Mumbai 6,80,000
(g) Consideration is received towards transfer of tenancy rights, which according to 8,00,000
Sukhdev is not liable to GST as it has suffered stamp duty.
(h) On violation of the terms in production sharing agreement, Sukhdev has paid 3,00,000
liquidated damages to the Government.
(i) He has been assigned the right to collect royalty on behalf of Maharashtra --
Government, as 'Excess Royalty Collection Contractor'. He has noticed that the
mining lease holders have short paid 2,00,000 as IGST from what had been
exempted to him under the assignment.
(j) He has sold self-fabricated machinery through his agent in Mumbai, that has been 10,00,000
used for 2 years, the value of which is not available in the open market. The agent
sells it immediately to an unrelated customer in Mumbai.
(k) Opening Balance and brought forward tax credits are as follows:
- Electronic Cash Ledger - CGST 12,000
- Electronic Credit Ledger - CGST 18,000
- Electronic Credit Ledger - SGST 12,000
- Electronic Credit Ledger - IGST 60,000
(I) Supply value is exclusive of taxes. Supply of services are taxable at CGST 9%,
SGST 9% and IGST 18% and supply of goods are taxable at CGST 2.5%, SGST 2.5%
and IGST 5%. Determine the tax payable in cash.
Provide suitable notes where required.
Answer
Computation of tax payable in cash
S. No. Particulars Amount (₹) CGST (₹) SGST (₹) IGST (₹)
(i) Consideration for services provided as 12,00,000 1,08,000 1,08,000
an operating member to the Joint
Venture
[The operating member is providing the
mining and exploration service to the
joint venture, and thus, the
consideration received therefor is not
cost petroleum and hence, is liable to
tax.]

Page 8.64
Input Tax Credit
(ii) Compensation received in the form of 6,00,000 Nil Nil

petroleum silt, which, as per the contract
with the Government, is part of cost
petroleum
[Cost petroleum is not a consideration
for service to the Government and thus,
is not taxable.]
(iii) Sale of petroleum silt to a SEZ developer 6,80,000 Nil
[Supply to SEZ developer is a zero- rated
supply and no tax is payable on the same
if made under a bond/LUT.]
(iv) Consideration for transfer of tenancy 8,00,000 72,000 72,000
rights
[Transfer of tenancy rights to a new
tenant against consideration in the form
of tenancy premium is taxable even
though stamp duty has been paid on the
same.]
(v) Sale of self-fabricated machinery* 9,00,000 22,500 22,500
[Since open market value of the machine
is not available, the value will be 90% of
the price charged for the supply of
machinery by the agent to his unrelated
customer.]**
*It has been assumed that the value of ₹
10 lakh at which the agent sells the self-
fabricated machinery to unrelated
customer is known to Sukhdev at the
time he sells the machinery to the agent.
**It has been assumed that the supplier
has opted to value the goods at 90% of
the value charged by the agent to the
unrelated customer.
Total tax liability on outward supplies 2,02,500 2,02,500
(i) Legal services provided by a firm of 1,00,000 9,000 9,000
advocates to Sukhdev, i.e. a business
entity.
(It has been assumed that aggregate
turnover of Sukhdev in the preceding
financial year exceeds ₹ 20 lakh.)
(ii) Renting of immovable property 2,00,000 18,000 18,000
provided by the State Government to
Sukhdev (a registered person)
(iii) Assignment, by the State Government, of 2,00,000
the right to collect royalty from mining
lease holders to the extent the
exemption is not available

Page 8.65
Input Tax Credit
Total tax liability on inward supplies under 27,000 27,000 2,00,000

reverse charge
C. Input tax credit
(i) Opening balance 18,000 12,000 60,000
(ii) Inter-State purchase Since the goods & 6,00,000 30,000
of machinery services are used
(iii) Legal services for effecting 1,00,000 9,000 9,000
(iv) Renting of taxable supplies 2,00,000 18,000 18,000
immovable property including zero
rated supplies, full
(v) Assignment of right 2,00,000
ITC thereon will
to collect royalty
be allowed.
Total ITC 45,000 39,000 2,90,000
[ITC may be availed for making zero rated supply
even if such a supply is an exempt supply. Sale of
petroleum silt, being a non- taxable supply, is an
exempt supply but since it is also a zero-rated
supply, ITC can be availed for making such
supply.]
D. Computation of tax payable in cash
Total tax liability on outward supplies 2,02,500 2,02,500
Less: ITC of IGST 1,26,500 1,63,500
Less: ITC of CGST and SGST 45,000 39,000
(CGST) (SGST)
Forward charge liability on outward 31,000
supplies payable in cash after set off of
ITC
Reverse charge liability payable in cash 27,000 27,000 2,00,000
without set off of ITC
[Tax payable under reverse charge,
being not an output tax, cannot be set off
against ITC and thus, will have to be paid
in cash.]
Total tax liability payable in cash 58,000 27,000 2,00,000
[Since ₹12,000 (CGST) is available in Electronic
Cash Ledger as opening balance, additional ₹
46,000 (CGST) needs to be paid in cash.]
Payment of liquidated damages to the 3,00,000 Nil Nil
Government
[Services provided by the Government by way of
tolerating non-performance of a contract for
which consideration in the form of liquidated
damages is payable to the Government under
such contract, is exempt from GST. Hence, no tax
will be payable by Sukhdev on such input
service.]

Page 8.66
Input Tax Credit
Note: In terms of section 49B of the CGST Act, 2017, full (100%) IGST credit of ₹ 2,90,000 must be utilised
first before using CGST or SGST credit. However, the said IGST credit can be set off against the CGST and
SGST liability in any order and in any proportion. Thus, the final answer in each case would vary.
Question 41
Mr. Rishi, a registered supplier under GST in the State of Maharashtra, provides the following information
for the month of January 2020:
OUTWARD SUPPLY:
(i) Supplied computers (which were purchased from an unregistered supplier) Nil
without any consideration to his brother-in-law in Ranchi (market value of
supply was ₹ 62,000)
(ii) Supplied a consignment of 10 laptops to M/s NK & Co. in the State of 6,00,000
Maharashtra at the instruction of third person being M/s ZX Computers of
Tamilnadu.
(iii) Provided stock counting service to M/s XY Impex registered with GST in the 80,000
State of Gujarat, whereas the place where the stock counting was carried out was
at the godown located in Mumbai
(iv) Provided renting service of his service apartment in Mumbai at a daily rent of ₹ 30,000
1500 for residential purposes
(v) Recovery agent services provided to Apex Finance Ltd., an NBFC located in Delhi 2,00,000
(vi) Advance received during the month for future intra-State supply 9,00,000
INWARD SUPPLY:
(i) Imported computer accessories from Korea and the goods landed in Mumbai 5,00,000
Port and reached at his registered premises on 31.01.2020
(ii) Availed GTA services from M/s Speed Trans of Kolkata with regard to transport 1,00,000
of traded goods where rate of CGST/SGST @ 2.5% each IGST @ 5% was
applicable
(iii) Apart from the above, received 15 invoices involving IGST of ₹ 1,00,000 during -
the current month
Mr. Rishi provided the following additional information:

(a) Turnover for the previous financial year was ₹ 21 lakh.
(b) He had availed services in an inter-State transaction with a taxable value of ₹ 4,00,000 and a tax
rate of 18%. This transaction was liable to tax under reverse charge. Payment for the same to the
supplier was not made till the current month (overdue for 181 days as at 01.01.2020). However,
tax due under the said transaction was paid to Government and credit availed in the month of
transaction itself.
(c) Out of the 15 invoices as per above, 12 invoices involving IGST of ₹ 95,000 were uploaded by the
suppliers in their GSTR-1 Return. All the invoices are eligible for claiming as ITC.
(d) He had sent goods valued ₹ 1,00,000 to his job worker, in the State of Kerala, who further processed
the said goods and made direct supply on 31.01.2020 from Kerala to a buyer in the State of
Maharashtra.
(e) Out of advance received for future supply, ₹ 5,00,000 related to supply of goods and the rest related
to service.

Page 8.67
Input Tax Credit
(f) Rate of CGST, SGST and IGST are 9%, 9% and 18% respectively for both inward and outward supply
of goods and services. Same rate is also applicable for inward supplies received, except where
otherwise provided.
(g) All the amounts given are exclusive of taxes wherever applicable.
From the information given above, you are required to compute the net GST liability payable in cash
(CGST and SGST or IGST, as the case may be) for the month of January, 2020. Assessee wants to make the
cash payment of GST under SGST head as far as possible.
Answer
Computation of net GST payable in cash for the month of January 2020
(i) Computers supplied without Nil - - -
consideration
[Not a supply as it is made without
consideration and is also not
covered in Schedule I because
computers have been supplied to
an unrelated person and ITC has
also not been availed on the
same.]
(ii) Consignment of laptops supplied 6,00,000 1,08,000
at the instruction of third person [6,00,000 x
[Since supply is a bill to ship to 18%]
supply where the goods are
delivered on the direction of a
third person-ZX Computers,
goods are deemed to be received
by ZX Computers and thus, the
place of supply is Tamil Nadu.
Hence, it is an inter-State supply.]
(iii) Stock counting service to M/s XY 80,000 7,200 7,200 NIL
Impex of Gujarat [80,000 x [80,000 x
[Intra-State supply as the place of 9%] 9%]
supply is the location of recipient,
viz. Mumbai. Godown at Mumbai
being a fixed establishment is the
location of recipient.]
(iv) Service apartment rented in 30,000 2,700 2,700
Mumbai [30,000 x [30,000 x
[Taxable, since the value of supply 9%] 9%]
of the accommodation unit
exceeds ₹ 1,000 per day. Intra-
State supply since place of supply
is Maharashtra as property is
located in Mumbai.]
(v) Recovery agent services provided 2,00,000 - - -

Page 8.68
Input Tax Credit
to an NBFC
[Tax is payable by the NBFC under
reverse charge.]
(vi) Advance received for intra-State 4,00,000 36,000 36,000
supply [4,00,000 x [4,00,000 x
[Tax on advance received for 9%] 9%]
supply of goods of ₹ 5,00,000 will
be payable at the time of issuance
of invoice.]
(vii) Finished goods sold from the 1,00,000 9,000 9,000
premises of the job worker* [1,00,000 x [1,00,000 x
[Supply of goods by principal 9%] 9%]
from the job worker’s premises is
regarded as supply by principal
only irrespective of the location of
job worker. Therefore, since the
place of supply is the location
where movement of goods
terminates for delivery to
recipient, i.e., Maharashtra, it is an
intra- State supply.]
*It has been assumed that either
Mr. Rishi has declared the job
worker’s place of business /
premises as his additional place of
business or the job worker is
registered. Further, it has been
assumed that the goods have been
sold from the job worker’s
premises at a price of ₹ 1,00,000
itself.
Total tax liability on outward supplies 54,900 54,900 1,08,000
(i) GTA services availed from M/s 1,00,000 5,000
Speed Trans [1,00,000 x
[Tax is payable under reverse 5%]
charge on the GTA services
received by a registered person
and on which tax is payable @ 5%.
Further, it is an inter-State supply
since supplier is located in
Kolkata and place of supply is
Maharashtra (location of
registered recipient)]
C. Input tax credit
Import of computer accessories* 5,00,000 90,000
[Input tax, inter alia, includes IGST [5,00,000 x
charged on import of goods] 18%]

Page 8.69
Input Tax Credit
*It has been assumed that the

value of imported computer
accessories is inclusive of basic
customs duty and social welfare
surcharge and consequently, the
IGST has been computed on the
same.
GTA services availed 1,00,000 5,000
IGST on invoices received during 95,000 +
the month 5,000 =
[Full ITC can be claimed on the 1,00,000
invoices uploaded by supplier in
Form GSTR-1. Further, where
invoice has not been uploaded by
the supplier in its GSTR-1, 10% of
the eligible ITC available in
respect of the uploaded invoices
or actual ITC in respect of invoices
not uploaded, whichever is lower,
can be claimed by the recipient,
[i.e., lower of 10% of ₹ 95,000, or
₹ 5,000]
Less: Input tax reversed [Outward (20,419)
supply, tax on which is payable
under reverse charge is
considered as exempt supply for
the purpose of reversal of ITC.
= ₹ 1,95,000 x ₹ 2,00,000/₹
19,10,000 (₹ 1,95,000 x turnover
of exempt supply/ total turnover)
[The condition for making the
payment for the supply within
180 days so that the ITC availed
does not get added to the output
tax liability does not apply to
reverse charge supplies. Thus, ITC
on ₹ 4,00,000 will not be affected.]
Total ITC available for set off - - 1,74,581
D. Computation of net GST payable
in cash
Total tax liability on outward 54,900 54,900 1,08,000
supplies
Less: ITC of IGST (54,900) (11,681) (1,08,000)
Forward charge liability on -
outward supplies payable in cash
after set off of ITC
Reverse charge liability on inward
supplies payable in cash without

Page 8.70
Input Tax Credit
set off of ITC

[Tax payable under reverse
charge, being not an output tax,
cannot be set off against ITC and
thus, will have to be paid in cash.] 5,000
Total net GST liability payable in cash - 43,219 5,000
(It has been assumed that IGST has been
paid on imported goods before January
2020. Therefore, the same has not been
considered as being paid in cash in the
month of January 2020.)
Question 42
Input Service Distributor (ISD) of a company is registered separately in the State of Kerala and is
distributing Input Tax Credit (ITC) to other units in the company. Following details are furnished for a
particular month, and you are required to help the ISD department in distributing the ITC to other units
that are carrying on manufacturing, supplying goods and services to customers.
S. No. Particulars Amount in lakh (₹)

Turnover in the relevant month of each of the units:
(1) Mumbai (Maharashtra) 12.00
(2) Bangalore (Karnataka) 60.00
(3) Hyderabad (Andhra Pradesh) 36.00
(4) Trivandrum (Kerala) 72.00
(5) Total ITC available during the month with the ISD (includes 48.00
CGST/SGST & IGST) on account of supplies received during the month
(6) From the above, ITC exclusive to Bangalore unit, available as IGST 12.00
credit
(7) From the above, ITC exclusive to Trivandrum and Hyderabad units 6.00
(CGST and SGST of ₹ 3.00 lakh each)
(8) Rest of the credit available is allocable as common credit to all the
units and is received from local suppliers in Kerala.
(9) Basic value of a debit note received, during the month, in respect of a 50.00
previous supply, with rate of tax @ 12% IGST being charged and
shown separately
(10) Total value in the credit note received, during the month, applicable 118.00
exclusively to Kerala unit, taxed at the rate of 9% CGST and 9% SGST,
which is charged and indicated separately
Also make your comments regarding the amount of ITC in credit notes, if exceeds the ITC from invoices
and debit notes in a particular month for all or any of the units.
Answer
Computation of the amount of credit distributed by the ISD to various units of the company
(It has been logically assumed that credit to be distributed by ISD is credit of input services.)

Page 8.71
Input Tax Credit
Particulars Mumbai Unit Bangalore Unit Hyderabad Unit Trivandrum Unit

CGST SGST IGST CGST SGST IGST CGST SGST IGST CGST SGST IGST
(₹) (₹) (₹) (₹) (₹) (₹) (₹) (₹) (₹) (₹) (₹) (₹)
ITC exclusive to 12
Bangalore unit
available as IGST
[ITC of IGST is
distributed as IGST
only.]
ITC exclusive to 2 2 2
Trivandrum and
Hyderabad units
[ITC of CGST and
SGST is distributed
as CGST and SGST to
unit located in
Kerala (Trivandrum
unit) and as IGST to
unit located in a
different State
(Hyderabad unit) in
the ratio of 2:1.]
Common credit for 2 10 6 6 6
all units [Balance
credit of CGST and
SGST (since supplies
are received locally)
of ₹ 15 lakh each (₹
48 lakh – ₹ 12 lakh –
₹ 6 lakh) to be
distributed among
all four units in
proportion of their
turnover of the
relevant month, i.e.,
1:5:3:6. Further, ITC
will be distributed to
Mumbai, Bangalore
and Hyderabad unit
as IGST and to
Trivandrum unit as
CGST and SGST.]
Additional ITC [₹ 6 0.4 2 1.2 2.4
lakh (₹ 50 lakh* ×
12%)] due to debit
note received** from
supplier to be
distributed among

Page 8.72
Input Tax Credit
all four units in

proportion of their
turnover of the
relevant month, i.e.,
1:5:3:6.
[ITC of IGST is
distributed as IGST
only.]
ITC to be reduced on 9 9
account of credit
note received from
supplier, exclusive to
Kerala unit***
9% of (₹ 118
lakh**** x 100/118)
Total ITC 0 0 2.4 0 0 24 0 0 9.2 -1 -1 2.4
apportioned to each
unit
Negative amount 1 1
apportioned to
Trivandrum unit
shall be added to its
output tax liability
since ITC distributed
to it by ISD is less
than the amount
reduced on account
of credit note
*Being basic value of debit note received, amount of ₹ 50 lakh has been assumed to be exclusive of taxes.
**It has been logically assumed that the additional ITC of ₹ 6 lakh on account of the debit note received
during the month from a supplier in respect of a previous supply pertains to all the four units.
***It has been logically assumed that there is one unit of the company located in Kerala and i.e.,
Trivandrum unit.
****Being total value in credit note received, amount of ₹ 118 lakh has been assumed to be inclusive of
taxes.
Question 43
M/s Fly-by-Night, tour operators, availed input tax credit in respect of certain transactions where no such
supplier was existent or from a person not doing any business from the registered place of business.
Jurisdictional Deputy Commissioner of GST wants to restrict the utilization of the credit by M/s Fly-by-
Night. You have been approached by M/s Fly-by-Night to give your advice on the following questions
raised by it:
(i) Is it possible for the Department to restrict the utilization of credit which is already availed?
(ii) If yes, under what circumstances this can be done by the Department?
Answer
Page 8.73
Input Tax Credit
(i) Yes, it is possible for the Department to restrict the utilization of credit which is already availed if
there are reasons to believe that such ITC has been fraudulently availed or is ineligible.
(ii) The restrictions can be imposed under the following circumstances: -
(a) ITC has been availed on the basis of tax invoices/valid documents -
• issued by a non-existent supplier or by a person not conducting any business from the
registered place of business; or
• without receipt of goods or services or both; or
• the tax in relation to which has not been paid to the Government
(b) Registered person availing ITC has been found non-existent or not to be conducting any
business from the registered place of business; or
(c) Registered person availing ITC is not in possession of tax invoice/valid.
Question 44
Cash and Credit Ltd. is registered with GST Department in the State of Maharashtra. It has its registered
office at Mumbai. It is engaged in the business of production, manufacture and supply of fresh fruits,
vegetables, fresh juices and fruit pulp etc. It has made the following intra-State supplies during the month
of April, 2020:
S. No. Particular Amount in lakh (₹)

1. Fresh fruits 1100
2. Vegetables 1100
3. Fresh juices 2000
4. Carbonated fruit drink 200
GST rate as applicable on above supplies is as follows:
S. No. Particular CGST SGST IGST

1. Fresh fruits Nil Nil Nil
2. Vegetables Nil Nil Nil
3. Fresh juices 6% 6% 12%
4. Carbonated fruit drink 14% 14% 28%
Further, for making the supplies of fruit juices, it has used the services of Goods Transport Agency
("GTA") based in Ahmedabad who have charged them ₹ 20 lakh as charges for their services. Such GTA
have not charged any tax on their invoices. Rate of tax on GTA under reverse charge is 5%.
In respect of the above supply, the company has received the following inward supplies:
S. No. Particular Amount of Amount of input tax credit

purchase thereon
(₹ in lakh) (₹ in lakh)
CGST SGST IGST
1. Fresh fruits for supply 800 Nil Nil Nil
2. Vegetables for supply 1200 Nil Nil Nil
3. Fruit pulp used for fruit juice and carbonated 200 20 20 Nil
drink
4. Sugar used for fruit juice and carbonated drink 100 6 6 Nil

Page 8.74
Input Tax Credit
5. Preservatives for fruit juice and carbonated drink 100 Nil Nil 12
6. Water for fruit juice and carbonated drink 20 Nil Nil Nil
7. Administrative expenses (common) 40 2 2 Nil
8. Marketing expenses (common) 50 Nil Nil 10
9. Purchase of machinery (capital goods) for fruit 40 Nil Nil 8
drink manufacture
10. Motor vehicle for director official use 100 14 14 Nil
Compute the output GST liability, available ITC and payment to be made from Electronic Cash and Credit
Ledger for the month of April, 2020 (considering that the entire ITC shall be utilized for payment of tax).
Answer
Computation of ITC available with Cash and Credit Ltd. for April, 2020
Particulars ITC (₹ in lakh)

CGST SGST IGST
I. Input tax credit on inputs, input services and capital goods
Fruit pulp 20 20
Sugar 6 6
Preservatives 12
Administrative expenses 2 2
Marketing expenses 10
Transportation charges for supply of fruit juices
[Tax is payable by Cash and Credit Ltd. @ 5% under reverse charge.
Further, it is an inter-State supply since supplier is located in
Ahmedabad and place of supply is Maharashtra (location of registered
recipient)]
Machinery 1
Input tax (CGST & SGST/ IGST) paid on inputs, input services and capital 8
goods used in the manufacture of taxable products viz., fresh juices &
carbonated fruit drinks is available as input tax credit
Motor vehicle - -
[ITC on motor vehicle for transportation of persons with seating
capacity of up to13 persons is blocked for a supplier who is not engaged
in further supply of such vehicles, transportation of passengers or
imparting training on driving such vehicles.]
Total 28 28 31
II. Input tax credit to be reversed on inputs and input services
Common credit of CGST on administrative expenses being used
commonly for taxable and exempt products = ₹ 2 lakh
Exempt turnover = ₹ 2200 lakh; Total turnover = ₹ 4400 lakh
Common credit attributable to exempt supply
₹ in lakh [2 x 2200/4400] = ₹1 lakh
Similar reversal for SGST credit (1) (1)
Common credit of IGST on marketing expenses being used commonly (5)
for taxable and exempt products = ₹10 lakh; Common credit attributable

Page 8.75
Input Tax Credit
to exempt supply
₹ in lakh [10 x 2200/4400] = ₹ 5 lakh
Total ITC available for set off 27 27 26
Computation of net GST payable for the month of April, 2020
Particulars Value* CGST SGST IGST

₹ [in lakh] ₹ [in lakh] ₹ [in lakh] ₹ [in lakh]
Intra-State sale of fresh fruits 1100 Nil Nil Nil
Intra-State sale of vegetables 1100 Nil Nil Nil
Intra-State sale of fresh juices 2000 120 120
Intra-State sale of carbonated fruit drinks 200 28 28
Total output tax liability 148 148
Less: Payment from Electronic Credit Ledger
IGST credit being set off against SGST liability as it (26)
can be set off against CGST
and SGST liability in any order and in any
proportion
CGST and SGST credit set off against CGST and (27) (27)
SGST liability respectively
Net GST payable from Electronic Cash Ledger [A] 121 95
GST payable on inward supply of GTA services 1
under reverse charge through Electronic Cash
Ledger [B]
[Tax payable under reverse charge, being not an
output tax, cannot be set off against ITC and thus,
will have to be paid in cash.]
Net GST payable through Electronic Cash Ledger 121 95 1
[A] + [B]
Total GST payable by cash 217
Note: In the above answer, tax payable from Electronic Cash Ledger has been computed by setting off
the IGST credit against SGST liability. However, since IGST credit can be set off against CGST and SGST
liability in any order and in any proportion, the same can be set off against CGST and/or SGST liabilities
in different ways as well. In all such cases, net CGST and net SGST payable from Electronic Cash Ledger
will differ though the total amount of net GST payable (₹ 217 lakh) in cash will remain the same.
*It has been assumed that the amounts given hereunder are exclusive of GST.
Question 45
ABC Ltd., a registered supplier, is engaged in the manufacture of dyeing machines. The company provides
the following information pertaining to GST paid on the purchases made/input services availed by it
during the month of September 2020:
Particulars GST Paid ₹

(i) Purchase of 10 apple i-pads which were given as gift to employees 1,85,000
(ii) Payment for club membership availed by employees as per terms of 90,000
employment

Page 8.76
Input Tax Credit
(iii) Purchase of maxi cab for transport of its employees to and from home to office 70,000
(iv) Purchase of calendars and diaries for distribution as new year compliments to 25,000
customers and distributors
(v) Works contract services availed for erection and installation of RO treatment 35,000
plant in factory
Determine the amount of ITC available to ABC Ltd. for the month of September, 2020 by giving necessary
explanations for treatment of various items. None of expenses incurred for staff was under statutory
obligation and seating capacity of the maxi cab was excluding driver.
Subject to the information given above, all the conditions necessary for availing the ITC have been
fulfilled.
Answer
Computation of ITC available with ABC Ltd. for the month of September, 2020
Particulars GST paid (₹)

Apple i-pads given as gifts to the employees Nil
[ITC in respect of goods that are disposed of by way of gifts is blocked.]
Club membership availed by employees Nil
[ITC on membership of a club is blocked as ABC Ltd. is not under any statutory
obligation to provide the same to its employees.]
Maxi cab for transport of employees 70,000
[ITC on motor vehicles for transportation of persons with seating capacity of more than
(or exceeding) 13 persons (including the driver) used for any purpose, is allowed.]
Calendars and diaries for distribution as compliments to customers and distributors Nil
[ITC in respect of goods that are disposed of by way of gifts is blocked.]
Works contract services for erection and installation of RO treatment plant in factory* 35,000
[ITC on works contract service used for construction of a plant and machinery fixed to
earth by foundation or structural support is allowed.]
*It has been logically assumed that the RO treatment plant installed in the factory is to
be used for making outward supply of dyeing machines.
Total ITC available 1,05,000
Question 46
ABC Co. Ltd., registered under GST, is engaged in the manufacture of heavy machinery. It procured the
following items during the month of July.
S. N. Items GST Paid (Rs.)

(i) Electrical transformers to be used in the manufacturing process 5,20,000
(ii) Trucks used for the transport of raw material 1,00,000
(iii) Raw material 2,00,000
(iv) Confectionery items. These items were supplied free of cost to the 25,000
customers in a customer meet organized by the company
Determine the amount of ITC available with ABC Co. Ltd., for the month of July by giving necessary
explanations for treatment of various items. Assume all the conditions necessary for availing the ITC have
been fulfilled.

Page 8.77
Input Tax Credit
Answer
Computation of ITC available with ABC Co. Ltd. for the month of July
S. N. Items ITC (Rs.)

Electrical transformers [Being goods used in the course or furtherance
(i) 5,20,000
of business, ITC thereon is available in terms of section 16(1)]
Trucks used for the transport of raw material [ITC on motor vehicles
(ii) 1,00,000
used for transportation of goods is not blocked under section 17(5)(a)]
Raw material
(iii) [Being goods used in the course or furtherance of business, ITC thereon 2,00,000
is available in terms of section 16(1)]
Confectionery items for consumption of customers at customers meet
[ITC on food or beverages is specifically disallowed unless the same is
(iv) Nil
used for making outward taxable supply of the same category or as an
element of the taxable composite or mixed supply-Section 17(5)(b)(i)]
Total ITC 8,20,000
Question 47
XYZ Ltd., registered under GST, is engaged in manufacture of taxable goods. Compute the ITC available
with XYZ Ltd. for the month of October, 20XX from the following particulars:
S. No. Inward Supplies GST (Rs.) Remarks

One invoice on which GST payable was Rs. 10,000 is
(i) Input ‘A’ 1,00,000
missing
Inputs are to be received in two installments. First
(ii) Input ‘B’ 50,000
installment has been received in October, 20XX.
XYZ Ltd. has capitalized the capital goods at full invoice
(iii) Capital goods 1,20,000 value inclusive of GST as it will avail depreciation on the
full invoice value.
One invoice dated 20.01.20XX on which GST payable was
(iv) Input Services 2,25,000
Rs. 50,000 has been received in October, 20XX.
Note:
i. All the conditions necessary for availing the ITC have been fulfilled.
ii. The annual return for the financial year ending 31st March 20XX was filed on 15th September,
20XX.
Answer
Computation of ITC available with XYZ Ltd. for the month of October, 20XX
S. No. Inward supplies ITC (Rs.)

(i) Input ‘A’ 90,000
[ITC cannot be taken on missing invoice. The registered person should have the
invoice in its possession to claim ITC-Section 16(2)(a)]
(ii) Input ‘B’ Nil

Page 8.78
Input Tax Credit
[When inputs are received in installments, ITC can be availed only on receipt of
last installment-First proviso to section 16(2)]
(iii) Capital goods Nil
[Input tax paid on capital goods cannot be availed as ITC, if depreciation has
been claimed on such tax component – Section 16(3)]
(iv) Input services 1,75,000
[As per section 16(4), ITC on an invoice cannot be availed after the due date of
furnishing of the return for the month of September following the end of
financial year to which such invoice pertains or the date of filing annual return,
whichever is earlier.
Since the annual return for the FY ending 31st March, 20XX has been filed on
15th September, 20XX (prior to due date of filing the return for September, 20XX
i.e., 20th October, 20XX), ITC on the invoice pertaining to FY ending 31st March,
20XX cannot be availed after 15th September, 20XX.]
Total 2,65,000
Question 48
What are the conditions necessary for obtaining ITC?
Answer
Following four conditions are to be satisfied by the registered taxable person for obtaining ITC:
a) he is in possession of tax invoice or debit note or such other tax paying documents as may be
prescribed;
b) he has received the goods or services or both;
c) subject to section 41, the supplier has actually paid the tax charged in respect of the supply to the
Government; and
d) he has furnished the return under section 39.
Question 49
Can a person take ITC without payment of consideration for the supply along with tax to the supplier?
Answer
Yes, the recipient can take ITC. However, he is required to pay the consideration along with tax within
180 days from the date of issue of invoice. This condition is not applicable where tax is payable on reverse
charge basis. Further, in case of deemed supplies without consideration and additions made to the value
of supplies on account of supplier’s liability, in relation to such supplies, being incurred by the recipient
of the supply, consideration is deemed to have been paid.
Question 50
A taxable person is in the business of information technology. He buys a car (maximum seating capacity
– 5 persons) for use of his Executive Directors. Can he avail the ITC in respect of GST paid on purchase of
such car?

Page 8.79
Input Tax Credit
Answer
No. As per section 17(5)(a), ITC on motor vehicles for transportation of persons with seating capacity of
up to 13 persons (including driver), can be availed only if the taxable person is in the business of
transport of passengers or is providing the services of imparting training on driving such motor vehicles
or is in the business of supply of such motor vehicles.
Question 51
A technical testing agency tests and certifies each batch of machine tools before dispatch by BMT Ltd.
Some of these tools are dispatched to a unit in a SEZ without payment of GST as these supplies are not
taxable. The finance personnel of BMT Ltd. want to know whether they need to carry out reversal of ITC
on the testing agency’s services to the extent attributable to the SEZ supplies. Give your comments.
Answer
Under section 16(2) of the IGST Act, credit of input tax is allowed to be taken for inward supplies used to
make zero rated supplies. Under section 17 of the CGST Act also, ITC is disallowed only to the extent it
pertains to supplies used for non-business purposes or supplies other than taxable and zero-rated
supplies. Supplies to SEZ units are zero rated supplies in terms of section 16(1) of IGST Act. Thus, full ITC
is allowed on inward supplies of BMT Ltd used for effecting supplies to the unit in the SEZ.
Question 52
Mr. A, a registered person was paying tax under Composition Scheme up to 30th July. However, w.e.f.
31st July, Mr. A becomes liable to pay tax under regular scheme. Is he eligible for any ITC?
Answer
Mr. A is eligible for ITC on inputs held in stock and inputs contained in semi- finished or finished goods
held in stock and capital goods as on 30th July. ITC on capital goods will be reduced by 5% per quarter
or part thereof from the date of invoice [Section 18(1)(c)].
Question 53
What are the conditions applicable to Input Service Distributor to distribute the credit?
Answer
The following conditions are applicable to Input Service Distributor to distribute the input tax credit
(ITC):
(i) The credit can be distributed to the recipients of credit against an ISD invoice containing prescribed
details.
(ii) The amount of the credit distributed shall not exceed the amount of credit available for
distribution.
(iii) The credit connected to an input service must be distributed only to the particular recipient to
whom that input service is attributable.
(iv) If the input service is attributable to more than one recipient, the relevant ITC is distributed pro
rata to such recipients in the ratio of turnover of the recipient in a State/ Union Territory to the
aggregate turnover of all the recipients to whom the input service is attributable and which are
operational during the current year.
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Input Tax Credit
(v) ITC pertaining to input services which are common for all units, is distributed to all the recipients
in the ratio of turnover in the prescribed manner.
(vi) ITC available for distribution in a month shall be distributed in the same month and the details
thereof shall be furnished in the prescribed form.
(vii) Both ineligible and eligible ITC are to be distributed separately.
(viii) ITC of CGST, SGST/UTGST and IGST are to be distributed separately.
(ix) ITC of CGST, SGST/UTGST in respect of recipient located in the same State/Union Territory is
distributed as CGST and SGST/UTGST respectively.
(x) ITC of CGST and SGST/UTGST, in respect of a recipient located in a different State/Union territory,
is distributed as IGST (total of ITC of CGST and SGST/UTGST which were to be distributed to such
recipient).
(xi) ITC on account of IGST is distributed as IGST.
Question 54
Mr. X, a supplier of goods, pays GST under regular scheme. He has made the following outward taxable
supplies in a tax period:
Particulars (₹)
Intra-State supply of goods 8,00,000
Inter-State supply of goods 3,00,000
He has also furnished the following information in respect of purchases made by him in that tax period:
Particulars (₹)
Intra-State purchases of goods 2,00,000
Inter-State purchases of goods 50,000
Mr. X has following ITCs with him at the beginning of the tax period:
Particulars (₹)
CGST 57,000
SGST Nil
IGST 70,000
Note:
i. Rate of CGST, SGST and IGST to be 9%, 9% and 18% respectively.
ii. Both inward and outward supplies are exclusive of taxes, wherever applicable.
iii. All the conditions necessary for availing the ITC have been fulfilled.
Compute the minimum GST, payable in cash, by Mr. X during the tax period. Make suitable assumptions
as required.
Answer
Computation of minimum GST payable in cash by Mr. X on outward supplies
Particulars (₹) GST (₹)

Intra-State supply of goods
CGST @ 9% on Rs. 8,00,000 72,000

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Input Tax Credit
SGST @ 9% on Rs. 8,00,000 72,000 1,44,000

Inter-State supply of goods
IGST @ 18% on Rs. 3,00,000 54,000
Total GST payable 1,98,000
Computation of total ITC
Particulars CGST @ 9% (₹) SGST @ 9% (₹) IGST @ 18% (₹)

Opening ITC 57,000 Nil 70,000
Add: ITC on Intra-State purchases of
18,000 18,000 Nil
goods valuing ₹ 2,00,000
Add: ITC on Inter-State purchases of
Nil Nil 9,000
goods valuing ₹ 50,000
Total ITC 75,000 18,000 79,000
Computation of minimum GST payable in cash
Particulars CGST @ 9% (₹) SGST @ 9% (₹) IGST @ 18% (₹)

GST Payable 72,000 72,000 54,000
Less: ITC (Nil)-IGST (25,000)-IGST (54,000)-IGST
(72,000)-CGST (18,000)-SGST
Minimum GST payable in cash Nil 29,000 Nil
Note: Since sufficient balance of ITC of CGST is available for paying CGST liability and cross utilization of
ITC of CGST and SGST is not allowed, ITC of IGST has been used to pay SGST (after paying IGST liability)
to minimize cash outflow.

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CHAPTER - 9
Registration
Question 1
Mahadev Enterprises, a sole proprietorship firm, opened a shopping complex dealing in supply of ready-
made garments at multiple locations, i.e. in Himachal Pradesh, Uttarakhand and Tripura in the month of
June.
It has furnished the following details relating to the supply made at such multiple locations for the month
of June:
Particulars Himachal Pradesh (₹)* Uttarakhand (₹)* Tripura (₹)*

Intra-State supply of taxable 22,50,000 - 7,00,000
goods
Intra-State supply of exempted - - 6,00,000
goods
Intra-State supply of non- - 21,00,000 40,000
taxable goods
*excluding GST
With the help of the above mentioned information, answer the following questions giving reasons:
(1) Determine whether Mahadev Enterprises is liable to be registered under GST law and what is the
threshold limit of taking registration in this case assuming that it is not required to pay any tax on
inward supplies under reverse charge.
(2) Explain with reasons whether your answer in (1) will change in the following independent cases:
(a) If Mahadev Enterprises is dealing exclusively in taxable supply of goods only from Himachal
Pradesh;
(b) If Mahadev Enterprises is dealing in taxable supply of goods and services only from Himachal
Pradesh;
(c) If Mahadev Enterprises is dealing in taxable supply of goods only from Himachal Pradesh and
has also effected inter-State supplies of taxable goods (other than notified handicraft goods)
amounting to ₹ 4,00,000.
Answer
As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a supplier is liable to be
registered in the State/ Union territory from where he makes a taxable supply of goods and/or services,
if his aggregate turnover in a financial year exceeds the threshold limit. The threshold limit for a person
making exclusive intra-State taxable supplies of goods is as under:
(i) ₹ 10 lakh for the States of Mizoram, Tripura, Manipur and Nagaland.
(ii) ₹ 20 lakh for the States of States of Arunachal Pradesh, Meghalaya, Puducherry, Sikkim, Telangana
and Uttarakhand.
(iii) ₹ 40 lakh for rest of India.
The threshold limit for a person making exclusive taxable supply of services or supply of both goods and
services is as under:
(ii) ₹ 20 lakh for the rest of India.

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As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.
The above is computed on all India basis.
In the light of the afore-mentioned provisions, the aggregate turnover of Mahadev Enterprises is
computed as under:
Computation of State-wise aggregate turnover of Mahadev Enterprises
Particulars Himachal Uttarakhand Tripura (₹)*

Pradesh (₹)* (₹)*
Intra-State supply of taxable goods 22,50,000 - 7,00,000
Intra-State supply of exempted goods - - 6,00,000
Intra-State supply of non- taxable goods [As - 21,00,000 40,000
per section 2(47), exempt supply includes
non-taxable supply. Thus, intra-State Supply
of non-taxable goods in Uttarakhand, being a
non-taxable supply, is an exempt supply and
is, therefore, included in the aggregate
turnover]
Aggregate Turnover 22,50,000 21,00,000 13,40,000
In the given case, Mahadev Enterprises is engaged in exclusive intra-State supply of goods from Himachal
Pradesh, Tripura and Uttarakhand. However, since Mahadev Enterprises makes taxable supply of goods
from one of the specified Special Category States (i.e. Tripura), it will not be eligible for the higher
threshold limit of ₹ 40 lakh; instead, the threshold limit for registration will be reduced to ₹ 10 lakh.
(1) In view of the above-mentioned provisions, Mahadev Enterprises is liable to be registered under GST
law with the aggregate turnover amounting to ₹ 56,90,000 (computed on all India basis). The
applicable threshold limit of registration in this case is ₹ 10 lakh. Further, he is not liable to be
registered in Uttarakhand since he is not making any taxable supply from Uttarakhand.
(2) (a) If Mahadev Enterprises is dealing in supply of goods only from Himachal Pradesh, the applicable
threshold limit of registration would be ₹ 40 lakh. Thus, Mahadev Enterprises will not be liable
for registration as its aggregate turnover would be ₹ 22,50,000.
(b) If Mahadev Enterprises is dealing in taxable supply of goods and services only from Himachal
Pradesh then higher threshold limit of ₹ 40 lakh will not be applicable as the same applies only
in case of exclusive supply of goods. Therefore, in this case, the applicable threshold limit will
be ₹ 20 lakh and hence, Mahadev Enterprises will be liable to registration.
(c) In case of inter-State supplies of taxable goods, section 24 requires compulsory registration
irrespective of the quantum of aggregate turnover. Thus, Mahadev Enterprises will be liable to
registration.
Question 2
LMN Pvt. Ltd., Coimbatore exclusively manufactures and sells product ‘X’ which is exempt from GST vide
notifications issued under relevant GST legislations. The company sells product ‘X’ only within Tamil
Nadu and is not registered under GST. Further, all the inward supply of the company are taxable under

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forward charge. The turnover of the company in the previous year was ₹ 45 lakh. The company expects
the sales to grow by 30% in the current year. The company purchased additional machinery for
manufacturing ‘X’ on 1st July. The purchase price of the capital goods was ₹ 30 lakh exclusive of GST @
18%.
However, effective from 1st November, exemption available on ‘X’ was withdrawn by the Central
Government and GST @ 12% was imposed thereon. The turnover of the company for the half year ended
on 30th September was ₹ 45 lakh.
(a) Examine the above scenario and advise LMN Pvt Ltd. whether it needs to get registered under GST.
(b) If the answer to the above question is in affirmative, advise LMN Pvt. Ltd. whether it can avail input
tax credit on the additional machinery purchased exclusively for manufacturing “X”?
Answer
(a) Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019 inter alia provides that every
supplier who is exclusively engaged in intra-State supply of goods is liable to be registered under
GST in the State/ Union territory from where he makes the taxable supply of goods only when
aggregate turnover in a financial year exceeds ₹ 40,00,000.
However, the above provisions are not applicable to few specified States, i.e. States of Arunachal
Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura,
Uttarakhand.
Further, a person exclusively engaged in the business of supplying goods and/or services that are
not liable to tax or are wholly exempt from tax is not liable to registration in terms of section
23(1)(a).
In the given case, the turnover of the company for the half year ended on 30th September is ₹ 45
lakh which is more than the applicable threshold limit of ₹ 40 lakh. Therefore, as per above
mentioned provisions, the company should be liable to registration. However, since LMN Pvt. Ltd.
supplied exempted goods till 31st October, it was not required to be registered till that day; though
voluntary registration was allowed under section 25(3).
However, the position will change from 1st November as the supply of goods become taxable from
that day and the turnover of company is above ₹ 40 lakh. It is important to note here that in terms
of section 2(6), the aggregate turnover limit of ₹ 40 lakh includes exempt turnover also.
Therefore, turnover of ‘X’ prior to 1st November will also be considered for determining the limit of
₹ 40 lakh even though the same was exempt from GST. Therefore, the company needs to register
within 30 days from 1st November (the date on which it becomes liable to registration) in terms of
section 25(1).
(b) Section 18(1)(a) provides that 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 shall be
entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-
finished or finished goods held in stock on the day immediately preceding the date from which he
becomes liable to pay tax under the provisions of this Act.
Thus, LMN Pvt. Ltd. cannot avail credit for additional machinery purchased exclusively for
manufacturing X as input tax credit of only inputs is allowed when a person gets registered for the
first time.
Question 3
SNP Pvt. Ltd., Coimbatore exclusively manufactures and sells product ‘Z’ which is exempt from GST vide

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notifications issued under relevant GST legislations. The company sells product ‘Z’ only within Tamil
Nadu and it not registered under GST. Further, all the inward supply of the company are taxable under
the sales to grow by 20% in the current year. Owing to the growing demand for the product, the company
decided to increase its production capacity and purchased additional machinery for manufacturing ‘Z’ on
1st July. The purchase price of the capital goods was ₹ 20 lakh exclusive of GST @ 18%.
However, effective from 1st November, exemption available on ‘Z’ was withdrawn by the Central
(a) The Board of Directors of SNP Pvt. Ltd. wants to know whether they have to register under GST?
(b) In case in the above question, SNP Pvt. Ltd. is already registered with respect to certain taxable
supplies being made by it along with manufacture of exempt product ‘Z’, other facts remaining the
same, can it take input tax credit on additional machinery purchased exclusively for manufacturing
‘Z’? If yes, then how much credit can be availed?
Advice SNP Pvt. Ltd. on the above issues with reference to the provisions of GST law.
Answer
(a) Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019 inter alia provides that
every supplier who is exclusively engaged in intra-State supply of goods is liable to be registered
under GST in the State/ Union territory from where he makes the taxable supply of goods only
when aggregate turnover in a financial year exceeds ₹ 40,00,000.
Uttarakhand.
However, a person exclusively engaged in the business of supplying goods and/or services that are
23(1)(a).
lakh which is more than the applicable threshold limit of ₹ 40 lakh. Therefore, as per section 22,
the company will be liable to registration. However, since SNP Pvt. Ltd. supplied exempted goods
till 31st October, it was not required to be registered till that day; though voluntary registration
was allowed under section 25(3).
Therefore, turnover of ‘Z’ will be considered for determining the threshold limit even though the
same was exempt from GST. Therefore, the company needs to register within 30 days from
1st November (the date on which it becomes liable to registration) in terms of section 25(1).
Further, the company cannot avail exemption of ₹ 40 lakh from 1st November as the GST law does
not provide any threshold exemption from payment of tax but threshold exemption from obtaining
registration (which in this case had been crossed).
(b) Rule 43(1)(a) of the CGST Rules, 2017 disallows input tax credit on capital goods used or intended
to be used exclusively for effecting exempt supplies.
However, as per section 18(1)(d), where an exempt supply of goods and/or services by a registered
person becomes a taxable supply, such person gets entitled to take credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable

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to such exempt supply and on capital goods exclusively used for such exempt supply on the day
immediately preceding the date from which such supply becomes taxable.
Rule 40(1)(a) of the CGST Rules, 2017 lays down that the credit on capital goods can be claimed
after reducing the t
ax paid on such capital goods by 5% per quarter of a year or part thereof from the date of the
invoice.
Therefore, in the given case, SNP Pvt. Ltd. could not claim credit on machinery till the time the
supply of product ‘Z’ for which said machinery was being used was exempt. However, it can claim
credit from 31st October - the day immediately preceding the date from which the supply of
product ‘Z’ became taxable (1st November).
The credit will be available for the remaining useful life of the machinery and will be computed as
follows:
Date of purchase of machinery 1st July

Date on which credit becomes eligible 31st October
Number of quarters for which credit is to be reduced 2 (including part of quarter)
GST paid on machinery [₹ 20,00,000 x 18%] ₹ 3,60,000
Credit to be reduced ₹ 3,60,000 x 5% x 2] ₹ 36,000
Amount of credit that can be taken [₹ 3,60,000 – ₹ 36,000] ₹ 3,18,000
Question 4
Rishabh Enterprises – a sole proprietorship firm – started an air-conditioned restaurant in Virar,
Maharashtra in the month of February wherein the customers are served cooked food as well as cold
drinks/non-alcoholic beverages. In March, the firm opened a liquor shop in Raipur, Uttarakhand for
trading of alcoholic liquor for human consumption.
Determine whether Rishabh Enterprises is liable to be registered under GST law with the help of the
following information:
Particulars February (₹)* March (₹)*

Serving of cooked food and cold drinks/non- alcoholic beverages 5,50,000 6,50,000
in restaurant in Maharashtra
Sale of alcoholic liquor for human consumption in Uttarakhand 5,00,000
Supply of packed food items from restaurant in Maharashtra 1,50,000 2,00,000
* excluding GST
You are required to provide reasons for treatment of various items given above.
Answer
making exclusive intra-State taxable supplies of goods is as under:-
and Uttarakhand.

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services is as under:-
As per section 2(6), aggregate turnover includes the aggregate value of:
(i) all taxable supplies,
(ii) all exempt supplies,
(iii) exports of goods and/or services and
(iv) all inter-State supplies of persons having the same PAN.
The above is computed on all India basis. Further, the aggregate turnover excludes central tax, State tax,
Union territory tax, integrated tax and cess. Moreover, the value of inward supplies on which tax is
payable under reverse charge is not taken into account for calculation of ‘aggregate turnover’.
In the given question, since Rishabh Enterprises is engaged in making taxable supplies of goods and
services from Maharashtra and non-taxable supplies from Uttarakhand, the threshold limit for obtaining
registration is ₹ 20 lakh.
In the light of the afore-mentioned provisions, the aggregate turnover of Rishabh Enterprises is
computed as under:
Computation of aggregate turnover of Rishabh Enterprises
Particulars Turnover of February Cumulative turnover of

(₹) February & March (₹)
Serving of cooked food and cold drinks/non-
12,00,000
alcoholic beverages in restaurant in 5,50,000
[₹ 5,50,000 + ₹ 6,50,000]
Maharashtra
Add: Sale of alcoholic liquor for human
consumption in Uttarakhand [As per section
2(47), exempt supply includes non- taxable
supply. Thus, supply of alcoholic liquor for
5,00,000
human consumption in Uttarakhand, being a
non-taxable supply, is an exempt supply and
is, therefore, includible while computing the
aggregate turnover.]
Add: Supply of packed food items from 3,50,000
1,50,000
restaurant in Maharashtra [₹ 1,50,000 + ₹ 2,00,000]
Aggregate Turnover 7,00,000 20,50,000
Rishabh Enterprises was not liable to be registered in the month of February since its aggregate turnover
did not exceed ₹ 20 lakh in that month. However, since its aggregate turnover exceeds ₹ 20 lakh in the
month of March, it should apply for registration within 30 days from the date on which it becomes liable
to registration. Further, he is not liable to be registered in Uttarakhand since he is not making any taxable
supply from Uttarakhand
Question 5
AB Pvt. Ltd., Pune provides house-keeping services. The company supplies its services exclusively
through an e-commerce website owned and managed by Hi-Tech Indya Pvt. Ltd., Pune. The turnover of
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AB Pvt. Ltd. in the current financial year is ₹ 18 lakh.

Advise AB Pvt. Ltd. as to whether they are required to obtain GST registration. Will your advice be any
different if AB Pvt. Ltd. sells readymade garments exclusively through the e-commerce website owned
and managed by Hi-Tech Indya Pvt. Ltd.?
Answer
As per section 22 of the CGST Act every supplier of goods or services or both is required to obtain
registration in the State/ Union territory from where he makes the taxable supply if his aggregate
turnover exceeds threshold limit in a financial year.
However, section 24 of the said Act enlists certain categories of persons who are mandatorily required
to obtain registration, irrespective of their turnover. Persons who supply goods or services or both
through such electronic commerce operator (ECO), who is required to collect tax at source under section
52, is one such person specified under clause (ix) of section 24. However, where the ECO is liable to pay
tax on behalf of the suppliers of services under a notification issued under section 9(5), the suppliers of
such services are entitled for threshold exemption.
Section 2(45) of the CGST Act defines ECO as any person who owns, operates or manages digital or
electronic facility or platform for electronic commerce. Electronic commerce is defined under section
2(44) to mean the supply of goods or services or both, including digital products over digital or electronic
network. Since Hi-Tech Indya Pvt. Ltd. owns and manages a website for e commerce where both goods
and services are supplied, it will be classified as an ECO under section 2(45).
Notification No. 17/2017 CT (R) dated 28.06.2017 issued under section 9(5) specifies services by way of
house-keeping, except where the person supplying such service through ECO is liable for registration
under section 22(1), as one such service where the ECO is liable to pay tax on behalf of the suppliers
In the given case, AB Pvt. Ltd. provides house-keeping services through an ECO. It is presumed that Hi-
Tech Indya is an ECO which is required to collect tax at source under section 52. However, house-keeping
services provided by AB Pvt. Ltd., which is not liable for registration under section 22(1) as its turnover
is less than ₹20 lakh, is a service notified under section 9(5). Thus, AB Pvt. Ltd. will be entitled for
threshold exemption for registration and will not be required to obtain registration even though it
supplies services through ECO.
In the second case, AB Pvt. Ltd. sells readymade garments through ECO. Such supply cannot be notified
under section 9(5) as only supplies of services are notified under that section. Therefore, in the second
case, AB Pvt. Ltd. will not be entitled for threshold exemption and will have to compulsorily obtain
registration in terms of section 24(ix).
Question 6
Discuss the procedure for amendment of registration under CGST Act and rules thereto?
Answer
The procedure for amendment of registration are contained in section 28 read with rule 19 of CGST Rules.
The significant aspects of the same are discussed hereunder:
1. Where there is any change in the particulars furnished in registration application/UIN application
at the time of obtaining the registration or thereafter, registered person shall submit an application
in prescribed manner, within 15 days of such change, along with documents relating to such change
at the Common Portal.
2. In case of amendment of core fields of information, the proper officer may, on the basis of
information furnished or as ascertained by him, approve or reject amendments in the registration
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particulars in the prescribed manner. Such amendment shall take effect from the date of occurrence
of event warranting such amendment.
3. However, where change relates to non-core fields of information, registration certificate shall stand
amended upon submission of the application for amendment on the Common Portal.
4. Where a change in the constitution of any business results in change of PAN of a registered person,
the said person shall apply for fresh registration. The reason for the same is that GSTIN is PAN based.
Any change in PAN would warrant a new registration.
Question 7
Pari & Sons is an unregistered dealer. On 10th August, aggregate turnover of Pari & Sons exceeded ₹
20,00,000. The firm applied for registration on 27th August and was granted the registration certificate
on 1st September.
Under CGST Rules, 2017, you are required to advise Pari & Sons as to what is the effective date of
registration in its case. It has also sought your advice regarding period for issuance of revised tax
invoices.
Answer
Section 22(1) provides that every supplier is liable to be registered under this Act in the State or Union
territory, other than special category States, from where he makes a taxable supply of goods or services
or both, if his aggregate turnover in a financial year exceeds the threshold limit.
Section 25(1) provides that a supplier whose aggregate turnover in a financial year exceeds the threshold
limit in a State/UT is liable to apply for registration within 30 days from the date of becoming liable to
registration (i.e., the date of crossing the threshold limit).
Where the application is submitted within the said period, the effective date of registration is the date on
which the person becomes liable to registration vide rule 10(2) of the CGST Rules, 2017; otherwise it is
the date of grant of registration in terms of rule 10(3) of the CGST Rules, 2017.
In the given case, since Pari & Sons have applied for registration on 27th August which is within 30 days
from the date of becoming liable to registration (10th August), its effective date of registration is 10th
August.
Further, every registered person who has been granted registration with effect from a date earlier than
the date of issuance of registration certificate to him, may issue revised tax invoices in respect of taxable
supplies effected during this period within one month from the date of issuance of registration certificate
[Section 31(3)(a) read with rule 53(2) of CGST Rules, 2017]23.
In view of the same, Pari & Sons may issue revised tax invoices against the invoices already issued during
the period between effective date of registration (10th August) and the date of issuance of registration
certificate (1st September), on or before 1st October.
Question 8
With the help of the following information in the case of M/s Jayant Enterprises, Jaipur (Rajasthan) for
the financial year, determine the aggregate turnover for the purpose of registration under the CGST Act.

(i) Sale of diesel on which Sale Tax (VAT) is levied by Rajasthan Government. 1,00,000

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(ii) Supply of goods, after completion of job work, from the place of Jayant 3,00,000
Enterprises directly by principal by declaring the place of M/s Jayant
Enterprises as its additional place of business.
(iii) Export of goods to England (U.K.) 5,00,000
(iv) Supply to Rajasthan. Its own additional place of business in 5,00,000
(v) Outward supply of services on which GST is to be paid by recipient under 1,00,000
reverse charge.
All the above amounts are excluding GST.

You are required to provide reasons for treatment of various items given above.
Answer
Computation of aggregate turnover of M/s Jayant Enterprises for the FY
Particulars ₹
Supply of diesel on which Sales Tax (VAT) is levied by Rajasthan Government [Note-1] 1,00,000
Supply of goods, after the completion of job work, from the place of Jayant Enterprises, Nil
directly by the principal [Note-2]
Export supply to England [Note-3] 5,00,000
Supply to its own additional place of business in Rajasthan24 [Note-4] Nil
Outward supply of services on which GST is to be paid by recipient under reverse 1,00,000
charge [Note-5]
Aggregate turnover 7,00,000
Notes:-
1. As per section 2(47), exempt supply includes non-taxable supply. Thus, supply of diesel, being a non-
taxable supply, is an exempt supply and exempt supply is specifically includible in aggregate
turnover in terms of section 2(6).
2. Supply of goods after completion of job work by a principal by declaring the place of business of job
worker its additional place of business shall be treated as the supply of goods by the principal in
terms of explanation (ii) to section 22.
3. Export supplies are specifically includible in the aggregate turnover in terms of section 2(6).
4. Supply made without consideration to units within the same State (under same registration) is a not
a supply and hence not includible in aggregate turnover.
5. Outward supplies taxable under reverse charge would be part of the “aggregate turnover” of the
supplier of such supplies. Such turnover is not included as turnover in the hands of recipient.
making exclusive intra-State taxable supplies of goods is as under:-
and Uttarakhand.
services is as under:-

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The applicable turnover limit for registration, in the given case, will be ₹ 20 lakh as Rajasthan is not a
Special Category State and M/s. Jayant Enterprises is engaged in supply of goods and services. Although,
the aggregate turnover of M/s Jayant Enterprises does not exceed ₹ 20 lakh, it is compulsorily required
to register in terms of section 24(i) irrespective of the turnover limit as it is engaged in making inter-
State supply of goods in the form of exports to England.
Question 9
Rajesh Dynamics, having its head office in Chennai, Tamil Nadu carries on the following activities with
respective turnovers in a financial year:
₹
Supply of petrol at Chennai, Tamil Nadu 18,00,000
Value of inward supplies on which tax is payable on reversecharge basis 9,00,000
Supply of transformer oil at Chennai, Tamil Nadu 2,00,000
Value of branch transfer from Chennai, Tamil Nadu to Bengaluru, Karnataka without 1,50,000
payment of consideration
Value of taxable supplies at Manipur branch 11,50,000
It argues that it does not have taxable turnover crossing threshold limit of ₹40,00,000 either at Chennai,
Tamil Nadu or Bengaluru, Karnataka and including turnover at Manipur branch. It believes that the
determination of aggregate turnover is not required for the purpose of obtaining registration, but is
required for determining composition levy.
Decide based on the above facts:
(i) The aggregate turnover of Rajesh Dynamics.
(ii) All conditions that fulfil the requirements for registration under CGST Act in the given
circumstances.
Answer
Computation of aggregate turnover of Rajesh Dynamics:
Particulars ₹
Supply of petrol at Chennai, Tamil Nadu [Being a non- taxable supply, it is an exempt 18,00,000
supply and thus, includible in aggregate turnover vide section 2(6)]
Value of inward supplies on which tax is payable on reversecharge basis Nil
Supply of transformer oil at Chennai, Tamil Nadu 2,00,000
Value of branch transfer from Chennai, Tamil Nadu to Bengaluru, Karnataka without 1,50,000
payment of consideration [Being a taxable supply, it is includible in aggregate
turnover]
Value of taxable supplies of Manipur Branch 11,50,000
Aggregate turnover 33,00,000
Rajesh Dynamics is not liable to be registered in Chennai, Tamil Nadu, if his aggregate turnover in a
financial year does not exceeds ₹ 40 lakh. However, since Rajesh Dynamics also makes taxable supplies
from Manipur, a specified Special Category State, the threshold exemption gets reduced to ₹ 10 lakh in
terms of section 22(1) [Notification No.10/2019-CT dated. 07.03.2019].

Page 9.10
Registration
Rajesh Dynamics’ argument that it is not liable to registration since the threshold exemption of ₹ 40 lakh
is not being crossed either at Chennai, Tamil Nadu, Bengaluru, Karnataka or Manipur is not correct as
firstly, the aggregate turnover to be considered in its case is ₹ 10 lakh and not ₹ 40 lakh and secondly, the
same is computed on all India basis and not State- wise.
Further, Rajesh Dynamics is also wrong in believing that aggregate turnover is computed only for the
purpose of determining the eligibility limit for composition levy since the aggregate turnover is required
for determining the eligibility for both registration and composition levy.
Further, Rajesh Dynamics is compulsorily required to register under section 24 irrespective of the
turnover limit as it is liable to pay tax on inward supplies under reverse charge and it also makes inter-
State taxable supply.

Page 9.11
Registration

Question 10
What is the validity period of the registration certificate issued to a casual taxable person and non-
resident taxable person?
Answer
In terms of section 27(1) read with proviso thereto, the certificate of registration issued to a “casual
taxable person” or a “non-resident taxable person” shall be valid for a period specified in the application
for registration or 90 days from the effective date of registration, whichever is earlier. However, the
proper officer, at the request of the said taxable person, may extend the validity of the aforesaid period
of 90 days by a further period not exceeding 90 days.
Question 11
Determine whether registration has to be obtained under GST in case of the following as per provisions
contained under CGST Act, 2017.
(1) Fine oils is engaged in the business of machine oil as well as petrol and diesel. The total turnover
on supply of machine oil is only Rs. 8 lakhs and in case of petrol and diesel is Rs. 8 crores.
(2) Ramlal, an agriculturist, for supply of produce out of cultivation of land amounting to Rs. 21 lakhs.
Answer
(1) Supply of petrol and diesel is not leviable to GST, but supply of machine oil is taxable. In order to
determine whether Fine oils is liable for registration, turnover of both the supplies, non taxable as
well as taxable would be taken into account for the threshold of Rs. 20 lakhs. Here the turnover of
machine oil, petrol and diesel exceeds Rs. 20 lakhs (Rs. 8.08 crores). Thus, Fine oils is liable for
registration.
(2) As per section 23 of the CGST Act, an agriculturist, to the extent of supply of produce out of
cultivation of land is not liable for registration under GST. In the case of Mr. Ramlal, even though
the turnover of produce out of cultivation has exceeded Rs. 20 lakhs, he will not be liable for
registration.
Question 12
Dharma Dutta has taken voluntary registration and has not opted for the composition scheme of levy. He
is aggrieved by the cancellation of his registration under GST, although he is filing Nil returns, as he has
not conducted any business for the past 8 months. He wants to know the circumstances under which the
proper officer can cancel registration on his own.
Answer
GST registration may be cancelled suo motu by GST Officer if the registered person: -
(i) does not conduct any business from the place of business
(ii) violates the anti-profiteering provisions
(iii) issues invoice/bill without supply of goods / services
(iv) does not file his GST return for six months
(v) does not file his GST return consecutive tax periods if he has opted for composition levy

Page 9.12
Registration
(vi) has not commenced business within 6 months from date of registration
(vii) has obtained the registration by means of fraud, wilful misstatement or suppression of facts.
Question 13
Decide with reason whether the registration is required under CGST Act, 2017 in the following
independent cases:
(i) A casual taxable person (CTP) has provided inter-State supply of notified products being textiles
hand printing amounting to ₹ 19.25 lakh during the month of January, 2020. Those products were
made by craftsmen by both hand and machines equally. CTP had obtained PAN and generated e-
way bill for supply.
(ii) Mr. Bantu of Delhi doing trading business across India and his intra-State turnover details are as
below,
(1) Taxable supplies made from Delhi - ₹ 18 lakh.
(2) Exempt supplies made from Andhra Pradesh - ₹ 10 lakh.
(3) Both taxable and exempt supplies made from Tamilnadu - ₹ 5,00,000 and ₹ 6,00,000
respectively.
Answer
(i) A casual taxable person (CTP) is liable to be registered compulsorily under GST irrespective of the
threshold limit.
However, CTPs making inter-State taxable supplies of notified products, when made by the
craftsmen predominantly by hand even though some machinery may also be used in the process,
have been exempted from obtaining registration if their aggregate turnover does not exceed ₹ 20
lakh [₹ 10 lakh for specified special category States].
Since, in the given case, the notified products were made by craftsmen by both hand and machines
equally, they are not eligible for exemption and are required to obtain registration mandatorily.
(ii) For a supplier exclusively engaged in intra-State supply of goods, the threshold limit of turnover to
obtain registration in the States of Delhi, Andhra Pradesh and Tamil Nadu is ₹ 40 lakh. Aggregate
turnover includes value of all taxable and exempt supplies under same PAN.
Thus, aggregate turnover of Mr. Bantu doing trading business across India (It has been assumed
that Mr. Bantu makes only intra-State supplies across India.)
= ₹ (18 lakh +10 lakh + 5 lakh + 6 lakh)
= ₹ 39 lakh.
Therefore, Mr. Bantu is not liable for registration as his turnover does not exceed ₹ 40 lakh.
Question 14
Determine the effective date of registration in following cases:
a. The aggregate turnover of Dhampur Footwear Industries of Delhi has exceeded the applicable
threshold limit of Rs. 40 lakh on 1st September. It submits the application for registration on 20th
September. Registration certificate is granted to it on 25th September.
b. Mehta Teleservices is an architect in Lucknow. Its aggregate turnover exceeds Rs. 20 lakh on 25th
October. It submits the application for registration on 27th November. Registration certificate is
granted to it on 5th December.

Page 9.13
Registration
Answer
a. Every supplier becomes liable to registration if his turnover exceeds the applicable threshold limit
[Rs. 40 lakh in this case] in a financial year [Section 22 read with Notification No. 10/2019 CT dated
07.03.2019]. Since in the given case, the turnover of Dhampur Industries exceeded Rs. 40 lakh on
1st September, it becomes liable to registration on said date
Further, since the application for registration has been submitted within 30 days from such date,
the registration shall be effective from the date on which the person becomes liable to registration
[Section 25 read with rule 10 of the CGST Rules, 2017]. Therefore, the effective date of registration
is 1st September.
b. Since in the given case, the turnover of Mehta Teleservices exceeds the applicable threshold limit
[Rs. 20 lakh] on 25th October, it becomes liable to registration on said date.
Further, since the application for registration has been submitted after 30 days from the date such
person becomes liable to registration, the registration shall be effective from the date of grant of
registration. Therefore, the effective date of registration is 5th December.
Question 15
In order to be eligible for grant of registration, a person must have a Permanent Account Number issued
under the Income- tax Act, 1961. State one exception to it.
Answer
A Permanent Account Number is mandatory to be eligible for grant of registration. One exception to this
is a non-resident taxable person. A non- resident taxable person may be granted registration on the basis
of other prescribed documents instead of PAN. He has to submit a self-attested copy of his valid passport
along with the application signed by his authorized signatory who is an Indian Resident having valid PAN
and application will be submitted in a different prescribed form.
Question 16
State which of the following suppliers are liable to be registered:
a. Agent supplying goods on behalf of some other taxable person and its aggregate turnover does not
exceed the applicable threshold limit during the financial year.
b. An agriculturist who is only engaged in supply of produce out of cultivation of land and its
aggregate turnover does not exceed the applicable threshold limit during the financial year.
Answer
a. Section 22 stipulates that every supplier becomes liable to registration if his turnover exceeds the
applicable threshold limit in a financial year. However, as per section 24, a person supplying
goods/services or both on behalf of other taxable persons whether as an agent or not is liable to be
compulsorily registered even if its aggregate turnover does not exceed the applicable threshold
limit during the financial year.
b. As per section 23, an agriculturist who is only engaged in supply of produce out of cultivation of
land is not required to obtain registration.
Question 17
Page 9.14
Registration
What are the advantages of taking registration in GST?
Answer
Registration will confer following advantages to the business:
• Legally recognized as supplier of goods or services.
• Proper accounting of taxes paid on the input goods or services which can be utilized for payment
of GST due on supply of goods or services or both by the business.
• Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid on the
goods or services supplied to purchasers or recipients.
• Become eligible to avail various other benefits and privileges rendered under the GST laws.

Page 9.15
CHAPTER - 10
Tax Invoice, Credit and Debit Notes
Question 1
Jai, a registered supplier, runs a general store in Ludhiana, Punjab. Some of the goods sold by him are
exempt whereas some are taxable. You are required to advise him on the following issues:
(i) Whether Jai is required to issue a tax invoices in all cases, even if he is selling the goods to the end
consumers?
(ii) Jai sells some exempted as well as taxable goods valuing ₹ 5,000 to a school student. Is he
mandatorily required to issue two separate GST documents?
(iii) Jai wishes to know whether it’s necessary to show tax amount separately in the tax invoices issued
to the customers. You are required to advise him.
Answer
(i) No, he is not required to issue tax invoice in all cases. As per section 31(1), every registered person
supplying taxable goods is required to issue a ‘tax invoice’. Section 31(3)(c) stipulates that every
registered person supplying exempted goods is required to issue a bill of supply instead of tax
invoice.
Further, rule 46A provides that a registered person supplying taxable as well as exempted goods
or services or both to an un-registered person may issue a single ‘invoice-cum-bill of supply’ for all
such supplies.
However, as per section 31(3)(b) read with rule 46, a registered person may not issue a tax invoice
if:
(i) value of the goods supplied <₹ 200,
(ii) the recipient is unregistered; and
(iii) the recipient does not require such invoice.
Instead, such registered person shall issue a Consolidated Tax Invoice for such supplies at the close
of each day in respect of all such supplies.
(ii) As per rule 46A, where a registered person is supplying taxable as well as exempted goods or
services or both to an unregistered person, a single “invoice-cum-bill of supply” may be issued
for all such supplies. Thus, there is no need to issue a tax invoice and a bill of supply separately to
the school student in respect of supply of the taxable and exempted goods respectively
(iii) As per section 33, where any supply is made for a consideration, every person who is liable to pay
tax for such supply shall prominently indicate in all documents relating to assessment, tax invoice
and other like documents, the amount of tax which shall form part of the price at which such supply
is made.
As per rule 46(m), a tax invoice shall contain the various particulars, interalia, namely, amount of
tax charged in respect of taxable goods or services (central tax, State tax, integrated tax, Union
territory tax or cess);
Hence, Jai has to show the tax amount separately in the tax invoices issued to customers.
Question 2
Avtaar Enterprises, Kanpur started trading exclusively in ayurvedic medicines from July 1. Its turnover

Page 10.1
exceeded ₹ 40 lakh on October 3. The firm applied for registration on October 31 and was issued
registration certificate on November 5.
Examine whether any revised invoice can be issued in the given scenario. If the answer to the first
question is in affirmative, determine the period for which the revised invoices can be issued as also the
last date up to which the same can be issued.
Answer
As per section 31(3)(a), a registered person may, within one month from the date of issuance of
certificate of registration, issue a revised invoice against the invoice already issued during the period
beginning with the effective date of registration till the date of issuance of certificate of registration to
him.
Further, rule 10(2) lays down that the registration shall be effective from the date on which the person
becomes liable to registration where the application for registration has been submitted within a period
of 30 days from such date.
In the given case, Avtaar Enterprises has applied for registration within 30 days of becoming liable for
registration and the registration has been granted. Thus, the effective date of registration is the date on
which Avtaar Enterprises became liable for registration i.e., October 3. Therefore, since in the given case
there is a time lag between the effective date of registration (October 3) and the date of grant of certificate
of registration (November 5), revised invoices can be issued. The same can be issued for supplies made
during this intervening period i.e., for the period beginning with October 3 till November 5. Further, the
revised invoices can be issued for the said period till December 5.
Question 3
Discuss the provisions relating to issue of an invoice/document in the following circumstances:
(i) Advance payment is received against a supply, but subsequently no supplies are made.
(ii) Goods are sent on approval for sale or return and are removed before the supply takes place.
(iii) Mr. Mohan provides continuous supply of services to his client, where the due date of payment for
such services is not ascertainable. No advance has been received in this behalf.
Answer
(i) As per section 31(3)(e), where advance payment is received against a supply for which receipt
voucher has been issued, but subsequently no supplies are made and no tax invoice is issued in
pursuance thereof, a refund voucher may be issued to the person who had made the advance
payment.
(ii) As per section 31(7), where the goods are sent on approval for sale or return and are removed
before the supply takes place, the invoice shall be issued before or at the time of supply or 6 months
from the date of removal, whichever is earlier.
(iii) As per section 31(5)(b), in case of continuous supply of services, where the due date of payment is
not ascertainable from the contract, the invoice shall be issued before or at the time when the
supplier of service receives the payment.

Page 10.2

Question 4
An international trade exhibition is going to be held in United States of America in January. Aayaat Niryat
Export House (ANEH) has participated in it. It intends to send 100 units of taxable goods manufactured
by it to USA for display in the said exhibition.
ANEH is of the view that the activity of sending the goods out of India for exhibition is a zero-rated supply.
However, its tax advisor does not concur with its view. Examine whether the view of ANEH is correct.
Assuming that ANEH could not sell any goods at the exhibition and brings back entire 100 units to India
(i) in February, (ii) in August,
Discuss the requirement to issue invoice, if any, in each of the above independent cases.
Would your answer be different if ANEH sells an aggregate of 65 units of the taxable goods in USA
exhibition on different dates in January and remaining 35 units are brought back on 31st January. The
tax advisor of ANEH advises ANEH that the export of 65 units qualify as zero-rated supply and it should
apply for refund of the unutilized ITC in respect of the same. Examine the technical veracity of the tax
advisor’s advice.
Answer
No, the view of ANEH that the activity of sending the goods out of India for exhibition is a zero-rated
supply, is not correct. As per section 7 of the CGST Act, for any activity or transaction to be considered a
supply, it must satisfy twin tests namely-
(i) it should be for a consideration by a person; and
(ii) it should be in the course or furtherance of business.
The exceptions to the above are the activities enumerated in Schedule I of the CGST Act which are treated
as supply even if made without consideration. Further, section 2(21) of the IGST Act defines “supply”,
wherein it is clearly stated that it shall have the same meaning as assigned to it in section 7 of the CGST
Act.
Section 16 of the IGST Act defines “zero rated supply” as any of the following supplies of goods or services
or both, namely:
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic
Zone unit.
Thus, only such “supplies” which are either “export” or are “supply to SEZ unit/ developer” would qualify
as zero-rated supply.
In view of the above provisions, Circular No. 108/27/2019 GST dated 18.07.2019 clarified that the
activity of sending/ taking the goods out of India for exhibition or on consignment basis for export
promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act, do not
constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there
is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered
as “zero rated supply” as per the provisions contained in section 16 of the IGST Act.
The said circular further clarified that the activity of sending/taking goods out of India for exhibition is
in the nature of “sale on approval basis” wherein the goods are sent/ taken outside India for the
approval of the person located abroad and it is only when the said goods are approved that the actual
supply from the exporter located in India to the importer located abroad takes place.
The activity of sending/ taking specified goods is covered under the provisions of section 31(7) of the

Page 10.3
CGST Act, 2017 read with rule 55 of CGST Rules, 2017. As per said provisions, in case of the goods being
sent or taken on approval for sale, the invoice shall be issued before/at the time of supply or 6 months
from the date of removal, whichever is earlier. The goods which are taken for supply on approval basis
can be moved from the place of business of the registered supplier to another place within the same State
or to a place outside the State on a delivery challan.
In view of the said provisions, ANEH is not required to issue invoice at the time of taking the goods out
of India since the activity of merely sending/ taking the taxable goods out of India is not a supply.
However, the goods shall be accompanied with a delivery challan. Further,
(i) In case the entire quantity of goods (100 units) sent to USA is not sold but brought back by ANEH
in February, i.e. within the stipulated period of 6 months from the date of removal, no tax invoice
is required to be issued as no supply has taken place in such a case.
(ii) In case, the entire quantity of goods (100 units) sent to USA is not sold and brought back by ANEH
in August, i.e. after 6 months from the date of removal, a tax invoice is required to be issued for
entire 100 units of taxable goods in accordance with the provisions contained in section 12
[determining time of supply of goods] and section 31 [tax invoice] of the CGST Act, 2017 read with
rule 46 [tax invoice] of the CGST Rules, 2017 within the time period stipulated under section 31(7)
of the CGST Act, 2017.
However, if an aggregate of 65 units of the goods are sold in USA exhibition by ANEH on different dates
in January (i.e. within the stipulated period of 6 months), a tax invoice would be required to be issued for
these units, at the time of each of these sales, in accordance with the provisions contained in section 12
and section 31 of the CGST Act read with rule 46 of the CGST Rules. When the goods are sold in exhibition,
actual supply from the exporter in India to the importer located abroad takes place and this supply
qualifies as export. Export of goods is a zero-rated supply in terms of section 16(1)(a) of the IGST Act,
2017.
If the remaining 35 units are brought back on 31st January, i.e. within the stipulated period of 6 months
from the date of removal, no tax invoice is required to be issued as no supply has taken place in such a
case.
Further, tax advisor’s advice is technically correct. Since the activity of sending / taking specified goods
out of India is not a zero-rated supply, execution of a bond/Letter of Undertaking (LUT), as required
under section 16 of the IGST Act, is not required.
However, the sender can prefer refund claim even when the specified goods were sent / taken out of
India without execution of a bond/LUT, if he is otherwise eligible for refund as per the provisions
contained in section 54(3) of the CGST Act, 2017 read with rule 89(4) of the CGST Rules, 2017 in respect
of zero-rated supply of 65 units.
Question 5
Subhashini Ltd. agreed to provide consultancy services to Madhu Enterprises in the month of May for
which it received an advance of ₹1,00,000 on 20th April from Madhu Enterprises. Subsequently, in the
month of May, before supply of service, the said service contract has to be cancelled owing to some
inadvertent circumstances. However, Subhashini Ltd. has issued the invoice for the advance received in
April itself and has paid the GST thereon.
You are the tax consultant of Subhashini Ltd. Please advise whether it can claim refund of tax paid or is
it required to adjust its tax liability in its returns?
Answer
In case GST is paid by the supplier on advances received for a future event which got cancelled

Page 10.4
subsequently and for which invoice is issued before supply of service, the supplier is required to issue a
“credit note” in terms of section 34 of the CGST Act, 2017. He shall declare the details of such credit notes
in the return for the month during which such credit note has been issued. The tax liability shall be
adjusted in the return subject to conditions of section 34. There is no need to file a separate refund claim.
However, in cases where there is no output liability against which a credit note can be adjusted,
registered persons may proceed to file a refund claim [Circular No. 137/07/2020 GST dated 13.04.2020].
Therefore, in the given case, Subhashini Ltd. is required to issue a credit note, declare its details in the
return for the month during which such credit note has been issued and adjust the tax liability. However,
if there is no output liability of Subhashini Ltd. against which the said credit note can be adjusted, it may
proceed to file a refund claim.
Question 6
Bhumika Caretakers, a registered person, provides the services of repair and maintenance of electrical
appliances. On April 1, it has entered into an annual maintenance contract with Naveen for its Air
Conditioner and Washing Machine.
As per the terms of contract, maintenance services will be provided on the first day of each quarter of the
relevant financial year and payment for the same will also be due on the date on which service is
rendered. During the year, it provided the services on April 1, July 1, October 1, and January 1 in
accordance with the terms of contract. When should Bhumika Caretakers issue the invoice for the
services rendered?
Answer
Continuous supply of service means, inter alia, supply of any service which is provided, or agreed to be
provided continuously or on recurrent basis, under a contract, for a period exceeding 3 months with the
periodic payment obligations.
Therefore, the given situation is a case of continuous supply of service as repair and maintenance services
have been provided by Bhumika Caretakers on a quarterly basis, under a contract, for a period of 1 year
with the obligation for quarterly payment.
In terms of section 31 of the CGST Act, in case of continuous supply of service, where due date of payment
is ascertainable from the contract (as in the given case), invoice shall be issued on or before the due date
of payment.
Therefore, in the given case, Bhumika Caretakers should issue quarterly invoices on or before April 1,
July 1, October 1, and January 1.
Question 7
Jain & Sons is a trader dealing in stationery items. It is registered under GST and has undertaken following
sales during the day:
Sr. No. Recipient of supply Amount (₹)

1 Raghav Traders - a registered retail dealer 190
2 Dhruv Enterprises – an unregistered trader 358
3 Gaurav – a Painter [unregistered] 500
4 Oberoi Orphanage – an unregistered entity 188
5 Aaradhya – a Student [unregistered] 158
None of the recipients require a tax invoice [Raghav Traders being a composition dealer].
Page 10.5
Determine in respect of which of the above supplies, Jain & Sons may issue a Consolidated Tax Invoice
instead of Tax Invoice at the end of the day?
Answer
In the given illustration, Jain & Sons can issue a Consolidated Tax Invoice only with respect to supplies
made to Oberoi Orphanage [worth Rs. 188] and Aaradhya [worth Rs. 158] as the value of goods supplied
to these recipients is less than Rs. 200 as also these recipients are unregistered and don’t require a tax
invoice.
As regards the supply made to Raghav Traders, although the value of goods supplied to it is less than Rs.
200, Raghav Traders is registered under GST. So, Consolidated Tax Invoice cannot be issued.
Consolidated Tax Invoice can also not be issued for supplies of goods made to Dhruv Enterprises and
Gaurav although both of them are unregistered. The reason for the same is that the value of goods
supplied is not less than Rs. 200.
Question 8
Sultan Industries Ltd., Delhi, entered into a contract with Prakash Entrepreneurs, Delhi, for supply of
spare parts of a machine on 7th September. The spare parts were to be delivered on 30th September.
Sultan Industries Ltd. removed the finished spare parts from its factory on 29th September. Determine
the date by which invoice must be issued by Sultan Industries Ltd. under GST law.
Answer
As per the provisions of section 31, invoice shall be issued before or at the time of removal of goods for
supply to the recipient, where the supply involves movement of goods. Accordingly, in the given case, the
invoice must be issued on or before 29th September.
Question 9
The aggregate turnover of Sangri Services Ltd., Delhi exceeded Rs. 20 lakh on 12th August. He applied for
registration on 3rd September and was granted the registration certificate on 6th September. You are
required to advice Sangri Services Ltd. as to what is the effective date of registration in its case. It has also
sought your advice regarding period for issuance of Revised Tax Invoices.
Answer
As per section 25 read with CGST Rules, 2017, where an applicant submits application for registration
within 30 days from the date he becomes liable to registration, effective date of registration is the date
on which he becomes liable to registration. Since, Sangri Services Ltd.’s turnover exceeded Rs. 20 lakh on
12th August, it became liable to registration on same day. Further, it applied for registration within 30
days of so becoming liable to registration, the effective date of registration is the date on which he
becomes liable to registration, i.e. 12th August.
As per section 31 read with CGST Rules, 2017, every registered person who has been granted registration
with effect from a date earlier than the date of issuance of certificate of registration to him, may issue
Revised Tax Invoices. Revised Tax Invoices shall be issued within 1 month from the date of issuance of
certificate of registration. Revised Tax Invoices shall be issued within 1 month from the date of issuance
of registration in respect of taxable supplies effected during the period starting from the effective date of
registration till the date of issuance of certificate of registration.
Therefore, in the given case, Sangri Services Ltd. has to issue the Revised Tax Invoices in respect of

Page 10.6
taxable supplies effected during the period starting from the effective date of registration (12th August)
till the date of issuance of certificate of registration (6th September) within 1 month from the date of
issuance of certificate of registration, i.e. on or before 6th October.
Question 10
Shyam Fabrics has opted for composition levy scheme in the current financial year. It has approached
you for advice whether it is mandatory for it to issue a tax invoice. You are required to advise him
regarding same.
Answer
A registered person paying tax under the provisions of section 10 [composition levy] shall issue, instead
of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed
[Section 31(3)(c) read with CGST Rules, 2017].
Therefore, in the given case, Shyam Fabrics cannot issue tax invoice. Instead, it shall issue a Bill of Supply.
Question 11
Discuss the provisions relating to issuance of refund voucher under CGST Act and rules there under.
Answer
Where, on receipt of advance payment with respect to any supply of goods or services or both the
registered person issues a Receipt Voucher, but subsequently no supply is made and no tax invoice is
issued in pursuance thereof, the said registered person may issue to the person who had made the
payment, a Refund Voucher against such payment.
Question 12
Is a registered person liable to pay tax under reverse charge under section 9(3) of the CGST Act required
to issue an invoice? Discuss the relevant provisions under CGST Act and rules there under.
Answer
A registered person who is liable to pay tax under reverse charge [under section 9(3)/9(4) of the CGST
Act] shall issue an Invoice in respect of goods or services or both received by him from the supplier who
is not registered on the date of receipt of goods or services or both. Thus, a recipient liable to pay tax by
virtue of section 9(3) has to issue invoice only when supplies have been received from an unregistered
supplier.
Question 13
Discuss the provisions relating to issuance of credit and debit notes under CGST Act and rules there
under.
Answer
(i) Issuance of Debit Note: There can be situations when after the invoice has been issued:
• The supplier has erroneously declared a value which is less than the actual value of the goods
or services or both provided.

Page 10.7
• The supplier has erroneously declared a lower tax rate than what is applicable for the kind
of the goods or services or both supplied.
• The quantity received by the recipient is more than what has been declared in the tax invoice.
• Any other similar reasons.
In order to regularize these kinds of situations, the supplier is allowed to issue a document called
as debit note to the recipient.
(ii) Issuance of Credit Note: During the course of trade or commerce, after the invoice has been
issued, there can be situations like:
• The supplier has erroneously declared a value which is more than the actual value of the
goods or services provided.
• The supplier has erroneously declared a higher tax rate than what is applicable for the kind
of the goods or services or both supplied.
• The quantity received by the recipient is less than what has been declared in the tax invoice.
• The quality of the goods or services or both supplied is not to the satisfaction of the recipient
thereby necessitating a partial or total reimbursement on the invoice value
• Any other similar reasons.

Page 10.8
CHAPTER - 11
Account and Records; E-Way Bill
Question 1
Sindhu Enterprises is a supplier of goods. Its turnover has exceeded ₹ 2 crore in current financial year.
Discuss whether Sindhu Enterprises is required to get its accounts audited by the Chartered Accountant
or Cost Accountant under GST law.
Answer
Section 35(5) read with rule 80 provides that every registered person must get his accounts audited by
a Chartered Accountant or a Cost Accountant if his aggregate turnover during a FY exceeds ₹ 2 crores.
Since the turnover of Sindhu Enterprises has exceeded ₹ 2 crore in current financial year, it has to get its
accounts audited by a Chartered Accountant/ Cost Accountant.
Question 2
Mala Services Ltd. is a supplier of management consultancy services. It has approached you to ascertain
the period for which the books of accounts or other records need to be maintained?
Answer
Section 36 stipulates that every registered person required to keep and maintain books of account or
other records in accordance with the provisions of sub-section (1) of section 35 shall retain them until
the expiry of 72 months from the due date of furnishing of annual return for the year pertaining to such
accounts and records.
However, a registered person, who is a party to an appeal or revision or any other proceedings before
any Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed by him or
by the Commissioner, or is under investigation for an offence under Chapter XIX, shall retain the books
of account and other records pertaining to the subject matter of such appeal or revision or proceedings
or investigation for a period of one year after final disposal of such appeal or revision or proceedings or
investigation, or for the period specified above, whichever is later.
Question 3
Essel Groups has started making taxable supplies. You are required to advice it about the accounts and
records required to be maintained by it as required under section 35(1).
Answer
Section 35(1) stipulates that a true and correct account of following is to be maintained:
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid
(f) such other particulars as may be prescribed.

Page 11.1
Question 4
Swad Restaurant has opted for composition scheme in the current financial year. Discuss the records
which are not to be maintained by a supplier opting for composition levy as enumerated in rule 56.
Answer
Following records are not required to be maintained by a supplier who has opted for composition scheme
as per rule 56(2) and (4):
(I) 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.
(II) 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.
Question 5
ABC Manufacturers Ltd. engages Raghav & Sons as an agent to sell goods on its behalf. For the purpose,
ABC Manufacturers Ltd. has supplied the goods to Raghav & Sons located in Haryana. Enumerate the
accounts required to maintained by Raghav & Sons as per rule 56(11).
Answer
Rule 56(11) provides that every agent shall maintain accounts depicting the-
(a) particulars of authorisation received by him from each principal to receive or supply goods or
services on behalf of such principal separately;
(b) particulars including description, value and quantity (wherever applicable) of goods or services
received on behalf of every principal;
(c) particulars including description, value and quantity (wherever applicable) of goods or services
supplied on behalf of every principal;
(d) details of accounts furnished to every principal; and
(e) tax paid on receipts or on supply of goods or services effected on behalf of every principal.
Question 6
Sindhi Toys Manufacturers, registered in Punjab, sold electronic toys to a retail seller in Gujarat, at a value
of ₹ 48,000 (excluding GST leviable @ 18%). Now, it wants to send the consignment of such toys to the
retail seller in Gujarat.
You are required to advise Sindhi Toys Manufacturers on the following issues:
(a) Whether e-way bill is mandatorily required to be generated in respect of such movement of goods?
(b) If yes, who is required to generate the e-way bill?
(c) What will be the consequences for non-issuance of e-way bill?
Answer
(a) Rule 138(1) of the CGST Rules, 2017 provides that e-way Bill is mandatorily required to be

Page 11.2
generated if the goods are moved, inter alia, in relation to supply and the consignment value
exceeds ₹ 50,000. Further, explanation 2 to rule 138(1) stipulates that the consignment value of
goods shall be the value, determined in accordance with the provisions of section 15, declared in
an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said
consignment and also includes CGST, SGST/UTGST, IGST and cess charged, if any, in the document
and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both
exempt and taxable supply of goods.
Accordingly, in the given case, the consignment value will be as follows:
= ₹ 48,000 x 118%
= ₹ 56,640.
Since the movement of goods is in relation to supply of goods and the consignment value exceeds
₹ 50,000, e-way bill is mandatorily required to be issued in the given case.
(b) An e-way bill contains two parts namely, Part A to be furnished by the registered person who is
causing movement of goods of consignment value exceeding ₹ 50,000/- and part B (transport
details) is to be furnished by the person who is transporting the goods.
Where the goods are transported by the registered person as a consignor or the recipient of supply
as the consignee, whether in his own conveyance or a hired one or a public conveyance, by road,
the said person shall generate the e-way bill on the common portal after furnishing information in
Part B [Rule 138(2)].
Where the goods are transported by railways or by air or vessel, the e- way bill shall be generated
by the registered person, being the supplier or the recipient, who shall, either before or after the
commencement of movement, furnish, on the common portal, the information in Part B [Rule
138(2A)].
Where the goods are handed over to a transporter for transportation by road, the registered person
shall furnish the information relating to the transporter on the common portal and the e-way bill
shall be generated by the transporter on the said portal on the basis of the information furnished
by the registered person in Part A [Rule 138(3)].
Where the consignor or the consignee has not generated the e-way bill and the aggregate of the
consignment value of goods carried in the conveyance is more than ₹ 50,000/, the transporter,
except in case of transportation of goods by railways, air and vessel, shall, in respect of inter-State
supply, generate the e-way bill on the basis of invoice or bill of supply or delivery challan, as the
case may be, and may also generate a consolidated e-way bill on the common portal prior to the
movement of goods [Rule 138(7)].
(c) It is mandatory to generate e-way bill in all cases where the value of consignment of goods being
transported is more than ₹ 50,000/- and it is not otherwise exempted in terms of rule 138(14) of
CGST Rules, 2017. If e-way bills, wherever required, are not issued in accordance with the
provisions contained in rule 138, the same will be considered as contravention of rules. As per
section 122(1)(xiv) of CGST Act, 2017, a taxable person who transports any taxable goods without
the cover of specified documents (e-way bill is one of the specified documents) shall be liable to a
penalty of ₹ 10,000/- or tax sought to be evaded (wherever applicable) whichever is greater.
Moreover, as per section 129(1) of CGST Act, 2017, where any person transports any goods or
stores any goods while they are in transit in contravention of the provisions of this Act or the Rules
made thereunder, all such goods and conveyance used as a means of transport for carrying the said
goods and documents relating to such goods and conveyance shall be liable to detention or seizure.
Question 7

Page 11.3
Power Electricals Ltd., a registered supplier of air-conditioners, is required to send from Mumbai
(Maharashtra), a consignment of parts of air-conditioner to be replaced under warranty at various client
locations in Gujarat. The value of consignment declared in delivery challan accompanying the goods is ₹
70,000. Power Electricals Ltd. claims that since movement of goods to Gujarat is caused due to reasons
other than supply, e-way bill is not mandatorily required to be generated in this case.
You are required to examine the technical veracity of the claim made by Power Electricals Ltd.
Answer
The goods to be moved to another State for replacement under warranty is not a ‘supply’. However, rule
138(1) of the CGST Act, 2017, inter alia, stipulates that every registered person who causes movement of
goods of consignment value exceeding ₹ 50,000:
(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person,
shall, generate an electronic way bill (E-way Bill) before commencement of such movement.
CBIC vide FAQs on E-way Bill has also clarified that even if the movement of goods is caused due to
reasons others than supply [including replacement of goods under warranty], e-way bill is required to
be issued.
Thus, in the given case, since the consignment value exceeds ₹ 50,000, e- way bill is required to be
mandatorily generated. Therefore, the claim of Power Electricals Ltd. that e-way bill is not mandatorily
required to be generated as the movement of goods is caused due to reasons other than supply, is not
correct.
Question 8
Beauty Cosmetics Ltd. has multiple wholesale outlets of cosmetic products in Mumbai, Maharashtra. It
receives an order for cosmetics worth ₹ 1,20,000 (inclusive of GST leviable @ 18%) from Prasannaa,
owner of a retail cosmetic store in Delhi. While checking the stock, it is found that order worth ₹ 55,000
can be fulfilled from the company’s Dadar (Mumbai) store and remaining goods worth ₹ 65,000 can be
sent from its Malad (Mumbai) store. Both the stores are instructed to issue separate invoices for the
goods sent to Prasannaa. The goods are transported to Prasannaa in Delhi, in a single conveyance owned
by Radhey Transporters.
You are required to advise Beauty Cosmetics Ltd. with regard to issuance of e- way bill(s).
Answer
Beauty Cosmetics Ltd. would be required to prepare two separate e-way bills since each invoice value
exceeds ₹ 50,000 and each invoice is considered as one consignment for the purpose of generating e-way
bills.
The FAQs on E-way Bill issued by CBIC clarify that if multiple invoices are issued by the supplier to one
recipient, that is, for movement of goods of more than one invoice of same consignor and consignee,
multiple e-way bills have to be generated. In other words, for each invoice, one e-way bill has to be
generated, irrespective of the fact whether same or different consignors or consignees are involved.
Multiple invoices cannot be clubbed to generate one e-way bill. However, after generating all these e-way
bills, one consolidated e-way bill can be prepared for transportation purpose, if goods are going in one
vehicle.

Page 11.4

Question 9
When is an e-way bill required to be generated?
Answer
As per rule 138 of the CGST Rules, 2017, whenever there is a movement of goods of consignment value
exceeding ₹ 50,000:
(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person,
e-way bill needs to be generated prior to the commencement of transport of goods.
Further, in the following situations, e-way bill needs to be issued even if the value of the consignment is
less than ₹ 50,000:
(i) Where goods are sent by a principal located in one State/ Union territory to a job worker located
in any other State/Union territory, the e-way bill shall be generated either by the principal or the
job worker, if registered, irrespective of the value of the consignment.
(ii) Where specified handicraft goods are transported from one State/ Union territory to another
State/ Union territory by a person who has been exempted from the requirement of obtaining
registration under section 24 of the CGST Act, 2017, the e-way bill shall be generated by the said
person irrespective of the value of the consignment.
Question 10
The supplier opting for composition levy need not maintain certain records as per rule 56(2) and 56(4)
of the CGST Rules, 2017. Explain.
Answer
As per rule 56(2) and 56(4) of the CGST Rules, 2017, the supplier opting for composition levy need not
maintain the following records:
(i) 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.
(ii) 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.
Question 11
Mr. Bala, a registered person at Chennai wants to maintain proper accounts and records relating to GST.
Advise him about the accounts and other records to be maintained under section 35(1) of the CGST Act,
2017.
Answer
Mr. Bala, is required to maintain a true and correct account of following under section 35(1) of the CGST

Page 11.5
Act, 2017:-
(a) production or manufacture of goods;
(b) inward and outward supply of goods or services or both;
(c) stock of goods;
(d) input tax credit availed;
(e) output tax payable and paid; and
(f) other prescribed particulars
The records may be maintained electronically. Where more than one place of business is specified in the
certificate of registration, the accounts relating to each place of business should be kept at such places of
business.
Question 12
Explain the provisions relating to period of retention of accounts as provided under section 36 of CGST
Act, 2017?
Answer
Section 36 of the CGST Act explains the provisions relating to period of retention of accounts as under: -
Every registered person required to keep and maintain books of account or other records shall retain
them until the expiry of 72 months from the due date of furnishing of annual return for the year
pertaining to such accounts and records.
However, a registered person, who is a party to an appeal or revision or any other proceedings before
any Appellate Authority or Revisional Authority or Appellate Tribunal or court, whether filed by him or
by the Commissioner, or is under investigation for an offence under Chapter XIX, shall retain the books
of account and other records pertaining to the subject matter of such appeal or revision or proceedings
or investigation for a period of 1 year after final disposal of such appeal or revision or proceedings or
investigation, or for the period specified above, whichever is later.
Question 13
Whether the transporters, who are not registered under the GST, are required to maintain any records
under the provisions of CGST Act, 2017? Also explain, if any other unregistered persons who are required
to maintain records under GST.
Answer
The transporters, who are not registered under GST, shall obtain a unique enrollment number on GST
common portal and maintain records of goods transported, delivered and goods stored in transit by them
along with GSTIN of the registered consignor and consignee for each of his branches.
Every owner or operator of warehouse/godown/any other place used for storage of goods, even if
unregistered, is also required to maintain records under GST.

Page 11.6
CHAPTER - 12
Payment of Tax
Question 1
Miss Nitya has following balances in her Electronic Cash Ledger as on 28th February as per GST portal.
Major Heads Minor Heads Amount (₹)

Tax 40,000
CGST Interest 1,000
Penalty 800
Tax 80,000
SGST Interest 400
Penalty 1,200
Fee 2,000
Tax 45,000
IGST Interest 200
Penalty Nil
Her tax liability for the month of February for CGST and SGST was ₹ 75,000 each. She failed to pay the tax
and contacted you as legal advisor on 12th April to advise her as to how much amount of tax or interest
she is required to pay, if any, by utilizing the available balance to the maximum extent possible as per
GST Laws. She wants to pay the tax on 20th April.
Other information:
(i) Date of collection of GST was 18th February.
(ii) No other transaction after this up to 20th April.
(iii) Ignore penalty and late fee for this transaction.
(iv) No other balance is available.
You are required to advise her with reference to legal provisions with brief notes on the legal provisions
applicable.
Answer
Due date for payment of tax collected on 18th February is 20th March. Interest @ 18% p.a. is payable for
the period for which the tax remains unpaid in terms of section 50 of CGST Act, 2017. In the given case,
since Miss Nitya wants to pay the tax on 20th April, interest payable on the amount of CGST and SGST
each is as follows:
₹ 75,000 × 18% × 31/365 = ₹ 1,147 (rounded off)
As per Section 49(10) of the CGST Act, 2017, any amount of tax, interest, penalty, fee or any other amount
available in the electronic cash ledger under the CGST Act, 2017 can be transferred to the electronic cash
ledger for integrated tax, central tax, State tax, Union territory tax or cess, in such form and manner and
subject to such conditions and restrictions as may be prescribed. Thus, amount entered under any Minor
head (Tax, Interest, Penalty, etc.) and Major Head (CGST, IGST, SGST/UTGST) of the Electronic Cash
Ledger can be transferred to any other major or minor head. Consequently, cross-utilization among
Major and Minor heads is also possible.
Thus, Miss Nitya is liable to pay the following amount of tax and interest as under:

Page 12.1
Payment of Tax
CGST SGST
Tax Interest Tax Interest
Tax Liability 75,000 1,147 75,000 1,147
Balances in Electronic cash ledger in
samemajor/minor head 40,000 1,000 80,000 400
Balance transferred from other 35,000 147 Nil 747
major/minor head (Note 1) (Note 2) (Note 3)
Amount payable in cash Nil Nil Nil Nil
Note 1 – ₹ 35,000 shortfall amount has been transferred from cash ledger balance available in Major Head
IGST.
Note 2 – ₹ 147 shortfall amount has been transferred from cash ledger balance in minor head penalty of
major head CGST.
Note 3 – ₹ 747 shortfall amount has been transferred from cash ledger balance in minor head tax of major
head SGST.
Since there is no restriction in intra-head or inter-head transfer of available balance in cash ledger as per
the relevant provisions, it is upon the taxpayer to decide from which account the shortfall has to be made
good.
Question 2
A makes intra-State supply of goods valued at ₹ 50,000 to B within State of Karnataka. There is no input
tax credit balance available with A. B makes inter- State supply to X Ltd. (located in Telangana) after
adding 10% as its margin on the value of goods excluding taxes. Thereafter, X Ltd. sells it to Y in Telangana
(Intra-State sale) after adding 10% as his margin on the value of goods excluding taxes.
Assume that the rate of GST chargeable is 18% (CGST and SGST at 9% each and IGST chargeable at 18%).
Calculate tax payable at each stage of the transactions detailed above. Wherever input tax credit is
available and can be utilized, calculate the net tax payable in cash. At each stage of the transaction,
indicate which Government will receive the tax paid and to what extent.
Answer
I. Intra-State supply of goods by A to B
₹
Value charged for supply of goods 50,000
Add: CGST @ 9% 4,500
Add: SGST @ 9% 4,500
Total price charged by A from B 59,000
A does not have credit of CGST, SGST or IGST. Thus, the entire CGST (₹ 4,500) & SGST (₹ 4,500)
charged will be paid in cash by A to the Central Government and Karnataka Government
respectively.
II. Inter-State supply of goods by B to X Ltd. – Margin @ 10%
₹
Value charged for supply of goods (₹50,000 x 110%) 55,000
Add: IGST @ 18% 9,900

Page 12.2
Payment of Tax
Total price charged by B from X Ltd. 64,900

Computation of IGST payable by B to Central Government in cash
₹
IGST payable 9,900
Less: Credit of CGST 4,500
Less: Credit of SGST 4,500
IGST payable to Central Government in cash 900
Credit of CGST and SGST can be used to pay IGST [Section 49(5) of the CGST Act, 2017]. Karnataka
Government will transfer SGST credit of ₹ 4,500 utilised in the payment of IGST to the Central
Government.
III. Intra-State supply of goods by X Ltd. to Y
₹
Value charged for supply of goods (₹ 55,000 x 110%) 60,500
Add: CGST @ 9% 5,445
Add: SGST @ 9% 5,445
Total price charged by X Ltd. from Y 71,390
Computation of CGST and SGST payable by X Ltd in cash
₹
CGST Payable 5,445
Less: Credit of IGST 5,445
CGST payable to Central Government in cash Nil
SGST payable 5,445
Less: Available Credit of IGST [₹ 9,900 – ₹ 5,445] 4,455
SGST payable to Telangana Government in cash 990
Credit of IGST can be used to pay IGST, CGST and SGST in any order and in any proportion. Central
Government will transfer IGST of ₹ 4,455 utilised in the payment of SGST to Telangana Government.
Question 3
Can one use input tax credit for payment of interest, penalty, and payment under reverse charge?
Answer
No, as per section 49(4) the amount available in the electronic credit ledger may be used for making any
payment towards ‘output tax’.
As per section 2(82), output tax means, the CGST/SGST chargeable under this Act on taxable supply of
goods and/or services made by him or by his agent and excludes tax payable by him on reverse charge
basis. Therefore, input tax credit cannot be used for payment of interest, penalty, and payment under
reverse charge.
Question 4
ABC limited filed the return for GST under section 39(1) for the month of November on 20thDecember

Page 12.3
Payment of Tax
showing self-assessed tax of ₹ 2,50,000 which was not paid.

Explain what are the implications for ABC limited as per relevant provisions.
Answer
As per section 2(117), “valid return” means a return furnished under sub- section (1) of section 39 on
which self-assessed tax has been paid in full.
Hence, in such a case, the return is not considered as a valid return and also input tax credit will not be
allowed to the recipient of supplies.
Question 5
Ms PPC & Co. have availed input tax credit of ₹ 42,500/- during September under IGST head, instead of
availing ₹ 21,250 under CGST & SGST heads. Mr. X, accountant of the above entity would like to use Form
GST PMT-09 for making a transfer from IGST head to respective CGST & SGST heads.
Examine the scenario and offer your comments
Answer
As per provisions of section 49(10) read with rule 87(13) of CGST Rules, 2017, “A registered person may,
on the common portal, transfer any amount of tax, interest, penalty, fee or any other amount available
in the electronic cash ledger under the Act to the electronic cash ledger for integrated tax, central tax,
State tax or Union territory tax or cess in FORM GST PMT-09”.
It is important to note that only amounts available under Electronic Cash Ledger can be transferred to
the respective heads using Form GST PMT-09 and not otherwise.
Accordingly, contention of the Accountant Mr. X of M/s PPC & Co., is not valid for transfer of ₹ 42,500
from head IGST to respective CGST & SGST in Electronic Credit Ledger.
Question 6
M/s ABC Ltd. have belatedly filed GST return (under section 39) for the month of January after 60 days
from the due date for filing such return. Total tax paid in such return is as below:
Particulars IGST (₹) CGST (₹) SGST (₹)

Output tax payable 4,50,000 2,85,000 2,85,000
Tax payable under reverse charge 18,000 32,000 32,000
Input tax available for utilisation 2,50,000 55,000 55,000
Tax paid through Electronic CashLedger 2,18,000 2,62,000 2,62,000
Examine the interest payable as per the provisions of GST law.

What would be your answer, if entire tax for the month of January has to be paid through Electronic
Credit Ledger except taxes to be paid on reverse charge basis?
Answer
Proviso to section 50 lays down that the interest on tax payable in respect of supplies made during a tax
period and declared in the return for the said period furnished after the due date in accordance with
the provisions of section 39, except where such return is furnished after commencement of any
proceedings under section 73 or section 74 in respect of the said period, shall be levied on that portion
of the tax that is paid by debiting the electronic cash ledger.

Page 12.4
Payment of Tax
In the given scenario, M/s ABC Ltd. have filed their return belatedly and as per the above provisions,
interest is payable on the tax component paid through Electronic Cash Ledger only. A point relevant to
note here is that tax payable on reverse charge basis also carries interest for the period of delay in
remittance of tax and input tax credit cannot be used to pay the same (i.e. tax payable under reverse
charge has to be paid in cash).
Accordingly, interest under section 50 payable for the tax paid through Electronic Cash Ledger is
computed as below:
IGST: 218,000 x 18% x 60/365 = 6,450
CGST: 262,000 x 18% x 60/365 = 7,752
SGST: 262,000 x 18% x 60/365 = 7,752
Further, if entire tax payable for January is paid through Electronic Credit ledger, except for the taxes to
be paid under reverse charge basis, then interest under section 50 is applicable only on the remittance
of tax under reverse charge basis and not for tax payable on forward charge basis. Interest payable is
given as below:
IGST: 18,000 x 18% x 60/365 = 532
CGST: 32,000 x 18% x 60/365 = 946
SGST: 32,000 x 18% x 60/365 = 946
Question 7
Examine the taxes to be paid for the month of July on the basis of below information furnished by M/s
Zinc & Co.:
Particulars IGST (₹) CGST (₹) SGST (₹)

Output tax payable 14,75,000 28,34,000 28,34,000
Tax payable under reverse charge 36,000 1,44,000 1,44,000
Balance in Electronic Credit Ledger 26,52,000 18,32,000 18,32,000
Output tax reported under IGST column pertains to the month of February, which was not paid for the
said period. Also, note that input tax credit available in Electronic Credit Ledger pertains to input tax on
purchases made during the month of July and no opening balance exists from previous tax period.
Answer
Payment of taxes is governed as per the provisions laid in section 49 read with section 49A and 49B of
CGST Act, 2017 along with rule 88A of CGST Rules, 2017
Also, section 49(8) of CGST Act, stipulates that every taxable person shall discharge his tax and other
dues under this Act or the rules made thereunder in the following order, namely:
(a) self-assessed tax, and other dues related to returns of previous tax periods;
(b) self-assessed tax, and other dues related to the return of the current tax period;
(c) any other amount payable under this Act or the rules made thereunder including the demand
determined under section 73 or section 74;”
As per the above provisions, self-assessed tax of previous tax period i.e. February shall be paid first and
later self-assessed tax of current tax period i.e. July shall be paid.
Payment of taxes under forward charge
Particulars IGST CGST SGST

Page 12.5
Payment of Tax
Balance in electronic credit ledger forutilization 26,52,000 18,32,000 18,32,000

Output tax payable for July 14,75,000 28,34,000 28,34,000
Less: Utilization of input tax credit:
a. IGST [Refer Note1] 14,75,000 5,88,500 5,88,500
b. CGST 0 18,32,000 0
c. SGST 0 0 18,32,000
Amount payable through electronic cash ledger Nil 4,13,500 4,13,500
Total amount payable through electronic cash ledger

Particulars IGST CGST SGST
Amount payable through Electronic cash ledger Nil 4,13,500 4,13,500
under forward charge
Amount payable through electronic cash ledger 36,000 1,44,000 1,44,000
under reverse charge [Refer Note-2]
Total amount payable through electronic cash 36,000 5,57,500 557,500
ledger
Notes:-
1 After utilization of IGST credit towards output IGST liability, balance has been utilized equally
amongst CGST & SGST
2 Input tax credit cannot be utilized for discharging tax liability under reverse charge basis, thus
payable vide electronic cash ledger.
Since, M/s Zinc & Co., have defaulted in payment of taxes for the month of February and the same has
been paid during July, interest is payable as per the provisions of section 50 of the CGST Act, 2017
Question 8
M/s Neptune & Co. is registered under GST in the state of Maharashtra. They have made zero-rated
supply of goods worth ₹ 84,50,000/- on payment of IGST for ₹ 10,14,000/- during the month of May. The
refund application under section 54 for the above supply has been rejected by the proper officer.
Mr. A, taxation manager of the firm, has sought for recrediting the Electronic Credit Ledger as per the
provisions of rule 86 for the above rejection. Examine the scenario and offer your comments
Answer
Rule 86 of CGST Rules provides that where a registered person has claimed refund of any unutilized
amount (i.e. ITC) from the electronic credit ledger in accordance with the provisions of section 54, the
amount to the extent of the claim shall be debited in the said ledger.
If the refund so filed is rejected, either fully or partly, the amount so debited to the extent of rejection,
shall be re-credited to the electronic credit ledger by the proper officer.
In the present case, M/s Neptune & Co., have made zero-rated supply with payment of IGST for ₹
10,14,000/- and the refund for the same has been rejected by the proper officer. Therefore, contention
of Mr. A is not sustainable as debit entry in the Electronic Credit Ledger has not been made as per sub-
rule (3) of Rule 86 towards “refund of any unutilized amount”.
Supply made during May by M/s Neptune & Co. is on payment of IGST and therefore provisions laid out
in sub-rule (4) of Rule 86 shall not be applicable.

Page 12.6
Payment of Tax
Question 9
Who is liable to pay GST? Explain in the context of general and special circumstances.
Answer
General rule - Supplier of goods or services is liable to pay GST. Specific circumstances –
• Import supplies – Recipient of goods or services has to pay tax under reverse charge
• The Government may, on the recommendations of the Council, by notification, specify categories of
services the tax on intra-State supplies, of which shall be paid by the electronic commerce operator,
if such services are supplied through it
• TDS – If total value of supply under contract > ₹ 2.5 lakhs, then Central and State Government, Local
authority, Government agencies is liable to deduct TDS and pay the same to the Government
• TCS - E-commerce operators are required to collect tax (TCS) on the aggregate value of supply
reduced by returns in a month
Question 10
What will happen if the deductor fails to issue TDS Certificate within the time prescribed?
Answer
As per section 51(4), if any deductor fails to furnish to the deductee the certificate, after deducting the
tax at source, within five days of crediting the amount so deducted to the Government, the deductor shall
pay, by way of a late fee, a sum of one hundred rupees per day from the day after the expiry of such five
days period until the failure is rectified, subject to a maximum amount of five thousand rupees.
Question 11
Whether the rate of tax of 1% notified under section 52 is CGST or SGST or a combination of both CGST
and SGST?
Answer
The rate of TCS as notified under CGST Act is payable under CGST and the equal rate of TCS is expected
under the SGST Act also, in effect aggregating to 1%.
Question 12
Is every e-commerce operator required to collect tax on behalf of actual supplier?
Answer
Yes, every e-commerce operator is required to collect tax where consideration with respect to the
supply is being collected by the e-commerce operator.
Question 13
State whether the provisions pertaining to tax collected at source under section 52 of CGST Act, will be
applicable in below mentioned scenarios -

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(a) Fitan sells watch on its own through its own website
(b) ABC limited who is dealer of Fitan brand sells watches through Slipkart, an electronic commerce
operator
Answer
Answers for both the scenarios is as follows:
As per Section 52, every electronic commerce operator not being an agent, shall collect an amount
calculated at such rate not exceeding one per cent., as may be notified by the Government on the
recommendations of
(a) the Council, of the net value of taxable supplies made through it by other suppliers where the
consideration with respect to such supplies is to be collected by the operator.
Hence, if the person sells on his own, provisions pertaining to tax collected at source (TCS) won’t
be applicable.
(b) If ABC limited who is dealer of Fitan brand sells watches through Slipkart, then the provision of
TCS will be applicable to Slipkart.
Question 14
Manihar Enterprises, registered in Delhi, is engaged in supply of various goods and services exclusively
to Government departments, agencies etc. and persons notified under section 51. It has provided the
information relating to the supplies made, their contract values and the payment due against each of
them in the month of October as under:
S. No. Particulars Total contract value Payment due
(inclusive of GST) in October (₹)
(₹)
i. Supply of stationery to Fisheries Department, 2,60,000 15,000
Kolkata
ii. Supply of car rental services to Municipal 2,95,000 20,000
Corporation of Delhi
iii. Supply of a heavy machinery to Public Sector 5,90,000 25,000
Undertaking located in Uttarakhand
iv. Supply of taxable goods to Delhi office of National 6,49,000 50,000
Housing Bank, a society established by
Government of India under the Societies
Registration Act, 1860
v. Interior decoration of Andhra Bhawan located in 12,39,000 12,39,000
Delhi. Service contract is entered into with the
Government of AndhraPradesh (registered only
in Andhra Pradesh)
vi. Supply of printed books and printed post cards to 9,72,000 50,000
a West Delhi Post Office [Out of total contract for books &
value of ₹ 9,72,000, contract value for supply of 20,000 for
books (exempt from GST) is ₹ 7,00,000 and printed post
for supply of printed post cards (taxable under cards
GST) is ₹ 2,72,000.]
vii. Maintenance of street lights in Municipal area of 3,50,000 3,50,000

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East Delhi* [The maintenance contract entered

into with the Municipal Corporation of Delhi also
involves replacement of defunct lights and other
spares. However, the value of supply of goods is
not more than 25% of the value of composite
supply.] *an activity in relation to any function
entrusted to a Municipality under article 243W of
the Constitution
You are required to determine amount of tax, if any, to be deducted from each of the receivable given
above assuming the rate of CGST, SGST and IGST as 9%, 9% and 18% respectively.
Will your answer be different, if Manihar Enterprises is registered under composition scheme?
Answer
As per section 51 read with section 20 of the IGST Act, 2017 and Notification No. 50/2018 CT 13.09.2018,
with effect from 01.10.2018, following persons are required to deduct CGST @ 1% [Effective tax 2% (1%
CGST + 1% SGST/UTGST)] or IGST @ 2% from the payment made/credited to the supplier (deductee) of
taxable goods or services or both, where the total value of such supply, under a contract, exceeds ₹
2,50,000:
(a) a department or establishment of the Central Government or State Government; or
(b) local authority; or
(c) Governmental agencies; or
(d) an authority or a board or any other body, -
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by any Government,
with 51% or more participation by way of equity or control, to carry out any function; or
(e) Society established by the Central Government or the State Government or a Local Authority under
the Societies Registration Act, 1860, or
(f) Public sector undertakings.
Further, for the purpose of deduction of tax, the value of supply shall be taken as the amount excluding
CGST, SGST/UTGST, IGST and GST Compensation Cess indicated in the invoice.
Since in the given case, Manihaar Enterprises is supplying goods and services exclusively to Government
departments, agencies etc. and persons notified under section 51, applicability of TDS provisions on its
various receivables is examined in accordance with the above-mentioned provisions as under:
S. Total Payment Tax to be deducted
No. Particulars contract due (₹) CGST SGST IGST
value (₹) (₹) (₹) (₹)
I. i Supply of stationery to Fisheries 2,60,000 15,000 --
Department, Kolkata (Note-1)
II. ii Supply of car rental services to 2,95,000 20,000 --
MunicipalCorporation of Delhi (Note-
2)
III. iii Supply of a heavy machinery to Public 5,90,000 25,000 500
Sector Undertaking located in
Uttarakhand (Note-3)

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IV. iv Supply of taxable goods to Delhi office 6,49,000 50,000 500 500
of National Housing Bank, a society
established by Government of India
under the Societies Registration Act,
1860(Note-4)
V. v Interior decoration of Andhra Bhawan 12,39,000 12,39,000 --
located in Delhi (Note-5)
VI. vi Supply of printed books and printed 9,72,000 --
post cardsto a West Delhi Post Office
(Note-6)
VII. vii Maintenance of street lights in 3,50,000 3,50,000 --
Municipal area of East Delhi (Note-7)
Notes:
1. Being an inter-State supply of goods, supply of stationery to Fisheries Department, Kolkata is subject
to IGST @ 18%. Therefore, total value of taxable supply [excluding IGST] under the contract is as
follows:
= ₹ 2,60,000 × 100 / 118
= ₹ 2,20,339 (rounded off)
Since the total value of supply under the contract does not exceed ₹ 2,50,000, tax is not required to
be deducted.
2. Being an intra-State supply of services, supply of car rental services to Municipal Corporation of
Delhi is subject to CGST and SGST @ 9% each. Therefore, total value of taxable supply [excluding
CGST and SGST] under the contract is as follows:
= ₹ 2,95,000 × 100 / 118
= ₹ 2,50,000
Since the total value of supply under the contract does not exceed ₹ 2,50,000, tax is not required to
be deducted.
3. Being an inter-State supply of goods, supply of heavy machinery to PSU in Uttarakhand is subject to
IGST @ 18%. Therefore, total value of taxable supply [excluding IGST] under the contract is as
follows:
= ₹ 5,90,000× 100 / 118
= ₹ 5,00,000
Since the total value of supply under the contract exceeds ₹ 2,50,000, PSU in Uttarakhand is required
to deduct tax @ 2% of ₹ 25,000, i.e. ₹ 500.
4. Being an intra-State supply of goods, supply of taxable goods to National Housing Bank, Delhi is
subject to CGST and SGST @ 9% each. Therefore, total value of taxable supply [excluding CGST and
SGST] under the contract is as follows:
= ₹ 6,49,000× 100 / 118
= ₹ 5,50,000
Since the total value of supply under the contract exceeds ₹ 2,50,000, National Housing Bank, Delhi
is required to deduct tax @ 2% (1% CGST + 1% SGST) of ₹ 50,000, i.e. ₹ 1,000.
5. Proviso to section 51(1) of the CGST Act, 2017 stipulates that no tax shall be deducted if the location
of the supplier and the place of supply is in a State or Union territory which is different from the
State or as the case may be, Union territory of registration of the recipient.

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Section 12(3) of the IGST Act, 2017, inter alia, stipulates that the place of supply of services, directly
in relation to an immovable property, including services provided by interior decorators, shall be
the location at which the immovable property is located or intended to be located. Accordingly, the
place of supply of the interior decoration of Andhra Bhawan shall be Delhi.
Since the location of the supplier (Manihar Enterprises) and the place of supply is Delhi and the State
of registration of the recipient i.e. Government of Andhra Pradesh is Andhra Pradesh, no tax is liable
to be deducted in the given case.
6. If the contract is made for both taxable supply and exempted supply, tax shall be deducted if the total
value of taxable supply in the contract exceeds ₹ 2,50,000. Being an intra-State supply of goods,
supply of printed post cards to a West Delhi Post Office is subject to CGST and SGST @ 9% each.
Therefore, total value of taxable supply [excluding CGST and SGST] under the contract is as follows:
= ₹ 2,72,000× 100 / 118
= ₹ 2,30,509 (rounded off)
Since the total value of taxable supply under the contract does not exceed ₹ 2,50,000, tax is not
required to be deducted.
7. Composite supply of goods and services in which the value of supply of goods constitutes not more
than 25% of the value of the said composite supply provided to, inter alia, local authority by way of
any activity in relation to any function entrusted to a Municipality under article 243W of the
Constitution is exempt from GST. Thus, maintenance of street lights (an activity in relation to a
function entrusted to a Municipality) in Municipal area of East Delhi involving replacement of
defunct lights and other spares where the value of supply of goods is not more than 25% of the value
of composite supply is a service exempt from GST. Since tax is liable to be deducted from the payment
made or credited to the supplier of taxable goods or services or both, no tax is required to be
deducted in the given case as the supply is exempt.
The answer will remain unchanged even if Manihar Enterprises is registered under composition scheme.
Tax will be deducted in all cases where it is required to be deducted under section 51 of the CGST Act,
2017 including the scenarios when the supplier is registered under composition scheme.
Question 15
Yash Shoppe, a registered supplier of Jaipur, is engaged in supply of various goods and services
exclusively to Government departments, agencies, local authority and persons notified under section 51.
You are required to briefly explain the provisions relating to tax deduction at source under section 51
and also determine the amount of tax, if any, to be deducted from each of the receivables given below
(independent cases) assuming that the payments as per the contract values are made on 31 st October.
The rates of CGST, SGST and IGST may be assumed to be 6%, 6% and 12% respectively.
(1) Supply of computer stationery to Public Sector Undertaking (PSU) located in Mumbai. Total
contract value is ₹ 2,72,000 (inclusive of GST)
(2) Supply of air conditioner to GST department located in Delhi. Total contract value is ₹ 2,55,000
(exclusive of GST)
(3) Supply of generator renting service to Municipal Corporation of Jaipur. Total contract value is ₹
3,50,000 (inclusive of GST)
Answer
As per section 51 of the CGST Act, 2017, Government departments, agencies, local authority and notified
persons are required to deduct tax @ 2% (1% CGST + 1% SGST/UTGST) or IGST @ 2% from payment

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made to the supplier of taxable goods and/ or services where the total value of such supply [excluding
tax and compensation cess indicated in the invoice], under a contract, exceeds ₹ 2,50,000.
Since in the given case, Yash Shoppe is supplying goods and services exclusively to Government
departments, agencies, local authority and persons notified under section 51 of the CGST Act, 2017,
applicability of TDS provisions on its various receivables is examined in accordance with the above-
mentioned provisions as under:
S. No. Particulars Total contract Tax to be deducted

value due to CGST SGST IGST
be received @1% @1% @2%
[excluding (₹) (₹) (₹)
GST] (₹)
1 Supply of computer stationery to PSU in
Mumbai 2,42,857
[Since the total value of supply under the
-- --
contract [excluding IGST (being inter-State [2,72,000 ×
supply)] does not exceed ₹ 2,50,000, tax is 100 / 112]
not required to be deducted.]
2 Supply of air conditioner to GST
Department in Delhi
2,55,000 -- 5,100
contract [excluding IGST (being inter-State
supply)] exceeds ₹ 2,50,000, tax is required
tobe deducted.]
3 Supply of a generator renting service to
Municipal Corporation of Jaipur 3,12,500
3,125 3,125
contract [excluding CGST and SGST (being [3,50,000×
intra-State supply)] exceeds ₹ 2,50,000, tax 100 / 112]
is required to be deducted.]
Total 3,125 3,125 5,100
Question 16
A is an e-commerce operator supplying goods through its electronic portal in capacity of an agent. The
goods belong to B and the consideration for such supplies is received by A and remitted to B as per the
contractual arrangement. A requires your help in arriving at the rate at which tax shall be collected from
the amount which is received by it against the supplies?
Answer
As per Section 52(1) of the CGST Act, 2017, the TCS provisions are not applicable in cases where the ECO
is an agent of the supplier. In the present case, A being an ECO is supplying goods through the electronic
portal in capacity of an agent and hence the liability to collect tax as per Section 52 shall not arise in this
case.
Question 17
X booked a Hotel in Udaipur, Rajasthan through an e-commerce portal for an amount of ₹ 25,000. As per

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the terms and conditions, the amount was payable at the hotel at the time of check in. Whether TCS
provisions shall apply in the present case?
Answer
No, as per the provisions under Section 52 of the CGST Act, 2017 the TCS provisions shall trigger only
when the ECO is receiving the consideration for supply from the recipient of supply. In the present case
the supplier i.e. the hotel is directly receiving the consideration from the recipient of the services i.e. X.
Hence, the present transactions shall not trigger the TCS provisions under Section 52.

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Question 18
(i) A Central Government Department located at Uttar Pradesh is registered with the Commercial Tax
Department UP State for deducting GST. It enters into a contract with a Public Sector Undertaking
(PSU), registered under GST in the State of Delhi, for supplying goods valued ₹ 3,50,000. The PSU
argues that no tax is deductible on this supply by the Central Government Department as it is
located outside the State of Uttar Pradesh and therefore not liable to tax under CGST and SGST as
it is a local levy and IGST tax deduction is not applicable if it is located in another State, other than
the State in which the Department is registered. You are required to comment on this.
(ii) Would there be any difference, if instead of the PSU if it was an entity in the private sector?
Applicable tax rate for deduction is 1% CGST, 1% SGST and 2% IGST.
(iii) If the private sector entity undertakes works contract, for the above Department in New Delhi.
What would be the position of tax deduction when the contract value is ₹ 5,00,000?
(iv) The disbursing officer has not paid the tax deducted in the month of February 2019, amounting to
₹ 2,00,000 under CGST and 2,00,000 under SGST to the Government's account on the relevant due
date, but has paid it on 14th May, 2019. Further, return for that month is also filed on that date and
the certificate is also issued simultaneously. What are the consequences, on such failures, to the
disbursing officer under the GST law?
Answer
(i) Certain specified persons are required to deduct tax from the payment made to the supplier of
taxable goods and/or services, where the total value of such supply [excluding GST] under a
contract, exceeds ₹ 2,50,000.
However, the tax is not liable to be deducted at source when supply of goods and/or services has
taken place between one specified person to another specified person. Since both Central
Government Department and PSU are the specified persons, tax is not deductible in case of supply
of goods between them.
(ii) Central Government Department is mandatorily required to deduct IGST @ 2% since a private
entity is not the specified person.
(iii) Since, in the given case, the location of supplier and place of supply is in the same State, i.e., Delhi
and location of recipient is in UP, Central Government Department is not required to deduct TDS
although the total value of supply under the contract is more than ₹ 2,50,000. [It has been assumed
that the location of private entity and the place of supply are in Delhi and the Central Government
Department is in U.P.]
(iv) Failure to deposit TDS with the Government and failure to furnish TDS return within the stipulated
time period will result in following consequences:
(A) Interest @ 18% p.a. on the amount of tax deducted shall be payable.
(B) Late fee of ₹ 100 per day for the period of delay in furnishing return, or ₹ 5,000, whichever
is lower, shall be payable. Equal amount of late fee will be payable under the respective State
law.
(C) Applicable penalty will also be levied.
Question 19
From the following information of independent cases, your expert advice, with appropriate reasoning, is

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sought on the applicability of TDS/TCS provisions of the CGST Act, 2017. You shall also quantify the
amount of TDS/TCS, as the case be, if the same is applicable.
(i) Top Fashions, a designer cloth dealer and registered in the State of West Bengal, effected supply
through 'QUICK DEAL', an electronic commerce operator. Net value of taxable intra-State supplies
effected for the month of October 2019 was ₹ 1,50,000.
(ii) M/s Super Builders, a registered supplier in Tamil Nadu, was awarded a works contract by
Government of Tamil Nadu amounting to ₹ 4,30,000. Of this, value of exempt supply was ₹ 1,00,000.
(iii) Tasty Caterers, a registered supplier of Kerala, provided catering services in Kochi, Kerala to
Government of Andhra Pradesh for its annual training camp held for its staff. Value of said services
was ₹ 4,50,000.
Answer
(i) An electronic commerce operator (ECO) is required to collect TCS - an amount @ 1% (CGST 0.5%
and SGST @ 0.5%) of the net value of taxable supplies made through it by other suppliers.
= ₹ 1,50,000 × 0.5%
= ₹ 750 (CGST) & ₹ 750 (SGST)
(ii) A State Government is required to deduct tax from the payment made to the supplier of taxable
goods and/or services, where the total value of such supply [excluding GST] under a contract,
exceeds ₹ 2,50,000. TDS to be deducted in the given intra-State supply (since place of supply and
location of supplier is in Tamil Nadu) is as follows:
= ₹ (4,30,000 - 1,00,000) × 1%
= ₹ 3,300 (CGST)
₹ 3,300 (SGST)
(iii) Since, in the given case, the location of supplier and place of supply are in the same State, i.e., Kerala
and location of recipient is in Andhra Pradesh,
Andhra Pradesh Government is not required to deduct TDS although the total value of supply under
the contract is more than ₹ 2,50,000.
Note: In above question, it has been assumed that the value given is exclusive of GST, wherever
applicable, since the rate of tax is not given in the question.
Question 20
Explain the following terms in brief:
a) E-FPB
b) CPIN
c) CIN
Answer
CPIN stands for Common portal Identification Number. It is created for every Challan successfully
generated by the taxpayer. It is a 14-digit unique number to identify the challan. CPIN remains valid for
a period of 15 days.
CIN or Challan Identification Number is generated by the banks, once payment in lieu of a generated
Challan is successful. It is a 18-digit number that is 14-digit CPIN plus 4-digit Bank Code.
CIN is generated by the authorized banks/Reserve Bank of India (RBI) when payment is actually received

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by such authorized banks or RBI and credited in the relevant government account held with them. It is
an indication that the payment has been realized and credited to the appropriate government account.
CIN is communicated by the authorized bank to taxpayer as well as to GSTN.
E-FPB stands for Electronic Focal Point Branch. These are branches of authorized banks which are
authorized to collect payment of GST. Each authorized bank will nominate only one branch as its E-FPB
for pan India transaction.
The E-FPB will have to open accounts under each major head for all governments. Any amount received
by such E-FPB towards GST will be credited to the appropriate account held by such E-FPB. For
NEFT/RTGS Transactions, RBI will act as E-FPB.

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CHAPTER - 13
Returns
Question 1
Which type of taxpayers need to file annual return under section 44? Enumerate.
Answer
Every registered person, other than ISD’s, casual/non-resident taxpayers, tax deductors at source, tax
collector at source are required to file an annual return in Form GSTR-9. Taxpayer under composition
scheme are required to file annual return in Form GSTR-9A. Casual tax payers, non-resident taxpayers,
ISDs and persons authorized to deduct/collect tax at source are not required to file annual return.
Question 2
Is an annual return under section 44 and a final return one and the same? Explain.
Answer
No. Annual return has to be filed by every registered person paying tax as a normal taxpayer, with certain
exceptions. Final return has to be filed only by those registered persons who have applied for cancellation
of registration. The final return has to be filed within three months of the date of cancellation or the date
of cancellation order, whichever is later.
Question 3
Do input service distributors (ISDs) need to file separate statement of outward supplies with their
return? Discuss.
Answer
No, the ISDs need to file only a return in Form GSTR-6 and the return has the details of credit received by
them from the service provider and the credit distributed by them to the recipient units. Since their
return itself covers these aspects, there is no requirement to file separate statement of outward supplies.
Question 4
Is it compulsory for a taxpayer to file return by himself? Explain.
Answer
No. A registered taxpayer can also get his return filed through a Goods and Services Tax Practitioner.
Question 5
Mr. Anand Kumar, a regular taxpayer, filed GSTR-1 for the month of August before the due date. Later, in
the month of February next year, he discovers error in the GSTR-1 of the month of August already filed
and wants to revise it.
You are required to advise him on the future course of action in this scenario.

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Answer
The mechanism of filing revised return for any correction of errors/omission is not available under GST.
The rectification of errors/omission is allowed in the subsequent returns.
Therefore, Mr. Anand Kumar who discovered an error in GSTR-1 for the month of August cannot revise
it. However, he should rectify said error in the GSTR- 1 filed for the month of February and should pay
the tax and interest, if any, in case there is short payment, in the return to be furnished for February. The
error can be rectified by furnishing appropriate particulars in the “Amendment Tables” contained in
GSTR-1.
However, as per section 37(3) of the CGST Act, no rectification of details furnished in GSTR-1 shall be
allowed after:
(i) filing of monthly return/ GSTR-3 for the month of September following the end of the financial year
to which such details pertain, or
(ii) filing of the relevant annual return, whichever is earlier.
Question 6
B Ltd. has filed the return for the month of October belatedly. At the time of computing the late fee to be
paid for delay in filing return, B Ltd. has taken a view that if the late fee has been paid as per the provisions
under the CGST Act, there is no requirement of paying the late fee under the SGST Act for the same default.
Whether B Ltd. has taken a correct view? Examine.
Answer
The understanding of B Ltd. is incorrect. For arriving at the late fee payable on account of delayed filing
of GST return, the computation of late fee is made separately for CGST and SGST/UTGST. This is because
the provisions of late fee on delayed filing of return are prescribed in both CGST Act and SGST/UTGST
Act although a common return is filed for both the laws.
Question 7
Tax authorities have been scrutinizing the returns furnished by A Ltd. During the scrutiny process, A Ltd.
has been made aware by the authorities about an incorrect disclosure in a return under section 39 filed
by it for a particular tax period.
A Ltd. seeks your opinion to rectify the incorrect disclosure made in the return.
Answer
In terms of section 39(9), any rectification in the return (under section 39) furnished by the registered
person is allowed only when the error or omission is discovered on account of reasons other than
scrutiny, audit, inspection, or enforcement activity by the tax authorities.
In the present case, since the incorrect disclosure has been highlighted to A Ltd. by the tax authorities
during the process of scrutiny, the rectification of the incorrect disclosure cannot be made by A Ltd. on
its own.
Question 8
ABC Ltd. has applied for cancellation of GST registration in the month of March. The consultant of ABC
Ltd. has suggested to furnish the final return in the month of September. He has advised the company

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that a final return needs to be furnished before the due date of furnishing the return for the month of
September of subsequent financial year or before furnishing of annual return (for the financial year in
which cancellation has been sought for), whichever is earlier. However, the jurisdictional authorities
have yet not passed the order of cancellation due to reasons not known to ABC Ltd.
Whether the advice given by the consultant of ABC Ltd. is correct? Examine.
Answer
No, the advice of the consultant is not correct.
In terms of section 45 read with rule 81, every registered person who is required to furnish GSTR-3B and
whose registration has been cancelled is required to file a final return within three months of the date of
cancellation or date of order of cancellation, whichever is later.
In the given case, the registration of the company has not been cancelled. Therefore, requirement of filing
final return will arise only when the registration of the company gets cancelled.
Question 9
XYZ Ltd. has deducted TDS from the consideration payable to A Ltd. for supplies made by it. The deductee,
i.e. A Ltd., seeks your advice on taking credit for the TDS deducted by XYZ Ltd. Also, whether the tax
deducted by XYZ Ltd. will be shown in the electronic credit ledger or electronic cash ledger of A Ltd.?
Answer
In terms of section 51(5) read with rule 66(2), the deductee shall claim credit, in his electronic cash
ledger, of the tax deducted and reflected in GSTR-7 of the deductor, after validation. Similarly, rule 87(9),
inter alia, provides that any amount deducted under section 51 shall be credited to the electronic cash
ledger of the deductee.
Therefore, in the present case, A Ltd., can take credit of TDS amount deducted by XYZ Ltd. in its electronic
cash ledger and use the same for payment of tax, interest, penalty, late fee or any other amount.
Question 10
Whether GSTPs are required to furnish any return for disclosure of activities carried out by them for any
of the registered person during a tax period? Elucidate.
Answer
In terms of section 48(2), a registered person may authorise an approved GSTP to furnish the details of
outward supplies under section 37, the details of inward supplies under section 38 and the return under
section 39 or annual return under section 44 or final return under section 45 and to perform other
prescribed functions. Thus, the GSTP can furnish the specified documents or information on behalf of the
registered person with prior authority of the registered person.
However, there is no specific return furnishing mechanism for GSTP to disclose the activities carried out
by it for any of the registered person during a tax period.

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Question 11
Explain the provisions of section 39(9) of the CGST Act, 2017 with reference to rectification of returns.
Answer
As per section 39(9) of the CGST Act, 2017, if any registered person after furnishing a return discovers
any omission or incorrect particulars therein, he shall rectify such omission or incorrect particulars in
the return to be furnished for the month during which such omission or incorrect particulars are noticed,
subject to payment of interest.
However, section 39(9) does not permit rectification of error or omission discovered on account of
scrutiny, audit, inspection or enforcement activities by tax authorities. Further, no such rectification of
any omission or incorrect particulars shall be allowed after the due date for furnishing of return for the
month of September following the end of the financial year, or the actual date of furnishing of relevant
annual return, whichever is earlier.
Question 12
M/s. Sahu & Co. a registered firm has filed its GST Return in GSTR-1 for the month of February, 2021
declaring an outward supply of Rs. 300 lakhs. The return was filed within the due date of its filing.
However, on a subsequent reconciliation of the return with the books of accounts it was found that 5
invoices having a total value of Rs. 20 lacs towards supply made to local parties were inadvertently
omitted to be reported. Sahu & Co. have approached you for an advice as to the course of action to be
adopted to rectify the omission.
Answer
As per GST law, the mechanism of filing revised returns for any correction of errors/omissions has been
done away with. The rectification of errors/omissions is allowed in the subsequent Returns. However,
no rectification is allowed after furnishing the return for the month of September following the end of
the financial year to which such details pertain or furnishing of the relevant annual return, whichever is
earlier.
Hence, the omission in the month of Feb 2021 can be included in the Return for the month when the
omission is noticed. The tax and interest @ 18% due on the turnover omitted to be reported for the
month of Feb 2021 has to be paid along with the taxes for the month in which the omission is noticed.
However, such rectification will be allowed only within the prescribed period as mentioned above.
Question 13
Mr. X, a regular tax payer, did not make any taxable supply during the month of July. Is he required to file
any goods and service tax return?
Answer
A regular tax payer is required to furnish a return u/s 39 for every month even if no supplies have been
effected during such period. In other words, filing of Nil return is also mandatory.
Therefore, Mr. X is required to file monthly return even if he did not make any taxable supply during the
month of July.

Page 13.4
Returns
Question 14
If a return has been filed, how can it be revised if some changes are required to be made?
Answer
In GST since the returns are built from details of individual transactions, there is no requirement for
having a revised return. Any need to revise a return may arise due to the need to change a set of invoices
or debit/ credit notes. Instead of revising the return already submitted, the system allows changing the
details of those transactions (invoices or debit/credit notes) that are required to be amended. They can
be amended in any of the future GSTR- 1 in the tables specifically provided for the purposes of amending
previously declared details.
As per section 39(9), omission or incorrect particulars discovered in the returns filed u/s 39 can be
rectified in the return to be filed for the month during which such omission or incorrect particulars are
noticed. Any tax payable as a result of such error or omission will be required to be paid along with
interest. The rectification of errors/omissions is carried out by entering appropriate particulars in
“Amendment Tables” contained in GSTR-1.

Page 13.5
CHAPTER - 14
Import and Export under GST
Question 1
Briefly discuss how exports are treated under the GST Law.
Answer
Under the GST Law, export of goods or services has been treated as:
• Inter-State supply and covered under the IGST Act.
• ‘Zero rated supply’, i.e. the goods or services exported shall be relieved of GST levied upon them
either at the input stage or at the final product stage.
Question 2
Explain how imports are taxed under GST.
Answer
All imports are deemed as inter-State supplies for the purposes of levy of GST (IGST). The incidence of
tax follows the destination principle and the tax revenue accrues to the State where the imported goods
and services are consumed. IGST paid on import of goods and services is available as ITC for set off
against the output tax liability. IGST on import of goods is levied under the IGST Act but the machinery
of the customs law is used to levy and collect the same.
Question 3
Describe how exports are taxed under GST.
Answer
Exports of goods and services are zero rated. The exporter has the option either to export under
bond/LUT without payment of IGST and claim refund of ITC or pay IGST at the time of export and claim
refund thereof.
Question 4
Is it necessary to execute a bond for effecting zero rated supplies? Elucidate.
Answer
No. The facility to export under LUT has been extended to all zero rated suppliers (barring a few
exceptions such as those who have been prosecuted for an offence involving tax of ₹ 2.5 crore) vide
Notification No. 37/2017 CT dated 4.10.2017. The other conditions for executing LUT have been specified
in Circular No. 8/8/2017 GST dated 4.10.2017 as amended.
Question 5
A Ltd. enters into an agreement for sale of goods with B Ltd., a company based in UAE. B Ltd. requires the

Page 14.1
goods to be delivered by A Ltd. to C Ltd., a company based in Karnataka.

Whether the transaction will qualify as export of goods under GST? Analyze the scenario and offer your
comments.
Answer
As per the definition of export of goods provided under section 2(5), export of goods means taking goods
out of India to a place outside India.
Since in the given case, the goods remain in India, i.e. with C Ltd. located in Karnataka, the transaction
between A Ltd. and B Ltd. cannot be treated as export of goods under GST.
Question 6
A Ltd. is making zero rated supplies which are also specifically exempt from GST. The company has paid
input tax of ₹ 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 ₹ 2,00,000 paid on inputs and input services used exclusively
in effecting such zero rated supplies.
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 ₹ 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 7
Whether services of short-term accommodation, conferencing, banqueting etc. provided to a SEZ
unit/developer by a supplier located in the same State as that of the SEZ unit/developer should be treated
as an inter-State supply under section 7(5)(b) or an intra-State supply in terms of section 8(2) read with
section 12(3)(c)? Examine.
Answer
Circular No. 48/22/2018 GST has clarified on this issue as under:
As per section 7(5)(b), the supply of goods and/or services to a SEZ unit/developer is treated as a supply
of goods and/or services in the course of inter-State trade or commerce. Whereas, as per section 12(3)(c),
the place of supply of services by way of accommodation in any immovable property for organising any
functions shall be the location at which the immovable property is located. Thus, in such cases, if the
location of the supplier and the place of supply are in the same State/ Union territory, it would be treated
as an intra- State supply.
It is an established principle of interpretation of statutes that in case of an apparent conflict between two
provisions, the specific provision shall prevail over the general provision. In the instant case, section
7(5)(b) is a specific provision relating to supplies of goods and/or services made to a SEZ unit/developer,
which states that such supplies shall be treated as inter-State supplies.
Further, proviso to section 8(2) also lays down that intra-State supply of services do not include supply

Page 14.2
of services to a SEZ unit/developer. It is, therefore, clarified that services of short-term accommodation,
conferencing, banqueting etc., provided to a SEZ unit/developer shall be treated as an inter-State supply.
Question 8
Mr. Amar Kant, a Chartered Accountant, being a partner in GST registered firm orders a gaming software
for his son from a company located in USA. He makes the payment for the same from his personal bank
account.
Examine whether the transaction will be liable to GST. If yes, in whose hands the tax liability will arise?
Answer
The supply of gaming software is in the nature of OIDAR service in terms of section 2(17).
The transaction is for personal consumption of Mr. Amar Kant and the payment has also been made from
the personal bank account of Mr. Amar Kant and not from the bank account of his GST registered firm.
Therefore, being an individual receiving OIDAR service for personal consumption, Mr. Amar Kant is a
non- taxable online recipient in terms of section 2(16).
Services received from a provider of service located in a non- taxable territory by an individual in relation
to any purpose other than commerce, industry or any other business or profession is exempt from IGST.
However, such exemption is not available in case of OIDAR services [Notification No. 9/2017 IT (R) dated
28.06.2017].
Therefore, being an OIDAR service provided by a supplier located outside India and received by a non-
taxable recipient, the same is liable to GST.
Tax on service supplied by any person located in a non-taxable territory to any person other than non-
taxable online recipient is payable by the recipient of such service under reverse charge. Therefore, tax
on OIDAR services provided by the company located in USA to Mr. Amar Kant, a non-taxable online
recipient, will be payable by such company under forward charge.
Question 9
‘Separate LUT is to be furnished for every export supply.’
With reference to the provisions of the GST law, examine the veracity or otherwise of the statement.
Answer
No, the statement is not correct.
The LUT remains valid for the whole financial year and there is no need to furnish separate LUT for each
export supply.
However, in case goods are not exported within the time limit specified in rule 96A(1) of the CGST Rules
and the registered person fails to pay the amount mentioned in the said sub rule, the facility of export
under LUT will be deemed to have been withdrawn. However, if the amount mentioned in the said sub-
rule is paid subsequently, the facility of export under LUT shall be restored. As a result, exports, during
the period from when the facility to export under LUT is withdrawn till the time the same is restored,
shall be either on payment of the applicable IGST or under bond with bank guarantee.
Rule 96A(1) provides inter alia that an exporter of goods has to execute the bond or LUT prior to export,
binding himself to pay the tax due along with interest @ 18% within 15 days after the expiry of 3 months,
or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for
export, if the goods are not exported out of India.

Page 14.3
Question 10
AXT Ltd. entered into a high sea sale transaction with BYU Ltd. for certain goods. AXT Ltd. is of the view
that GST on such sale transaction is payable at the time of such sale and basic customs duty is payable at
the time of filing the bill of entry for import of goods.
Examine whether the view taken by AXT Ltd. is correct.
Answer
AXT Ltd.’s view is partially correct.
Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods,
after the goods have been dispatched from the port of origin located outside India but before clearance
for home consumption (high sea sale) is neither treated as supply of goods nor supply of services in terms
of paragraph 8(b) of Schedule III to the CGST Act.
Thus, GST is not leviable on high sea sales. Therefore, AXT Ltd.’s view that GST is payable on a high sea
sale transaction at the time of sale, is not correct.
As per section 14 of the Customs Act, 1962, the value for the purpose of charging customs duty on
imported goods is the value at the time of importation, i.e. at the time of filing of the bill of entry. Further,
IGST on imported goods is also levied at the time of filing of bill of entry. Therefore, in case of high sea
sales, the assessable value of imported goods for levying customs duty and IGST is determined on the
basis of the price paid by the last high sea sales buyer who files the bill of entry for home consumption.
Therefore, AXT Ltd.’s view that basic customs duty is payable at the time of filing the bill of entry for
import of goods is correct.

Page 14.4

Question 11
Discuss supplies which have been notified as deemed exports under section 147 of CGST Act, 2017.
Answer
The following supplies have been notified as deemed exports under section 147 of the CGST Act, 2017:
1. Supply of goods by a registered person against Advance Authorisation.
2. Supply of capital goods by a registered person against Export Promotion Capital Goods
Authorisation.
3. Supply of goods by a registered person to Export Oriented Unit.
4. Supply of gold by a notified bank/Public Sector Undertaking against Advance Authorisation.
Question 12
GER Ltd. of Germany supplies luxurious car worth ₹ 1 crore to IND Ltd. of India. Before the car reached
Indian port but after crossing of the territorial waters of India, IND Ltd. sells it to T1 Ltd. by way of
transfer of documents of title.
T1 Ltd. clears the said car for warehousing and stores said goods in customs bonded warehouse.
T1 Ltd. sells the said car from warehouse to T2 Ltd., and T2 Ltd. clears the said car from the customs
bonded warehouse.
Answer the following with brief reasons:
(i) Is GST leviable on import of goods from GER Ltd. by IND Ltd.?
(ii) Is GST leviable on supply of goods by IND Ltd. to T1 Ltd.?
(iii) Is GST leviable on supply of goods by T1 Ltd. to T2 Ltd.?
(iv) Is GST leviable on clearance of goods by T2 Ltd. from the customs bonded warehouse?
Answer
(i) GST on import of goods is levied at the time when customs duty is levied on the said goods under
the Customs Act, 1962, i.e., on importation. Importation gets completed when the goods become
part of the mass of goods within the country.
Thus, GST is not leviable on import of goods from GER Ltd. by IND Ltd. since the import of goods is
not complete.
(ii) GST is not leviable on supply of goods by IND Ltd. to T1 Ltd. as supply of goods by the consignee to
any other person, by endorsement of documents of title to the goods, after the goods have been
dispatched from the port of origin located outside India but before clearance for home
consumption is treated neither as a supply of goods nor a supply of services.
(iii) GST is not leviable on supply of goods by T1 Ltd. to T2 Ltd. since supply of warehoused goods to
any person before clearance for home consumption is treated neither as a supply of goods nor a
supply of services.
(iv) Yes, GST is leviable on clearance of goods by T2 Ltd. from the customs bonded warehouse as
customs duty is levied on warehoused goods at the time of clearance thereof from the warehouse
and as mentioned in point (i), GST on import of goods is levied at the time when customs duty is
levied thereon.

Page 14.5
CHAPTER - 15
Refunds
Question 1
Is there any time limit for sanctioning of refund under section 54?
Answer
Yes, refund has to be sanctioned within 60 days from the date of receipt of application complete in all
respects. If refund is not sanctioned within the said period of 60 days, interest @ 6% p.a. will have to be
paid in accordance with section 56.
However, in case where provisional refund to the extent of 90% of the amount claimed is refundable in
respect of zero-rated supplies made by certain categories of registered persons in terms of sub-section
(6) of section 54, the provisional refund has to be given within 7 days from the date of acknowledgement
of the claim of refund.
Question 2
Discuss the provisions relating to refund of the amount of advance tax deposited by a casual taxable
person under section 27(2).
Answer
The amount of advance tax deposited by a casual taxable under section 27(2), shall be refunded only
when such person has, in respect of the entire period for which the certificate of registration granted to
him had remained in force, furnished all the returns required under section 39 [Section 54(13)]. Further,
refund of any amount, after adjusting the tax payable by the applicant out of the advance tax deposited
by him under section 27 at the time of registration, shall be claimed in the last return required to be
furnished by him [Fourth proviso to rule 89(1)].
Question 3
In case of refund under exports of goods, whether BRC/FIRC is necessary for granting refund?
Answer
In case of refund on account of export of goods, the refund rules do not prescribe BRC/FIRC as a necessary
document for filing of refund claim. However, for export of services details of BRC/FIRC is required to be
submitted along with the application for refund.
Question 4
When is a deficiency memo issued in respect of a refund claim made under section 54?
Answer
Rule 90(3) provides for communication in prescribed form (deficiency memo) where deficiencies are
noticed. The said sub-rule also provides that once the deficiency memo has been issued, the claimant is
required to file a fresh refund application after the rectification of the deficiencies.

Page 15.1
Refunds
Question 5
State the exceptions to the principle of unjust enrichment as applicable to refund claims.
Answer
The principle of unjust enrichment is applicable in all cases of refund except in the following cases:-
i. Refund of tax paid on export of goods or services or both or on inputs or input services used in
making such exports.
ii. Unutilized input tax credit in respect of (i) zero rated supplies made without payment of tax or, (ii)
where the credit has accumulated on account of rate of tax on inputs being higher than the rate of
tax on output supplies.
iii. refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice
has not been issued.
iv. refund of tax in pursuance of section 77 of CGST/SGST Act i.e. tax wrongfully collected and paid to
Central Government or State Government.
v. if the incidence of tax or interest paid has not been passed on to any other person.
vi. such other class of persons who has borne the incidence of tax as the Government may notify.
Question 6
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)(a) of the IGST Act, 2017.
The company has made the following supplies during a tax period:
Export of product ‘A’ to UK for $ 10,000. Assessable value under customs in 7,00,000
(i) Indian rupees. [Export duty is levied on product ‘A’ at the time of exports.
Further, value of like goods domestically supplied by the similarly placed
supplier is ₹ 6,00,000]
Domestic supplies of taxable product ‘B’* during the period [excluding tax @ 10,00,000
(ii) 5%] [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)
(iii) Supply of goods to Export Oriented Unit [excludingtax @ 18%] 5,00,000
[ITC has been claimed by the recipient]
(iv) Export of exempt supplies of goods (Value of like goods domestically supplied 6,00,000
by the similarly placed supplier is ₹ 5,00,000)
The ITC available for the above tax period is as follows:

(i) On inputs 3,50,000
(ii) On capital goods 1,20,000
Determine the maximum amount of refund admissible to Kailash Global (P) Ltd. for the given tax period.

Page 15.2
Refunds
Answer
Computation of maximum amount of refund admissible to Kailash Global (p) Ltd.
Particulars (₹)
Exports of product ‘A’ to UK [Note (i)] Nil
Domestic supplies of taxable product ‘B’ during the period[Note (ii)] 75,000
Supply of goods to Export Oriented Unit [Note (iii)] Nil
Export of exempt supplies [Note (iv)] 75,000
Total refund claim admissible 1,50,000
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)(a) 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)].
Rule 89(5) stipulates that in the case of refund on account of inverted duty structure, refund of ITC
is granted as per the following formula –
Turnover of inverted rated supply of Tax payable on such
Maximum
= goods and services x Net ITC - inverted rated supply
Refund Amount
Adjusted Total Turnover of goods and services
where-
“Net ITC” means ITC availed on inputs during the relevant period other than the ITC availed for
which refund is claimed under sub-rules (4A) or (4B) or both.
“Adjusted total turnover” means the sum total of the value of:
(a) the turnover in a State/ Union territory, as defined under section 2(112), excluding turnover
of services; &
(b) the turnover of zero-rated supply of services determined in terms of specified manner and
non-zero-rated supply of services,
excluding:
(i) the value of exempt supplies other than zero-rated supplies; and
(ii) the turnover of supplies in respect of which refund is claimed under sub-rule (4A) or sub-
rule (4B) or both, if any,
during the relevant period.
“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, 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

Page 15.3
Refunds
Thus, maximum refund amount under rule 89(5) = ₹ 3,50,000 x 10,00,000/ ₹ 28,00,000 - ₹ 50,000
= ₹ 75,000
(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 vide Notification No.
48/2017 CT dated 18.10.2017. 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 in the 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 be an 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.
Rule 89(4) stipulates that in the case of zero-rated supply of goods or services or both without
payment of tax under bond/LUT in accordance with the provisions of section 16(3) of the IGST Act,
2017, refund of ITC shall be granted as per the following formula:
(Turnover of zero-rated supply of goods +
Refund Amount = Turnover of zero-rated supply of services) x Net ITC
Adjusted Total Turnover
where-
“Net ITC” means ITC availed on inputs and input services during the relevant period other than the
ITC availed for which refund is claimed under sub-rules (4A) or (4B) or both.
“Turnover of zero-rated supply of goods” means the value of zero- rated supply of goods made
during the relevant period without payment of tax under bond/LUT, or the value which is 1.5 times
the value of like goods domestically supplied by the same or, similarly placed, supplier, as declared
by the supplier, whichever is less, other than the turnover of supplies in respect of which refund is
claimed under sub-rules (4A) or (4B) or both.
“Adjusted total turnover” means the same as explained in point ii above.
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 whichever is lower), Net ITC = ₹ 3,50,000 and Adjusted Total Turnover = ₹
28,00,000 (as computed in point ii above)
Thus, maximum refund amount under rule 89(4) = ₹ 3,50,000 x ₹ 6,00,000/ ₹ 28,00,000 = ₹ 75,000.
Question 7
Super Engineering Works, a registered supplier in Haryana, is engaged in supply of taxable goods within
the State. Given below are the details of the turnover and applicable GST rates of the final products
manufactured by Super Engineering Works as also the input tax credit (ITC) availed on inputs used in
manufacture of each of the final products and GST rates applicable on the same, during a tax period:
Products Turnover* Output GST ITC availed Input GST

(₹) Rates (₹) Rates
A 500,000 5% 54,000 18%
B 350,000 5% 54,000 18%
C 100,000 18% 10,000 18%
*excluding GST

Page 15.4
Refunds
Determine the maximum amount of refund of the unutilized input tax credit that Super Engineering
Works is eligible to claim under section 54(3)(ii) provided that Product B is notified as a product, in
respect of which no refund of unutilised input tax credit shall be allowed under said section.
Answer
Section 54(3)(ii) allows refund of unutilized input tax credit (ITC) at the end of any tax period to a
registered person where the credit has accumulated on account of inverted duty structure i.e. 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 Council.
In the given case, the rates of tax on inputs used in Products A and B (18% each) are higher than rates of
tax on output supplies of Products A and B (5% each). However, Product B is notified as a product, in
respect of which no refund of unutilised ITC shall be allowed under section 54(3)(ii). Therefore, only
Product A is eligible for refund under section 54(3)(ii).
Further, rule 89(5) stipulates that in the case of refund on account of inverted duty structure, refund of
ITC shall be granted as per the following formula -
Turnover of inverted rated supply of
Maximum Tax payable on such inverted
= goods and services x Net ITC -
Refund Amount rated supply of goods and services
where,-
A. "Net ITC" means input tax credit availed on inputs during the relevant period;
B. Adjusted Total Turnover means the sum total of the value of-
(a) the turnover in a State or a Union territory, as defined under section 2(112), excluding the
turnover of services; and
(b) the turnover of zero-rated supply of services determined in specified manner and non-zero-
rated supply of services, excluding-
(i) the value of exempt supplies other than zero-rated supplies; and
(ii) the turnover of supplies in respect of which refund is claimed under rule 89(4A) or rule
89(4B) or both, if any,
during the relevant period.
C. Relevant period means the period for which the claim has been filed.
In accordance with the aforesaid provisions, the maximum refund amount which Super Engineering
Works is eligible to claim shall be computed as follows:
Tax payable on inverted rated supply of Product A = ₹ 5,00,000 × 5% = ₹ 25,000
Net ITC = ₹ 1,18,000 (₹ 54,000 + ₹ 54,000 + ₹ 10,000) [Net ITC availed during the relevant period needs
to be considered irrespective of whether the ITC pertains to inputs eligible for refund of inverted rated
supply of goods or not as clarified vide Circular No. 79/53/2018-GST dated 31.12.2018]
Adjusted Total Turnover = ₹ 9,50,000 (₹ 5,00,000 + ₹ 3,50,000 + ₹ 1,00,000) Turnover of inverted rated
supply of Product A = ₹ 5,00,000
Maximum refund amount for Super Engineering Works is as follows:
= [(₹ 5,00,000 × ₹ 1,18,000)/ ₹ 9,50,000] - ₹ 25,000 = ₹ 37,105 (rounded off)
Question 8

Page 15.5
Refunds
With reference to section 54(3), mention the cases where refund of unutilised input tax credit is allowed.
Answer
As per section 54(3), a registered person may claim refund of unutilised input tax credit at the end of any
tax period in the following cases:
(i) Zero rated supplies made without payment of tax: Supply of goods or services or both to an SEZ
developer/unit or export of goods or services or both qualifies as zero rated supplies. However,
refund of unutilized input tax credit shall not be allowed if:
• the goods exported out of India are subjected to export duty;
• the supplier of goods or services or both avails of drawback in respect of CGST or claims refund
of the IGST paid on such supplies.
(ii) Accumulated ITC on account of inverted duty structure: 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 Council.
Question 9
State few cases where refundable amount shall be paid to the applicant, instead of being credited to
Consumer Welfare Fund under CGST Act, 2017.
Answer
Section 54(8) provides that the refundable amount shall be paid to the applicant, instead of being
credited to the Consumer Welfare Fund, if such amount is relatable to —
(a) refund of tax paid on export of goods and/or services or on inputs or input services used in making
such exports;
(b) refund of unutilized ITC in case of zero-rated supplies made without payment of tax or accumulated
ITC on account of inverted duty structure;
(c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which
invoice has not been issued, or where a refund voucher has been issued;
(d) refund of tax paid on a transaction treating it to be an intra-State supply, but which is subsequently
held to be an inter-State supply or vice-versa;
(e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the
incidence of such tax and interest to any other person; or
(f) the tax or interest borne by notified class of applicants.
Question 10
Y Ltd. exported service valued at US $ 1,00,000. Supply of service was completed on 15th January.
Payment for this service was received on 28th February. Refund claim was filed by Y Ltd. in respect of
tax paid on inputs and inputs services for ₹ 6,00,000 on 31st March. The refund claim was sanctioned on
30th June. What is the amount of refund Y Ltd. will get in accordance with law? What is the relevant date
and rate of interest as per GST law?
Answer
As per clause (i) of first proviso to section 54(3), refund claim admissible to Y Ltd. on account of export
Page 15.6
Refunds
of services being a zero-rated supply, is the unutilized ITC of ₹ 6,00,000.

Where the supply of services had been completed prior to the receipt of payment, relevant date is the
date of receipt of payment in convertible foreign exchange, i.e. 28th February [Explanation to section 54].
As per section 56, where any tax ordered to be refunded to any applicant is not refunded within 60 days
from the date of receipt of application, interest shall be payable @ 6% p.a. from the date immediately
after the expiry of 60 days from the date of receipt of application till the date of refund of such tax.
Since in the given case, tax ordered to be refunded is not refunded within 60 days from the date of receipt
of application, viz., 31st March, interest @ 6% p.a. is payable.

Page 15.7
Refunds

Question 11
Wye Ltd. provides the following details of September 20XX for computation of refund claim under rule
89(4) of the CGST Rules, 2017. Compute the eligible claim under the said rule assuming that other
conditions are fulfilled.

Opening balance of ITC 5,00,000
ITC availed during the period, which includes the claim for refund made of ₹ 25,00,000
5,00,000 eligible under rule 89(4A)/89(4B) of the CGST Rules, 2007
Zero rated supply of goods made during the period without payment of tax under 6,00,00,000
bond/ LUT, which include the supply of ₹ 1,00,00,000 for which refund claim is
made under rule 89(4A)/89(4B) of the CGST Rules, 2017
Supply of goods other than zero rated supply 3,00,00,000
Answer
As per rule 89(4) of the CGST Rules, 2017, in case of zero-rated supply of goods without payment of tax
under bond/LUT, refund of ITC is granted as per the following formula:
Net ITC excludes ITC availed for which refund is claimed under rule 89(4A)/ (4B) of the CGST Rules,
2017. Further, turnover of zero-rated supply of goods and adjusted total turnover exclude turnover of
supplies in respect of which refund is claimed under 89 (4A)/ (4B).
Accordingly, turnover of zero rated supply of goods = ₹ 5,00,00,000 [₹ 6,00,00,000 – ₹ 1,00,00,000];
Net ITC = ₹ 20,00,000 [₹ 25,00,000 – ₹ 5,00,000] and
Adjusted Total Turnover = ₹ 8,00,00,000 [₹ 6,00,00,000 + ₹ 3,00,00,000 – ₹ 1,00,00,000]
Thus, maximum refund amount under rule 89(4)
= ₹ 20,00,000 × ₹ 5,00,00,000 / ₹ 8,00,00,000 = ₹ 12,50,000.
Question 12
Synotex Pvt. Ltd. manufactures taxable goods, ‘Q’ and exempt goods ‘S’. Product ‘S’ is sold in international
markets without payment of tax under letter of undertaking. The company is registered under GST in the
State of Maharashtra.
The company provides the following information in relation to various supplies made by it during a tax
period:
(a) Product ‘S has been exported to UK for £ 12,000
(b) Product ‘Q’ has been supplied to Betty Enterprises within India for ₹ 20,00,000
Note: The above amounts are exclusive of taxes, wherever applicable.
The company provides the following information in relation to tax paid on inward supplies received
during the said tax period:
(a) GST of ₹ 5,00,000 has been paid on inputs

Page 15.8
Refunds
(b) GST of ₹ 2,40,000 has been paid on capital goods

(c) GST of ₹ 2,00,000 has paid on input services
(d) All the above inputs, input services and capital goods are used in the manufacturing process
Following additional information is also provided:
(i) Value of product ‘S’ exported to UK in Indian rupees is ₹ 12,00,000. However, value of such product
when supplied domestically by the company in similar quantities is ₹ 10,00,000.
(ii) Betty Enterprises is a 100% export-oriented undertaking. It has claimed the ITC on goods supplied
to it by Synotex Pvt. Ltd.
(iii) The balance in the electronic credit ledger of Synotex Pvt. Ltd. at the end of the tax period for which
the refund claim is being filed after GSTR-3B for the said period has been filed is ₹ 5,80,000.
(iv) The balance in the electronic credit ledger of Synotex Pvt. Ltd. at the time of filing the refund
application is ₹ 3,00,000.
Compute the amount refundable to Synotex Pvt. Ltd. for the tax period.
Answer
Export of product ‘S’
Export of goods is a zero rated supply in terms of section 16(1)(a) of the IGST Act, 2017. Section 16(2) of
the IGST Act, 2017 stipulates that subject to the provisions of section 17(5) of the CGST Act, 2017, ITC
may be availed for making zero-rated supplies even if such supply may be an exempt supply. As per
section 54(3)(i) of the CGST Act, 2017, a registered person may claim refund, of any unutilised ITC at the
end of any tax period in the case of zero rated supply made without payment of tax.
Therefore, in the given case, Synotex Pvt. Ltd. will be eligible to claim ITC for export of exempt product
‘S’ in terms of section 16(2) of the IGST Act, 2017 and will thus, be able to claim refund of unutilised ITC
in terms of section 54(3)(i) of the CGST Act, 2017.
As per rule 89(4) of the CGST Rules, 2017, refund of unutilized ITC in case of zero rated supply without
payment of tax under letter of undertaking is granted in accordance with the following formula:
Here,
Net ITC = ₹ 7,00,000 [Net ITC includes ITC on inputs and input services but not ITC on capital goods].
Turnover of zero-rated supply of goods (Product ‘S’) = ₹ 12,00,000 [Lower of the value of zero rated
supply of goods (₹ 12,00,000) or the value which is 1.5 times the value of like goods domestically supplied
by the same or, similarly placed, supplier (₹ 15,00,000)].
Adjusted total turnover = ₹ 32,00,000 [₹ 20,00,000 + ₹ 12,00,000]
Thus, refund amount under rule 89(4) = ₹ 7,00,000 x ₹ 12,00,000/ ₹ 32,00,000 = ₹ 2,62,500.
Circular No. 125/44/2019 GST dated 18.11.2019 provides that amount refundable to the applicant is
least of the following amounts:
(a) Maximum refund amount as per the formula in rule 89(4) of the CGST Rules [₹ 2,62,500]
(b) Balance in the electronic credit ledger at the end of the tax period for which the refund claim is
being filed after GSTR-3B for the said period has been filed [₹ 5,80,000]
(c) Balance in the electronic credit ledger at the time of filing the refund application [₹ 3,00,000]
Thus, amount refundable to Pvt. Ltd. of unutilized ITC is ₹ 2,62,500.

Page 15.9
Refunds
Supply of product ‘R’ to Betty Enterprises, a 100% EOU

Supplies to EOU is notified as deemed export under section 147 vide Notification No. 48/2017 CT dated
18.10.2017. 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) of the CGST Rules, 2017]. Therefore, since in the given case, Betty Enterprises (recipient) is
claiming ITC, Synotex Pvt. Ltd. (supplier of deemed exports) cannot claim refund of ITC.
Therefore, amount refundable to Synotex Pvt. Ltd. is ₹ 2,62,500.
Question 13
The following particulars are furnished by Delight Exporters, Karnataka, which is duly registered under
the GST law. The entity has also filed bond/LUT in order to export goods without payment of any taxes.
You are required to calculate the refund amount in respect of input tax credit on inputs and input services
relating to goods exported in the relevant tax period.
S. No. Particulars of supply Value of supply in ₹

1. Turnover - excluding supply of services, but includes exempt supplies 76,00,000
of ₹ 8,00,000 and inward supplies of ₹ 2,00,000
2. Zero-rated supply of goods under bond/LUT 12,00,000
3. Export services under bond/LUT 48,00,000
4. Non zero-rated supply of services 10,00,000
5. Payments received towards zero-rated supply, which includes ₹ 48,00,000
12,00,000 against which services are yet to be supplied.
6. Advance received in the past, against which zero-rated supplies have 14,00,000
been made in the current tax period
7. Turnover on which suppliers have claimed refund under rule 89(4A)
and rule 89(4B)
-Goods 6,00,000
-Services 6,00,000
8. ITC on inputs and input services during the tax period including those 12,00,000
under rule 89(4A) and rule 89(4B)
9. ITC relating to rule 89(4A) and rule 89(4B) 2,40,000
Answer
In case of zero-rated supply of goods and services without payment of tax under bond/LUT, refund of
ITC relating to goods and services exported is granted as per the following formula:
Accordingly, the amount of refund shall be computed as follows:
Particulars ₹
Net ITC excluding ITC availed for which refund is claimed under rule 89(4A) and 89(4B) 9,60,000
(₹ 12,00,000 - ₹ 2,40,000)
Turnover of zero-rated supply of goods excluding turnover of supplies in respect of 6,00,000

Page 15.10
Refunds
which refund is claimed under 89(4A) and 89(4B)

Turnover of zero rated supply of services 50,00,000
[Aggregate of payments received during the relevant period and services where supply
has been completed for which payment had been received in advance in any prior
period reduced by advances received for which the supply of services has not been
completed during the relevant period]
[₹ 48 lakh + 14 lakh - ₹ 12 lakh]
*It is assumed that S. No. 6. of the table in the question belongs to zero rated supply of
service and not for zero rated supply of goods.
Adjusted total turnover = Turnover in a State excluding turnover of services + Turnover 1,14,00,000
of zero-rated supply of services determined as above + Non-zero-rated supply of
services – [Exempt supplies other than zero-rated supplies + Turnover of supplies in
respect of which refund is claimed under 89(4A) and 89(4B)]
[₹ 76 lakh - ₹ 2 lakh + ₹ 50 lakh + ₹ 10 lakh – (₹ 8 lakh + ₹ 6 lakh + ₹ 6 lakh)]
* The exempt supplies are logically assumed to be other than zero rated supplies.
Refund of ITC for zero rated supply of goods and zero rated supply of services 4,71,579
[₹ 9,60,000 x (₹ 56,00,000/ ₹ 1,14,00,000)] (rounded off)
Note: The above answer is based on the following assumptions made with regard to the information
given in the table in the question:
(i) Turnover at S. No. 1 [₹ 76 lakh] includes the turnover of zero rated supply of goods given at S. No. 2
[₹ 12 lakh].
(ii) Turnover of zero rated supply of goods given at S. No. 2 [₹ 12 lakh] includes turnover of supplies of
goods in respect of which refund has been claimed under rule 89(4A) and 89(4B) [₹ 6 lakh]
(iii) Turnover of zero rated supply of services computed as per rule 89(4)(D) [₹ 50 lakh] includes the
turnover of supplies of services in respect of which the refund is claimed under rule 89(4A) and
89(4B) [₹ 6 lakh].
However, the above question can also be answered on the basis of alternate assumptions e.g., the
turnover of zero rated supply of goods given at S. No. 2 [₹ 12 lakh] excludes turnover of supplies of goods
in respect of which refund has been claimed under rule 89(4A) and 89(4B) [₹ 6 lakh] or the turnover at
S. No. 1 [₹ 76 lakh] does not include the turnover of zero rated supply of goods given at S. No. 2 [₹ 12
lakh] and turnover of supplies of goods in respect of which refund has been claimed under rule 89(4A)
and 89 (4B) [₹ 6 lakh].
Question 14
M/s Housefull Convention Hall is in the business of letting out its halls for functions. It provides you with
the following information for determining the amount of refund out of advance received based on time
of supply for one of its clients.
S. No. Particulars Date Amount in ₹

(1) Advance paid at the time of booking the hall for a function 16.07.2019 1,00,000
from 1st to 3rd Nov., 2019
(2) Additional deposit paid 18.08.2019 2,00,000
(3) Function is held as scheduled 1st Nov. to 3rd
Nov. 2019
(4) Invoice is issued (Taxable value) 25.11.2019 2,50,000
(5) Consider that there is a change in the rate of tax on 15th

Page 15.11
Refunds
October, 2019 from (CGST 2.5% and SGST 2.5%) to

(CGST 9% and SGST 9%)
What would be the amount of refund payable to the client?
Answer
The time of supply of services is the date of issue of invoice if the same is issued within 30 days from the
date of supply of service or the date of receipt of payment, whichever is earlier.
In the given case, invoice is issued within 30 days of the supply of service and advances have also been
received. Therefore, tax becomes payable at the time of receipt of advances on 16.07.2019 and
18.08.2019 as it is not clear at the time of receipt of such advances as to what would be the total value of
the supply. However, when invoice is issued for a lesser value on 25.11.2019, refund would become
payable to the client.
In case of change in rate of tax, where the service is supplied and invoice is issued after the change in rate
of tax and payment is received before change in rate of tax, time of supply shall be date of issue of invoice,
i.e., 25.11.2019. Hence, applicable rate of tax is new rate even though tax has been paid at old rate on
advances received.
Therefore, refund payable to client will be computed as under:
Total advance received including GST* = ₹ 3,00,000
Less: Actual liability [₹ 2,50,000 + ₹ 2,50,000 x 18% (new rate of tax)] = ₹ 2,95,000
Amount of refund = ₹ 5,000
*It has been assumed that the advances received are inclusive of tax.

Page 15.12
CHAPTER - 16
Job Work
Question 1
Under what circumstances, can the principal directly supply goods from the premises of job worker
without declaring the premises of job worker as his additional place of business?
Answer
The goods can be supplied directly from the place of business of job worker without declaring it as
additional place of business in two circumstances namely where the job worker is a registered taxable
person or where the principal is engaged in supply of such goods as may be notified by the Commissioner.
Question 2
What happens when the inputs or capital goods are not received back or supplied from the place of
business of job worker within prescribed time period?
Answer
If the inputs or capital goods are not received back by the principal or are not supplied from the place of
business of job worker within the prescribed time limit, it would be deemed that such inputs or capital
goods had been supplied by the principal to the job worker on the day when the said inputs or capital
goods were sent out by the principal (or on the date of receipt by the job worker where the inputs or
capital goods were sent directly to the place of business of job worker). Thus, the principal would be
liable to pay tax accordingly.
Question 3
Who is responsible for the maintenance of proper accounts related to job work?
Answer
It is completely the responsibility of the principal to maintain proper accounts of job work related inputs
and capital goods.
Question 4
Genie Engineers had a mould delivered directly to a job worker from the supplier for making certain
precision parts for use in the factory of Genie Engineers. As per agreement, the mould was to remain with
the job worker as long as work was being sent to him.
After four years a departmental audit team that visited the job worker noticed the mould and traced it to
Genie Engineers. GST was demanded from Genie Engineers for taking ITC without receiving the mould
and furthermore for not bringing the mould back after three years of delivery to the job worker.
How should they respond to this?
Answer
Genie Engineers should reply on the following lines:

Page 16.1
Job Work
Under section 19(6), the principal may take ITC on capital goods sent to a job worker for job work
without being first brought to his place of business.
The capital goods sent for job work should either be returned to the principal or must be supplied from
the job worker’s premises within 3 years [extendible by another 2 years] from sending them to the job
worker or direct receipt by the job worker from the supplier. If the above time-lines are not met, it is
deemed that the capital goods were supplied by the principal to the job worker (in other words, tax will
be payable on them) on the day they were sent out to the job worker [Section 19(6)].
However, sub-section (7) of section 19 provides that the time-limit of three years in sub-section (6) for
bringing back the capital goods from the job worker does not apply to moulds.
Hence, Genie Engineers have correctly taken the ITC on moulds.
Question 5
Sudama Industries Ltd., registered in the State of Jammu & Kashmir, manufactures plastic pipes for other
suppliers on job-work basis.
On 10th January, Plasto Manufacturers (registered in the State of Himachal Pradesh) sent plastic worth
₹ 4 lakh and moulds worth ₹ 50,000, free of cost, to Sudama Industries Ltd. to make plastic pipes. Sudama
Industries Ltd. also used its own material - a special type of lamination material for coating the pipes -
worth ₹ 1 lakh in the manufacture of pipes. It raised an invoice of ₹ 2 lakh as job charges for making pipes
and returned the manufactured pipes through delivery challan to Plasto Manufacturers on 20th October
in the same financial year.
The same quality and quantity of plastic pipes, as was made for Plasto Manufacturers, were made by
Sudama Industries Ltd. from its own raw material and sold to Solid Pipes (registered in Jammu and
Kashmir) for ₹ 7.5 lakh on 20th October.
Examine the scenario and offer your views on the following issues with reference to the provisions
relating to job work under the GST laws:
(i) Is there any difference between the manufacture of plastic pipes by Sudama Industries Ltd. for
Plasto Manufacturers and for Solid Pipes?
(ii) Whether Sudama Industries can use its own material even when it is manufacturing the plastic
pipes on job-work basis?
(iii) Whether sending the plastic and moulds to Sudama Industries Ltd. by Plasto Manufacturers is a
supply and a taxable invoice needs to be issued for the same?
(iv) Whether Sudama Industries should include the value of free of cost plastic and moulds supplied by
Plasto Manufacturers in its job charges?
Answer
(i) As per section 2(68), job work means any treatment or process undertaken by a person on goods
belonging to another registered person and the expression “job worker” shall be construed
accordingly. The registered person on whose goods (inputs or capital goods) job work is performed
is called the principal. Thus, the job worker is expected to work on the goods sent by the principal.
Therefore, when the goods are manufactured by Sudama Industries Ltd. for Plasto Manufacturers,
it is job work as the process is undertaken on inputs (plastic and moulds) supplied by the principal
(Plasto Manufacturers) and when goods are manufactured for Solid Pipes, it is manufacture on own
account as the pipes are manufactured from company’s own raw material. Further, processing or
treatment on job work basis is a supply of service in terms of para 3 of Schedule II to the CGST Act,
2017 and manufacture of pipes on own account is a supply of goods.

Page 16.2
Job Work
(ii) It has been clarified vide Circular No. 38/12/2018 GST dated 26.03.2018 that the job worker, in
addition to the goods received from the principal, can use his own goods for providing the services
of job work.
(iii) Section 143 provides that the registered principal may, without payment of tax, send inputs or
capital goods to a job worker for job work. Subsequently, on completion of the job work, the
principal shall either bring back the goods to his place of business or supply (including export) the
same directly from the place of business/ premises of the job worker within one year in case of
inputs or within three years in case of capital goods (except moulds and dies, jigs and fixtures or
tools). Thus, the provision relating to return of goods is not applicable in case of moulds, dies, jigs,
fixtures and tools.
If the time frame of one year/ three years for bringing back or further supplying the inputs/ capital
goods is not adhered to, the activity of sending the goods for job work shall be deemed to be a
supply by the principal on the day when the said inputs/ capital goods were sent out by him. Thus,
essentially, sending goods for job work is not a supply as such, but it acquires the character of
supply only when the inputs/ capital goods sent for job work are neither received back by the
principal nor supplied further by the principal from the place of business/ premises of the job
worker within one/ three years of being sent out.
Therefore, sending of plastic and moulds by Plasto Manufacturers to Sudama Industries Ltd. (job
worker) is not supply as the manufactured pipes are received back within the stipulated time and
the provisions relating to return of goods are not applicable in case of moulds.
Rule 45 provides that the inputs, semi-finished goods or capital goods being sent for job work shall
be sent under the cover of a delivery challan issued by the principal.
Therefore, Plasto Manufacturers need not issue a taxable invoice for sending the inputs to Sudama
Industries Ltd. but should send the inputs under the cover of a challan.
(iv) As per section 15(2)(b), any amount that the supplier is liable to pay in relation to such supply but
which has been incurred by the recipient of the supply and not included in the price actually paid
or payable for the goods or services or both, is includible in the value of supply. However, Sudama
Industries Ltd. should not include the value of free of cost plastic and moulds supplied by Plasto
Manufacturers in its job charges as Sudama Industries Ltd. is manufacturing the plastic pipes on
job work basis. The scope of supply of the Sudama Industries Ltd. is to manufacture plastic pipes
from the raw material supplied by the Plasto Manufacturers. Thus, at no point of time was Sudama
Industries Ltd. (supplier of job work service) liable to pay for the raw material and therefore, the
value thereof should not be included in its job charges even though the same has been incurred by
Plasto Manufacturers (recipient of job work service).
Question 6
Alok Pvt. Ltd., a registered manufacturer, sent steel cabinets worth ₹ 50 lakh under a delivery challan to
M/s Prem Tools, a registered job worker, for job work on 28th January. The scope of job work included
mounting the steel cabinets on a metal frame and sending the mounted panels back to Alok Pvt. Ltd. The
metal frame is to be supplied by M/s Prem Tools. M/s Prem Tools has agreed to a consideration of ₹ 5
lakh for the entire mounting activity including the supply of metal frame. During the course of mounting
activity, metal waste is generated which is sold by M/s. Prem Tools for ₹ 45,000. M/s Prem Tools sent
the steel cabinets mounted on the metal frame to Alok Pvt. Ltd. on 3rd December in the same financial
year.
Assuming GST rate for metal frame as 28%, for metal waste as 12% and standard rate for services as
18%, you are required to compute the GST liability of M/s Prem Tools. Also, give reason(s) for inclusion
or exclusion of the value of cabinets in the job charges for the purpose of payment of GST by M/s Prem
Page 16.3
Job Work
Tools.
Answer
As per para 3 of Schedule II to the CGST Act, any treatment or process which is applied to another person’s
goods is a supply of services and accordingly is subject to GST rate applicable for services.
In the given case, M/s Prem Tools (job worker) undertakes the process of mounting the steel cabinets of
Alok Pvt. Ltd. (principal) on metal frames.
In view of para 3 of Schedule II to the CGST Act cited above, the mounting activity classifies as service
even though metal frames are also supplied as a part of the mounting activity. Accordingly, the job
charges will be chargeable to rate of 18%, which is the applicable rate for services.
Further, the value of steel cabinets will not be included in the value of taxable supply made by M/s Prem
Tools as the supply of cabinets does not fall within the scope of supply to be made by M/s Prem Tools.
M/s Prem Tools is only required to mount the steel cabinets, which are to be supplied by Alok Pvt. Ltd.,
on metal frames, which are to be supplied by it.
As regards sale of waste generated during the job work, since M/s Prem Tools is registered, the tax
leviable on the supply will have to be paid by it in terms of section 143(5). Such supply will be treated as
supply of goods and subject to GST rate applicable for metal waste.
Accordingly, the GST liability of M/s Prem Tools will be computed as under:

Job charges 5,00,000
GST @ 18% (A) 90,000
Sale of metal waste 45,000
GST @ 12% (B) 5,400
Total GST payable (A) + (B) 95,400
Question 7
Bedi Manufacturers, a registered person, instructs its supplier to send the capital goods directly to Rajesh
Enterprises, who is a job worker, outside its factory premises for carrying out certain operations on the
goods. The goods were sent by the supplier on 10th April and were received by the job worker on 15th
April. Rajesh Enterprises carried out the job work, but did not return the capital goods to their principal
- Bedi Manufacturers. Discuss whether Bedi Manufacturers are eligible to retain the input tax credit
availed by them on the capital goods. What action under the GST Act is required to be taken by Bedi
Manufacturers?
What would be your answer if in place of capital goods, jigs and fixtures are supplied to the job worker
and the same has not been returned to the principal?
Answer
As per section 19(5), the principal is entitled to take input tax credit of capital goods sent for job work
even if the said goods are directly sent to job worker.
Further, section 19(6) stipulates that where the capital goods sent directly to a job worker are not
received back by the principal within a period of 3 years of the date of receipt of capital goods by the job
worker, it shall be deemed that such capital goods had been supplied by the principal to the job worker
on the day when the said capital goods were received by the job worker.
In view of aforementioned provisions, Bedi Manufacturers are eligible to retain the input tax credit

Page 16.4
Job Work
availed by them on the capital goods.

However, if the capital goods are not returned by Rajesh Enterprises within 3 years from 15th April (date
of receipt of capital goods by job worker), it shall be deemed that such capital goods had been supplied
by Bedi Manufacturers to Rajesh Enterprises on 15th April and Bedi Manufacturers shall be liable to pay
the tax along with applicable interest.
However, there is no time limit for return of moulds and dies, jigs and fixtures or tools sent out to a job
worker for job work [Section 19(7)].
However, if Rajesh Enterprises does not return the jigs and fixtures to Bedi Manufacturers, it shall not be
considered as a supply of jigs and fixtures to Rajesh Enterprises by Bedi Manufacturers. In this case also,
Bedi Manufacturers will be eligible to retain the input tax credit availed by them.

Page 16.5
CHAPTER - 17
Assessment and Audit
Question 1
ABC Limited is a supplier of medical equipment to various hospitals. While supplying the equipment ABC
Limited is not sure about the rate of IGST applicable on such supplies, i.e. 18% or 28%. You are required
to advise ABC Ltd. in this situation.
Answer
In such an event, ABC Limited can move an application for provisional assessment for seeking permission
to discharge the tax liability provisionally @ 18% upon the submission of bond and security and subject
to finalization of the assessment.
Upon finalization of the assessment, ABC Limited would be liable to pay the differential tax liability along
with applicable interest if it is found that the applicable rate was 28% whereas ABC Limited paid the tax
@ 18% pursuant to the order passed initially on its application for seeking provisional assessment.
Question 2
Is summary assessment order to be necessarily passed against the registered person?
Answer
No. In certain cases, like when goods are under transportation or are stored in a warehouse, and the
registered person in respect of such goods cannot be ascertained, the person in charge of such goods
shall be deemed to be the registered person and will be assessed to tax.
Question 3
How many types of audit are prescribed under GST Act. Briefly explain each one of them.
Answer
There are three types of audit prescribed in the GST Act(s) as explained below:
(a) Audit by Chartered Accountant or a Cost Accountant: Every registered person whose turnover
exceeds the prescribed limit, shall get his accounts audited by a Chartered Accountant or a Cost
Accountant. (Section 35(5) of the CGST Act)
(b) Audit by Department: The Commissioner or any officer of CGST or SGST or UTGST authorized by
him by a general or specific order, may conduct audit of any registered person (Section 65 of the
CGST Act)
(c) Special Audit: If at any stage of scrutiny, inquiry, investigations or any other proceedings, if the
department is of the opinion that the value has not been correctly declared or credit availed is not
with in the normal limits, the department may direct special audit by Chartered Accountant or Cost
Accountant, nominated by the department. (Section 66 of the CGST Act)
Question 4
Explain in what cases, assessment order passed by proper officer may be withdrawn under CGST Act,
2017?

Page 17.1
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 30 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, 2017or for payment of
late fee under section 47 of the CGST Act, 2017 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.
Question 5
Explain the difference between Audit by Tax Authorities under section 65 and Special Audit under section
66 of the CGST Act, 2017.
Answer
Audit by Tax authorities under section 65 of the CGST Act, 2017:-
(i) The Commissioner or any officer authorized by him can undertake audit of any registered person
for such period, at such frequency and in such manner as may be prescribed.
(ii) The audit shall be completed within a period of 3 months from the date of commencement of audit.
However, the Commissioner can extend this period by a further period upto maximum 6 months.
Special Audit under section 66 of the CGST Act, 2017:-
(i) The registered person can be directed to get his records including books of account examined and
audited by a chartered accountant or a cost accountant during any stage of scrutiny, inquiry,
investigation or any other proceedings; depending upon the complexity of the case. Any officer not
below the rank of Assistant Commissioner may order special audit, with the prior approval of the
Commissioner, if he is of the opinion that the value has not been correctly declared or the credit
availed is not within the normal limits.
(ii) Audit is to be completed within 90 days. However, the Assistant Commissioner can extend this
period by a further period of 90 days.
Question 6
Explain the recourse that may be taken by the officer in case proper explanation is not furnished for the
discrepancy detected in the return filed, while conducting scrutiny of returns under section 61 of the
CGST Act, 2017.
Answer
If proper explanation is not furnished for the discrepancy detected in return filed, while conducting
scrutiny of returns under section 61 of the CGST Act, 2017 of a registered person, the proper officer may:
(i) conduct audit of the registered person; or

Page 17.2
(ii) direct the registered person to get his records including books of account examined and audited
by a Chartered Accountant or a Cost Accountant nominated for this purpose by the Commissioner;
or.
(iii) exercise the powers of inspection, search and seizure with respect to the registered person, or
(iv) proceed to determine the tax and other dues of the registered person under Sections 73 or 74 of
the Act.
Question 7
Write a brief note on Summary Assessment in certain special cases as per section 64 of the CGST Act,
2017.
Answer
As per section 64 of the CGST Act, 2017, summary assessments can be initiated to protect the interest of
revenue with the previous permission of Additional/Joint Commissioner when the proper officer has
evidence that a taxable person has incurred a liability to pay tax under the Act, and any delay by him in
passing an assessment order may adversely affect the interest of revenue.
Additional/Joint Commissioner may withdraw summary assessment order on an application filed by
taxable person within 30 days from the date of receipt of order or on his own motion, if he finds such
order to be erroneous and may instead follow the procedures laid down in section 73 or section 74 to
determine the tax liability of such taxable person.
Where the taxable person to whom the liability pertains is not ascertainable and such liability pertains
to supply of goods, the person in charge of such goods shall be deemed to be the taxable person liable to
be assessed and liable to pay tax and any other amount due under this section.
Question 8
Kulbhushan & Sons has entered into a contract to supply a consignment of certain taxable goods.
However, since it is unable to determine the value of the goods to be supplied by it, it applies for payment
of tax on such goods on a provisional basis along with the required documents in support of its request.
On 12th January, the Assistant Commissioner of Central Tax issues an order allowing payment of tax on
provisional basis indicating the value on the basis of which the assessment is allowed on provisional basis
and the amount for which the bond is to be executed and security is to be furnished.
Kulbhushan & Sons complies with the same and supplies the goods on 25th January thereafter paying the
tax on provisional basis in respect of said consignment on 19th February.
Consequent to the final assessment order passed by the Assistant Commissioner of Central Tax on 21 st
March, a tax of ₹ 1,80,000 becomes due on the consignment.
Kulbhushan & Sons pays the tax due on 9th April. Determine the interest payable, if any, by Kulbhushan
& Sons in the above case.
Assuming all the other facts remaining the same, if consequent to the final assessment order passed on
21st March, a tax of ₹ 4,20,000 becomes refundable on the consignment, refund of which is applied by
Kulbhushan & Sons on 9th April and tax was refunded to it on 05th June, determine the interest receivable,
if any, by Kulbhushan & Sons in the given case.
Answer
Section 60(4) of the CGST Act, 2017 stipulates that where the tax liability as per the final assessment is

Page 17.3
higher than under provisional assessment i.e. tax becomes due consequent to order of final assessment,
the registered person shall be liable to pay interest on tax payable on supply of goods but not paid on the
due date, at the rate specified under section 50(1) [18% p.a.], from the first day after the due date of
payment of tax in respect of the goods supplied under provisional assessment till the date of actual
payment, whether such amount is paid before or after the issuance of order for final assessment.
In the given case, due date for payment of tax on goods cleared on 25 th January under provisional
assessment is 20th February.
In view of the provisions of section 60(4), in the given case, Kulbhushan & Sons is liable to pay following
interest in respect of the consignment of goods supplied:
= ₹ 1,80,000 × 18% × 48/365
If, in the given case, it is assumed that consequent to the final assessment order passed on 21st March, a
tax of ₹ 4,20,000 becomes refundable to Kulbhushan & Sons, answer would be as follows:
Section 60(5) of the CGST Act, 2017 stipulates that where the tax liability as per the final assessment is
less than in provisional assessment i.e. tax becomes refundable consequent to the order of final
assessment, the registered person shall be paid interest at the rate specified under section 56 [6% p.a.]
from the date immediately after the expiry of 60 days from the date of receipt of application under section
54(1) till the date of refund of such tax.
However, since in the given case, refund has been made (05th June) within 60 days from the date of receipt
of application of refund (09th April), interest is not payable to Kulbhushan& Sons on tax refunded.
Question 9
Whether principal of natural justice is must to be followed before passing assessment order against the
unregistered person?
Answer
Yes, principal of natural justice is must to be followed before passing assessment order against an
unregistered person seeking to impose any financial burden on him.

Page 17.4

Question 10
Divy Trader obtained permission for provisional assessment and supplied three consignments of
furniture on 28th April, 20XX. The tax payment on provisional basis was made in respect of all the three
consignments on 20th May, 20XX.
Consequent to the final assessment order passed by the Assistant Commissioner on 21stJune, 20XX, a tax
of ₹ 1,20,000 and ₹ 1,50,000 became refundable on 1st and 3rd consignments, whereas a tax of ₹ 1,20,000
became due on 2nd consignment. Divy Trader applies for the refund of the tax on 1stand 3rd
consignments on 12thJuly, 20XX and pays the tax due on 2nd consignment on the same day. Tax was
actually refunded to it of 1st consignment on 8thSeptember, 20XX, whereas of 3rd consignment on 18th
September, 20XX. Customers of Divy Trader who purchased the consignments have not taken Input Tax
Credit (ITC).
Determine the interest payable and receivable, if any, under CGST Act, 2017 by Divy Trader.
Answer
Where tax becomes due consequent to order of final assessment, interest is payable @ 18% p.a., from the
first day after the due date of payment of tax in respect of the goods supplied under provisional
assessment till the date of actual payment, whether such amount is paid before/after the issuance of
order for final assessment.
In the given case, due date for payment of tax on goods cleared on 28.04.20XX under provisional
assessment is 20.05.20XX.
Thus, interest payable in respect of 2nd consignment
= ₹ 1,20,000 × 18% × 53 [21.05.20XX – 12.07.20XX]/365
Further, section 56 of CGST Act, 2017 provides that where tax becomes refundable consequent to the
order of final assessment, interest is receivable @ 6% p.a. from the date immediately after the expiry of
60 days from the date of receipt of refund application till the date of refund of such tax.
In the given case, since refund of tax of 1st consignment has been paid on 08.09.20XX which is within 60
days from the date of receipt of application of refund (12.07.20XX), interest is not receivable on tax
refunded in respect of 1st consignment.
However, interest receivable in respect of 3rd consignment is as follows:
60 days from the date of receiving the refund application expire on 10.09.20XX.
= ₹ 1,50,000 × 6% × 8 [11.09.20XX - 18.09.20XX]/365
= ₹ 197 (rounded off).

Page 17.5
CHAPTER - 18
Inspection, Search, Seizure and Arrest
Question 1
Explain the situation in which access to business premises is allowed under section 71. Also, list the
records which are to be produced during access to business premises.
Answer
During the course of any proceeding under this Act, the duly empowered officer can have access to any
business premises, which may be required for the purpose of such enquiry. During such access, the
officers can inspect the books of accounts, documents, computers, computer programs, computer
software and such other things as may be required.
It is the duty of the persons in charge of such premises to furnish the required documents. Similarly, the
persons in charge of business premises are also duty bound to furnish such documents to the audit party
deputed by the proper officer or the Chartered Accountant or Cost Accountant, who has been deputed by
the Commissioner to carry out special audit. The following records are covered by this provision and are
to be produced, if called for.
(i) the records prepared and maintained by the registered person and declared to the proper officer
in the prescribed manner.
(ii) trial balance or its equivalent.
(iii) statements of annual financial accounts, duly audited.
(iv) cost audit report, if any.
(v) the income - tax audit report, if any.
(vi) any other relevant record.
Question 2
Explain the safeguards provided under section 69 to a person who is placed under arrest.
Answer
Section 69 provides following safeguards to a person who is placed under arrest:
(a) If a person is arrested for a cognizable offence, he must be informed of the grounds of arrest and
be produced before a magistrate within 24 hours.
(b) If a person is arrested for a non-cognizable offence, he shall be admitted to bail or in default of bail,
forwarded to the custody of the Magistrate.
(c) All arrest must be in accordance with the provisions of the Code of Criminal Procedure relating to
arrest in terms of section 69(3).
Question 3
Who can order for carrying out ‘inspection’ and under what circumstances?
Answer
As per section 67, inspection can be carried out by an officer of CGST/SGST only upon a written

Page 18.1
authorization given by an officer of the rank of Joint Commissioner or above. A Joint Commissioner or an
officer higher in rank can give such authorization only if he has reasons to believe that the person
concerned has done one of the following:
i. suppressed any transaction of supply;
ii. suppressed stock of goods in hand;
iii. claimed excess input tax credit;
iv. contravened any provision of the CGST Act to evade tax;
v. a transporter or an owner/operator of a warehouse/godown/any other place has kept goods
which have escaped payment of tax or has kept his accounts or goods in a manner that is likely to
cause evasion of tax.
Question 4
Who can order for search and seizure under the provisions of the CGST Act?
Answer
An officer of the rank of Joint Commissioner or above can authorize an officer in writing to carry out
search and seize goods, documents, books or things. Such authorization can be given only where the Joint
Commissioner/an officer above his rank has reasons to believe that any goods liable to confiscation or
any documents or books or things relevant for any proceedings are hidden in any place. The Joint
Commissioner/an officer above his rank can himself search and seize such goods, documents or books
or things.
Question 5
Describe the powers that can be exercised by an officer during a valid search.
Answer
An officer carrying out a search has the power to search for and seize goods (which are liable to
confiscation) and documents, books or things (relevant for any proceedings under the CGST Act) from
the premises searched. During search, the officer has the power to break open the door of the premises
authorized to be searched if access to the same is denied. Similarly, while carrying out search within the
premises, he can break open any almirah or box if access to such almirah or box is denied and in which
any goods, account, registers or documents are suspected to be concealed. He can also seal the premises
if access to it denied.
Question 6
Discuss the responsibilities of the person to whom summons has been issued.
Answer
A person who is issued summon is legally bound to attend either in person or by an authorized
representative and he is bound to state the truth before the officer who has issued the summon upon any
subject which is the subject matter of examination and to produce such documents and other things as
may be required.

Page 18.2
Question 7
Explain the meaning of ‘arrest’.
Answer
The term ‘arrest’ has not been defined in the CGST Act. However, as per judicial pronouncements, it
denotes ‘the taking into custody of a person under some lawful command or authority’. In other words,
a person is said to be arrested when he is taken and restrained of his liberty by power or colour of lawful
warrant.
Question 8
State the circumstances when the proper officer can authorize ‘arrest’ of any person under the CGST Act.
Answer
The Commissioner of CGST can authorize a CGST officer to arrest a person if he has reasons to believe
that the person has committed an offence attracting a punishment prescribed under section 132(1) (a),
(b), (c), (d) or section 132(2). This essentially means that a person can be arrested only where the tax
evasion is more than ` 2 crore and the offences are specified offences namely, making supply without any
invoice; issue of invoice without any supply; amount collected as tax but not paid to the Government
beyond a period of 3 months and taking input tax credit without receiving goods and services. However,
the monetary limit shall not be applicable if the offences are committed again (even after being convicted
earlier), i.e. repeat offender of the specified offences can be arrested irrespective of the tax amount
involved in the case.

Page 18.3
CHAPTER - 19
Demands and Recovery
Question 1
Mohan Enterprises is entitled for exemption from tax under GST law. However, it collected tax from its
buyers worth ₹ 50,000 in the month of August. It has not deposited the said amount collected as GST with
the Government. You are required to brief to Mohan Enterprises the consequences of collecting tax, but
not depositing the same with Government as provided under section 76.
Answer
It is mandatory to pay amount, collected from other person representing tax under GST law, to the
Government. Every person who has collected from any other person any amount as representing the tax
under GST law, and has not paid the said amount to the Government, shall forthwith pay the said amount
to the Government, irrespective of whether the supplies in respect of which such amount was collected
are taxable or not.
For any such amount not so paid, proper officer may issue SCN for recovery of such amount and penalty
equivalent to amount specified in notice.
The proper officer shall, after considering the representation, if any, made by the person on whom SCN
is served, determine the amount due from such person and thereupon such person shall pay the amount
so determined alongwith interest at the rate specified under section 50 from the date such amount was
collected by him to the date such amount is paid by him to the Government.
Question 2
Discuss briefly the time limit for issue of show cause notice as contained under sections 73 and 74.
Answer
The provisions relating to ‘relevant date’ as contained in CGST Act, 2017 are as under:
(i) In case of section 73 (cases other than fraud/suppression of facts/willful misstatement), the time-
limit for issuance of SCN is 2 years and 9 months from the due date of filing Annual Return for the
Financial Year to which the demand pertains or from the date of erroneous refund.
(ii) In case of section 74 (cases involving fraud/suppression of facts/willful misstatement), the time-
limit for issuance of SCN is 4 years and 6 months from the due date of filing of Annual Return for
the Financial Year to which the demand pertains or from the date of erroneous refund.
Question 3
Is there any time limit prescribed for adjudication of the cases under CGST Act, 2017? If yes, discuss the
same.
Answer
The provisions relating to time-limit for adjudication of cases as contained in section 73 and 74 are as
under:
(i) In case of section 73 (cases other than fraud/suppression of facts/willful misstatement), the time
limit for adjudication of cases is 3 years from the due date for filing of annual return for the financial

Page 19.1
year to which demand relates to [Section 73(10)].

(ii) In case of section 74 (cases of fraud/suppression of facts/willful misstatement), the time limit for
adjudication is 5 years from the due date for filing of annual return for the financial year to which
demand relates to [Section 74(10)].
Question 4
A person is chargeable with tax in case of fraud. He decides to pay the amount of demand alongwith
interest before issue of notice. Is there any immunity available to such person?
Answer
Yes. Person chargeable with tax, shall have an option to pay the amount of tax along with interest and
penalty equal to 15% per cent of the tax involved, as ascertained either on his own or ascertained by the
proper officer, and on such payment, no notice shall be issued with respect to the tax so paid [Section
74(6)].
Question 5
Briefly discuss the modes of recovery of tax available to the proper officer.
Answer
The proper officer may recover the dues in following manner:
(a) Deduction of dues from the amount owned by the tax authorities payable to such person.
(b) Recovery by way of detaining and selling any goods belonging to such person;
(c) Recovery from other person, from whom money is due or may become due to such person or who
holds or may subsequently hold money for or on account of such person, to pay to the credit of the
Central or a State Government;
(d) Distrain any movable or immovable property belonging to such person, until the amount payable
is paid. If the dues not paid within 30 days, the said property is to be sold and with the proceeds of
such sale the amount payable and cost of sale shall be recovered.
(e) Through the Collector of the district in which such person owns any property or resides or carries
on his business, as if it was an arrear of land revenue.
(f) By way of an application to the appropriate Magistrate who in turn shall proceed to recover the
amount as if it were a fine imposed by him.
(g) By enforcing the bond/instrument executed under this Act or any rules or regulations made
thereunder.
(h) CGST arrears can be recovered as an arrear of SGST and vice versa [Section 79].
Question 6
Enlist the circumstances for which a show cause notice can be issued by the proper officer under section
73. Specify the time limit for issuance of such show cause notice as also the time period for issuance of
order by the proper officer under section 73.
Answer
As per section 73, a show cause notice can be issued by the proper officer if it appears to him that:
Page 19.2
 tax has not been paid; or

 tax has been short paid; or
 tax has been erroneously refunded; or
 input tax credit has been wrongly availed or utilized,
for any reason other than the reason of fraud or any wilful misstatement or suppression of facts to evade
tax.
The notice should be issued at least 3 months prior to the time limit specified for passing the order
determining the amount of tax, interest and any penalty payable by defaulter [Sub-section (2) of section
73].
The order referred herein has to be passed within three years from the due date for furnishing the annual
return for the financial year to which the tax not paid or short paid or input tax credit wrongly availed or
utilised relates to or within three years from the date of erroneous refund [Sub-section (10) of section
73].
Thus, the time-limit for issuance of show cause notice is 2 years and 9 months from the due date of filing
annual return for the financial year to which the demand pertains or from the date of erroneous refund.
As per section 44(1), the due date of filing annual return for a financial year is 31st day of December
following the end of such financial year.
Question 7
Subharti Enterprises collected GST on the goods supplied by it from its customers on the belief that said
supply is taxable. However, later it discovered that goods supplied by it are exempt from GST.
The accountant of Subharti Enterprises advised it that the amount mistakenly collected by Subharti
Enterprises representing as tax was not required to be deposited with Government. Subharti Enterprises
has approached you for seeking the advice on the same. You are required to advise it elaborating the
relevant provisions.
Answer
The provisions of section 76 make it mandatory on Subharti Enterprises to pay amount collected from
other person representing tax under this Act, to the Government.
Section 76 stipulates that notwithstanding anything to the contrary contained in any order or direction
of any Appellate Authority or Appellate Tribunal or Court or in any other provisions of the CGST Act or
the rules made thereunder or any other law for the time being in force, every person who has collected
from any other person any amount as representing the tax under this Act, and has not paid the said
amount to the Government, shall forthwith pay the said amount to the Government, irrespective of
whether the supplies in respect of which such amount was collected are taxable or not.
Where any amount is required to be paid to the Government as mentioned above, and which has not been
so paid, the proper officer may serve on the person liable to pay such amount a notice requiring him to
show cause as to why the said amount as specified in the notice, should not be paid by him to the
Government and why a penalty equivalent to the amount specified in the notice should not be imposed
on him under the provisions of this Act.
The proper officer shall, after considering the representation, if any, made by the person on whom show
cause notice (SCN) is served, determine the amount due from such person and thereupon such person
shall pay the amount so determined.
The person who has collected any amount as representing the tax, but not deposited the same with the
Government shall in addition to paying the said amount determined by the proper officer shall also be

Page 19.3
liable to pay interest thereon. Interest is payable at the rate specified under section 50. Interest is payable
from the date such amount was collected by him to the date such amount is paid by him to the
Government.
The proper officer shall issue an order within 1 year [excluding the period of stay order] from the date
of issue of the notice. The proper officer, in his order, shall set out the relevant facts and the basis of his
decision.
Question 8
Rajul Associates has been issued a show cause notice (SCN) on 31.12.2021 under section 73(1) on
account of short payment of tax during the period between 01.07.2017 and 31.12.2017. It has been given
an opportunity of personal hearing on 15.01.2022.
Advice Rajul Associates as to what should be the written submissions in the reply to the show cause
notice issued to it.
Answer
The written submissions in reply to SCN issued to Rajul Associates are as follows:
i. The show cause notice (SCN) issued for normal period of limitation under section 73(1) is not
sustainable.
ii. The SCN under section 73(1) can be issued at least 3 months prior to the time limit specified for
issuance of order under section 73(10). The adjudication order under section 73(10) has to be
issued within 3 years from the due date for furnishing of annual return for the financial year to
which the short-paid tax relates to.
The due date for furnishing annual return for a financial year ison or before the 31st day of
December following the end of such financial year [Section 44]. Thus, SCN under section 73(1) can
be issued within 2 years and 9 months from the due date for furnishing of annual return for the
financial year to which the short-paid tax relates to.
iii. The SCN has been issued for the period between 01.07.2017 to 31.12.2017 which falls in the
financial year (FY) 2017-18. Due date for furnishing annual return for the FY 2017-18 is 31.12.2018
and 3 years’ period from due date of filing annual return lapses on 31.12.2021. Thus, SCN under
section 73(1) ought to have been issued latest by 30.09.2021.
iv. Since the notice has been issued after 30.09.2021, the entire proceeding is barred by limitation and
deemed to be concluded under section 75(10).
Question 9
Everest Technologies Private Limited has been issued a show cause notice (SCN) on 31.01.2021 under
section 73(1) on account of short payment of tax during the period between 01.07.2017 and 31.12.2017.
Everest Technologies Private Limited contends that the show cause notice issued to it is time-barred in
law.
You are required to examine the technical veracity of the contention of Everest Technologies Private
Limited.
Answer
The contention of Everest Technologies Private Limited is not valid in law. The SCN under section 73(1)
can be issued at least 3 months prior to the time limit specified for issuance of order under section 73(10)

Page 19.4
[Section 73(2)]. The adjudication order under section 73(10) has to be issued within 3 years from the
due date for furnishing of annual return for the financial year to which the short-paid/not paid tax relates
to.
The due date for furnishing annual return for a financial year is 31st day of December following the end
of such financial year [Section 44]. Thus, SCN under section 73(1) can be issued within 2 years and 9
months from the due date for furnishing of annual return for the financial year to which the short-
paid/not paid tax relates to.
The SCN has been issued for the period between 01.07.2017 to 31.12.2017 which falls in the financial
year (FY) 2017-18. Due date for furnishing annual return for the FY 2017-18 is 31.12.2018 and 3 years’
period from due date of filing annual return lapses on 31.12.2021. Thus, SCN under section 73(1) ought
to have been issued latest by 30.09.2021. Since in the given case, the notice has been issued on
31.01.2021, notice is not time-barred.
Question 10
Anant & Co. self-assessed its tax liability as ₹ 90,000 for the month of April, but failed to make the
payment.
Subsequently the Department initiated penal proceedings against Anant & Co. for recovery of penalty
under section 73 for failure to pay GST and issued show cause notice on 10th August which was received
by Anant & Co. on 14th August.
Anant & Co. deposited the tax along with interest on 25th August and informed the department on the
same day.
Department is contending that he is liable to pay a penalty of ₹ 45,000 (i.e. 50% of ₹ 90000).
Examine the correctness of the stand taken by the Department with reference to the provisions of the
CGST Act. Explain the relevant provisions in brief.
Answer
Due date for payment of tax for the month of April is 20th May.
As per section 73, where self-assessed tax is not paid within 30 days from due date of payment of such
tax, penalty equivalent to 10% of tax or ₹ 10,000, whichever is higher, is payable. Thus, option to pay tax
within 30 days of issuance of SCN to avoid penalty, is not available in case of self- assessed tax.
Since in the given case, Anant & Co. has not paid the self-assessed tax within 30 days of due date [i.e. 20th
May], penalty equivalent to:
(i) 10% of tax, viz., ₹ 9,000 (10% of ₹ 90,000) or
(ii) ₹ 10,000,
whichever is higher, is payable by him. Thus, penalty payable is ₹ 10,000.
Hence, the stand taken by the Department that penalty will be levied on Anant & Co. is correct, but the
amount of penalty of ₹ 45,000 is not correct.

Page 19.5

Question 11
On 05.07.20XX, a show cause notice for ₹ 5,00,000 was issued to Mr. Vijay Kumar Sharma demanding
short payment of GST of ₹ 4,50,000 for the month of January, 20XX and also interest of ₹ 50,000.
Mr. Sharma raised objections and after personal hearing on 30.08.20XX, adjudicating authority passed
the final order for ₹ 3,50,000 for GST, without any reference with regard to payment of interest.
Mr. Sharma deposited the tax of ₹ 3,50,000 on 02.09.20XX and informed the department on the same day.
Subsequently, on 15.09.20XX, department demanded payment of interest of ₹ 60,000 on GST of ₹
3,50,000.
Mr. Vijay Kumar Sharma is not ready to pay any interest. His contention is that he is not liable for interest
because he deposited all the amount specified in the final adjudication order.
Examine with a brief note the validity of the action taken by the Department with reference to provisions
of the CGST Act, 2017.
Answer
As per section 75 of the CGST Act, 2017, the interest on the tax short paid has to be paid whether or not
the same is specified in the order determining the tax liability.
Thus, in view of the same, Mr. Vijay Kumar Sharma will have to pay the interest even though the same is
not specified in the final adjudication order. His contention that he is not liable for interest because he
deposited all the amount specified in the final adjudication order is not valid in law.
However, the amount of interest demanded in the order cannot be in excess of the amount specified in
the notice.
Therefore, in the given case, Department cannot demand the interest in excess of the amount specified
in the notice, which will be ₹ 50,000.
Question 12
Checkernot has self-assessed tax liability under IGST Act, 2017, as ₹ 80,000. He fails to pay the tax within
30 days from the due date of payment of such tax.
Determine the interest and penalty payable by him explaining the provisions of law, with the following
particulars available from his records:
Date of collection of tax 18th September, 20XX
Date of payment of tax 26th November, 20XX
No Show Cause Notice (SCN) has been issued to him so far, while he intends to discharge his liability,
even before it is issued to him, on the assumption that no penalty is leviable on him as payment is made
before issue of SCN.
Answer
Due date for payment of tax collected on 18.09.20XXis 20.10.20XX. However, since tax is actually paid on
26.11.20XX, interest @ 18% p.a. is payable for the period for which the tax remains unpaid [37 days] in
terms of section 50 of CGST Act, 2017 read with Notification No. 13/2017 CT dated 28.06.2017. Amount
of interest is:
= ₹ 80,000 × 18% × 37/365 = ₹ 1,460 (rounded off)
As per section 73(11) of CGST Act, 2017, where self-assessed tax/any amount collected as tax is not paid

Page 19.6
within 30 days from due date of payment of tax, then, inter alia, option to pay such tax before issuance of
SCN to avoid penalty, is not available.
Consequently, penalty equivalent to
(i) 10% of tax, viz., ₹ 8,000 or
(ii) ₹ 10,000,
whichever is higher,
is payable in terms of section 73(9) of CGST Act, 2017. Therefore, penalty of ₹ 10,000 will have to be paid
by Checkernot. However, such penalty is payable when the PO issues an order in this behalf.
Question 13
Discuss briefly the procedure for issue of adjudication order under section 74(9) & (11) and the time
limit for passing adjudication order under section 74(10) of the CGST Act, 2017.
Answer
The procedure for issue of adjudication order under section 74 of CGST Act, 2017 is as under:-
Where a show cause notice/statement is issued to a person chargeable with tax, he may furnish a
representation to the proper officer in his defence, if he is of the view that he is not so liable to pay
whole/part of the amount mentioned in the show cause notice.
The proper officer after considering the representation, if any, made by the person chargeable with tax,
pass an order determining the amount of tax, interest and penalty due from such person [Section 74(9)].
Where any person served with an adjudication order pays the tax along with interest payable thereon
under section 50 and a penalty equivalent to 50% of such tax within 30 days of communication of the
order, all proceedings in respect of the said notice shall be deemed to be concluded [Section 74(11)].
As per section 74(10) of CGST Act, 2017, the proper officer shall issue the adjudication order within 5
years from the due date for furnishing of Annual Return for the financial year to which the tax not
paid/short paid/input tax credit wrongly availed/ utilised relates to or within 5 years from the date of
erroneous refund.
Question 14
A show cause notice was issued demanding GST of ₹ 1,80,180 for the month of July, 20XX on 1st October,
20XX. However, adjudicating authority after the personal hearing found that there was a typographical
error while mentioning the amount of GST and he confirmed the demand for ₹ 10,80,180. Assessee seeks
your advice.
What would be your advice if: (a) assessee comes to you after issue of order or (b) a corrigendum revising
the amount to ₹ 10,80,180 on 15th November, 20XX, is issued.
Answer
(i) Advice after issue of order:
As per section 75(7) of the CGST Act, 2017, inter alia, the amount of tax, interest and penalty
demanded in the order cannot exceed the amount specified in the notice.
Since, in the given case, the amount of tax demanded in the order exceeds the amount of tax
demanded in the show cause notice, the assessee can file an appeal against the adjudication order
within the prescribed time limit.

Page 19.7
(ii) Advice after issue of corrigendum:

Any authority, who has issued, inter alia, any notice, may rectify any error which is apparent on the
face of record in such notice, inter alia, on its own motion within a period of 6 months from the
date of issue of such notice except where the rectification is purely in the nature of correction of a
clerical or arithmetical error, arising from any accidental slip or omission [Section 161 of the CGST
Act, 2017].
In the given case, since the corrigendum has been issued to rectify a typographical error in the
show cause notice, which is an error apparent on the face of the record, the rectification is correct
in law. Further, being rectification of a clerical error, the time limit of 6 months will not apply.
Therefore, the assessee should reply to the show cause notice considering the revised amount of
demand.
Question 15
Mr. X, registered under GST Act, had made short payment of GST for the month of July 20XX.
He does not want a show cause notice to be served on him by proper officer. Advice Mr. X, if:
(i) Short payment of tax is on account of reasons other than fraud
(ii) Short payment of tax is on account of fraud.
Answer
(i) Short payment of tax is on account of reasons other than fraud
As per section 73 of the CGST Act, 2017, the show cause notice will not be issued by the proper
officer, if Mr. X pays the amount of tax short paid along with interest payable thereon on the basis
of his own ascertainment of such tax or the tax as ascertained by the proper officer, before the
service of notice and inform the proper officer in writing of such payment.
(ii) Short payment of tax is on account of fraud
As per section 74 of the CGST Act, 2017, the show cause notice will not be issued by the proper
officer, if Mr. X pays the amount of tax short paid along with interest payable thereon and a penalty
equal to 15% of such tax on the basis of his own ascertainment of such tax or the tax as ascertained
by the proper officer, before the service of notice and inform the proper officer in writing of such
payment.
Question 16
Inoba Bhave is engaged in supply of taxable services. He supplies some services in the month of April and
collects IGST of ₹ 15,50,000 on said supply on 18th April. However, he fails to pay the tax so collected
within 30 days from the due date of payment of such tax.
No Show Cause Notice (SCN) has been issued to him so far. Inoba Bhave decides to discharge his tax
liability, before the SCN is issued to him. He is of the view that no penalty is leviable if the payment of tax
is made before issue of SCN.
Therefore, he self-assesses his tax liability at ₹ 15,50,000 and pays the same on 26th June. Determine the
interest and penalty, if any, payable by Inoba Bhave.
Answer
Due date for payment of tax collected on 18th April is 20th May. However, since tax is actually paid on
26th June, interest @ 18% p.a. is payable for the period for which the tax remains unpaid [37 days] in
Page 19.8
terms of section 50 of CGST Act, 2017 read with Notification No. 13/2017 CT dated 28.06.2017. Amount
of interest is:
= ₹ 15,50,000 × 18% × 37/365 = ₹ 28,282 (rounded off)
As per section 73(11) of the CGST Act, 2017, where self-assessed tax/any amount collected as tax is not
paid within 30 days from due date of payment of tax, then, inter alia, option to pay such tax before
issuance of SCN to avoid penalty, is not available.
Consequently, penalty equivalent to
(i) 10% of tax, viz., ₹ 1,55,500 or
(ii) ₹ 10,000, whichever is higher,
is payable in terms of section 73(9) of the CGST Act, 2017.
Therefore, penalty of ₹ 1,55,500 will have to be paid by Inoba Bhave.
Question 17
Narmada Enterprises, a registered person, pays CGST and SGST on a transaction considered by it to be
an intra-State supply. However, subsequently said transaction is held to be an inter-State supply.
Examine the recourse available with Narmada Enterprises.
Answer
Section 77(1) of the CGST Act, 2017 stipulates that a registered person who has paid the Central tax and
State tax or, as the case may be, the Central tax and the Union territory tax on a transaction considered
by him to be an intra -State supply, but which is subsequently held to be an inter-State supply, shall be
refunded the amount of taxes so paid.
Further, section 19(2) of the IGST Act, 2017 provides that a registered person who has paid central tax
and State tax or Union territory tax, as the case may be, on a transaction considered by him to be an intra-
State supply, but which is subsequently held to be an inter-State supply, shall not be required to pay any
interest on the amount of integrated tax payable.
Thus, in the given case, Narmada Enterprises shall be refunded the amount of taxes so paid and it shall
not be required to pay any interest on the amount of IGST payable by it on the transaction wrongly
considered by it earlier as intra-State transaction.
Question 18
A taxable person has mistakenly paid CGST and SGST for an inter-State supply. Subsequently, when he
discovers the same, can he adjust the IGST liability against the wrongly paid CGST and SGST?
Answer
Section 77, inter alia, stipulates that a registered person who has paid the Central tax and State tax or, as
the case may be, the central tax and the Union territory tax on a transaction considered by him to be an
intra-State supply, but which is subsequently held to be an inter-State supply, shall be refunded the
amount of taxes so paid in such manner and subject to such conditions as may be prescribed.
The IGST liability cannot be adjusted against the CGST and SGST wrongly paid.
Question 19
A taxpayer has suppressed certain facts resulting in short payment of tax. The mistake is pointed out by
Page 19.9
the Department, but no show cause notice (SCN) has been issued. As per the taxpayer, suppression is
accepted at ₹ 12,00,000 and he agrees that the suppression has taken place in the month of January, 2019.
He clears the dues on 20th April, 2019. However, the Department, on verification, identifies additional
suppression of ₹ 2,00,000 in the same month of January, 2019. SCN is issued and the taxpayer represents
before the proper officer, which results into an adverse order against the taxpayer. The order is passed
on 25.05.2019 and the taxpayer complies with the adverse adjudication order on 27.06.2019.
Determine the tax, interest and penalty payable at each stage. Assume Tax Rate as 18%.
Answer
Note: In the given question, suppression accepted at ₹ 12 lakh may be assumed to be either the value or
the tax amount. Further, where the amount of ₹ 12 lakh is assumed to be the value of suppression.
Further, as per explanation 2 to section 74 of the CGST Act, 2017, the expression “suppression” means
non-declaration of facts or information which a taxable person is required to declare in the return,
statement, report or any other document furnished under this Act or the rules made thereunder, or
failure to furnish any information on being asked for, in writing, by the proper officer. Therefore, the
question can be answered either by assuming that the information has been suppressed in the
return/statement/report filed IN the month of January (interest would become payable from 21st
January in this case) or by assuming that suppression activity has taken place in January and the same
has been reported in the return/statement/report filed IN the month of February (interest would
become payable from 21st February in this case).
In view of the above assumptions, following alternative answers are possible:
Alternative 1- Where amount of ₹ 12 lakh is assumed to be the value of suppression
Tax, interest and penalty payable before the issue of the SCN: In case of short payment of tax by
reason of suppression of facts, if the taxpayer pays such short-paid tax and applicable interest before the
issuance of show cause notice, penalty equal to 15% of such tax is payable.
Value suppressed = ₹ 12,00,000 Tax @ 18% = ₹ 2,16,000
Interest = ₹ 2,16,000 × 18% × 90/365 = ₹ 9,587 (rounded off) [From 21st January to 20 th April]
(It has been assumed that the information has been suppressed in the return/statement/report filed in
the month of January and thus, interest would become payable from 21st January in this case.)
OR
Interest = ₹ 2,16,000 × 18% × 59/365 = ₹ 6,285 (rounded off) [From 21st February to 20 th April]
(It has been assumed that suppression activity has taken place in January and the same has been reported
in the return/statement/report filed in the month of February and thus, interest would become payable
from 21st February in this case.)
Penalty = ₹ 2,16,000 × 15% = ₹ 32,400
Tax, interest and penalty payable after the adjudication order: In case of short payment of tax by
reason of suppression of facts, if the taxpayer pays such short-paid tax and applicable interest after 30
days of communication of the adjudication order penalty equal to 100% of such tax is payable.
Value suppressed = ₹ 2,00,000
Tax @ 18% = ₹ 36,000
Interest = ₹ 36,000 × 18% × 158/365 = ₹ 2,805 (rounded off) [From 21st January to 27th June]
OR

Page 19.10
Interest = ₹ 36,000 × 18% × 127/365 = ₹ 2,255 (rounded off) [From 21st February to 27th June]
Penalty = ₹36,000 x 100% = 36,000
Alternative 2- Where amount of ₹ 12 lakh is assumed to be the suppressed amount of tax
Tax, interest and penalty payable before the issue of the SCN: In case of short payment of tax by
reason of suppression of facts, if the taxpayer pays such short-paid tax and applicable interest before the
issuance of show cause notice, penalty equal to 15% of such tax is payable.
Tax payable = ₹ 12,00,000
Interest = ₹ 12,00,000 × 18% × 90/365 = ₹ 53,260 (rounded off) [From 21st January to 20th April]
OR
Interest = ₹ 12,00,000 × 18% × 59/365 = ₹ 34,915 (rounded off) [From 21st February to 20th April]
Penalty = ₹ 12,00,000× 15% = ₹ 1,80,000
Tax, interest and penalty payable after the adjudication order: In case of short payment of tax by
reason of suppression of facts, if the taxpayer pays such short-paid tax and applicable interest after 30
days of communication of the adjudication order penalty equal to 100% of such tax is payable.
Tax payable = ₹ 2,00,000
Interest = ₹ 2,00,000 × 18% × 158/365 = ₹ 15,584 (rounded off) [From 21st January to 27th June]
OR
Interest = ₹ 2,00,000 × 18% × 127/365 = ₹ 12,526 (rounded off) [From 21st February to 27th June]
Penalty = ₹ 2,00,000
Question 20
Mr. Jagjeevan has filed Form GSTR 3B after the due date prescribed for filing it. The adjudicating authority
is of the opinion that penalty has to be levied under section 73(9) & (11) of the CGST Act, 2017 and has
decided to pass an order for levying penalty of 10% of the tax or ₹ 10,000, whichever is higher, on the
grounds that amount collected as tax has not been paid within a period of 30 days from the due date of
payment of tax. Discuss the decision of the adjudication authority as to its correctness or otherwise.
Also, discuss the law of limitation period for issuing the show cause notice and passing the adjudication
order under section 73 of the CGST Act, 2017.

Page 19.11
Answer
The decision of the adjudicating authority is not correct in law.
The provisions of section 73(11) of the CGST Act, 2017 can be invoked only when the provisions of
section 73 are invoked and the provisions of section 73 are generally not invoked in case of delayed filing
of the return in Form GSTR-3B because tax along with applicable interest has already been paid.
Thus, penalty under the provisions of section 73(11) is not payable in such cases although a general
penalty may be imposed since the tax has been paid late in contravention of the provisions of the CGST
Act, as clarified vide Circular No. 76/50/2018 GST dated 31.12.2018.
The time-limit for issuance of SCN is 2 years and 9 months and time-limit for passing the adjudication
order is within 3 years from:
(i) the due date of filing annual return for the financial year to which the demand pertains or
(ii) the date of erroneous refund, as the case may be.

Page 19.12
CHAPTER - 20
Liability to Pay in Certain Cases
Question 1
Avataar Industries, a registered person under GST, has sold whole of its business to Rolex Manufacturers.
Determine the person liable to pay GST, interest or any penalty under GST law [determined before sale,
but still unpaid] due from Avataar Industries upto the time of such transfer.
Answer
Where a taxable person, liable to pay tax under this Act, transfers his business in whole or in part, by sale,
gift, lease, leave and license, hire or in any other manner whatsoever, the taxable person and the person
to whom the business is so transferred shall, jointly and severally, be liable wholly or to the extent of
such transfer, to pay the tax, interest or any penalty due from the taxable person upto the time of such
transfer, whether such tax, interest or penalty has been determined before such transfer, but has
remained unpaid or is determined thereafter.
Thus, in the given case, Avataar Industries and Rolex Manufacturers shall, jointly and severally, be liable
wholly or to the extent of such transfer, to pay GST, interest or any penalty [determined before sale, but
still unpaid] due from Avataar Industries upto the time of such transfer.
Question 2
ABC Manufacturers Ltd. engages Raghav & Sons as an agent to sell goods on its behalf. Raghav & Sons
sells goods to Swami Associates on behalf of ABC Manufacturers Ltd. Determine the liability to pay GST
payable on such goods as per the provisions of section 86.
Answer
Where an agent supplies or receives any taxable goods on behalf of his principal, such agent and his
principal shall, jointly and severally, be liable to pay the tax payable on such goods under this Act.
Thus, in the given case, ABC Manufacturers Ltd. and Raghav & Sons shall, jointly and severally, be liable
to pay GST payable on such goods.
Question 3
A person, liable to pay GST, interest and penalty under GST law, dies. Determine the person liable to pay
the GST, interest and penalty due from such person under GST law determined after his death if the
business carried on by such person is continued after his death by his legal representative.
Would your answer be different if the business carried on by the person who has died, is discontinued
after his death?
Answer
Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, where a person, liable to pay
tax, interest or penalty under this Act, dies, then if a business carried on by the person is continued after
his death by his legal representative or any other person, such legal representative or other person, shall
be liable to pay tax, interest or penalty due from such person under this Act, whether such tax, interest
or penalty has been determined before his death but has remained unpaid or is determined after his
death.

Page 20.1
If the business carried on by the person who has died, is discontinued after his death
tax, interest or penalty under this Act, dies, then if a business carried on by the person is discontinued,
whether before or after his death, his legal representative shall be liable to pay, out of the estate of the
deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or penalty
due from such person under this Act, whether such tax, interest or penalty has been determined before
his death but has remained unpaid or is determined after his death.
Question 4
What happens to the GST liability when the estate of a taxable person is under the control of Court of
Wards?
Answer
Where the estate of a taxable person owning a business in respect of which any tax, interest or penalty is
payable is under the control of the Court of Wards/Administrator General/Official Trustee/Receiver or
Manager appointed under any order of a Court, the tax, interest or penalty shall be levied and recoverable
from such Court of Wards/Administrator General/Official Trustee/Receiver or Manager to the same
extent as it would be determined and recoverable from a taxable person.
Question 5
Discuss the liability to pay tax in case of an amalgamation/merger, under section 87.
Answer
Section 87 stipulates that when two or more companies are amalgamated/ merged in pursuance of an
order of court or Tribunal or otherwise and the order is to take effect from a date earlier to the date of
the order and any two or more of such companies have supplied/ received any goods and/or services to
or from each other during the period commencing on the date from which the order takes effect till the
date of the order, then such transactions of supply and receipt shall be included in the turnover of supply
or receipt of the respective companies and they shall be liable to pay tax accordingly.
For the purposes of the CGST Act, 2017, the said two or more companies shall be treated as distinct
companies for the period up to the date of the said order. The registration certificates of the said
companies shall be cancelled with effect from the date of the said order.
Question 6
Discuss the liability to pay tax, interest or penalty on death of a person liable to pay tax, interest or penalty
as per the provisions of section 93(1).
Answer
Save as otherwise provided in the Insolvency and Bankruptcy Code, 2016, where a person, liable to
pay tax, interest or penalty under CGST Act, dies, then:
 Business is continued after his death: if a business carried on by the person is continued after his
death by his legal representative or any other person, such legal representative or other person,
shall be liable to pay tax, interest or penalty due from such person under this Act.
 Business is discontinued after his death: if the business carried on by the person is discontinued,

Page 20.2
whether before or after his death, his legal representative shall be liable to pay, out of the estate of
the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or
penalty due from such person under this Act,
whether such tax, interest or penalty has been determined before his death but has remained unpaid or
is determined after his death.
Question 7
With reference to the provisions of CGST Act, 2017, explain the liability of partners of firm to pay tax?
Answer
Section 90 explains the liability of partners of firm to pay tax as under:-
Partners of the firm jointly and severally liable to pay any tax, interest or penalty of the firm:
Notwithstanding any contract to the contrary and any other law for the time being in force, where any
firm is liable to pay any tax, interest or penalty under this Act, the firm and each of the partners of the
firm shall, jointly and severally, be liable for such payment.
Retiring partner liable to pay any tax, interest or penalty of the firm due up to the date of his
retirement: Where any partner retires from the firm, he or the firm, shall intimate the date of retirement
of the said partner to the Commissioner by a notice in that behalf in writing and such partner shall be
liable to pay tax, interest or penalty due up to the date of his retirement whether determined or not, on
that date.
However, if no such intimation is given within 1 month from the date of retirement, the liability of such
partner shall continue until the date on which such intimation is received by the Commissioner.
Question 8
Explain the provisions relating to liability for GST in case of company in liquidation (section 88).
Answer
The provisions relating to liability for GST in case of company in liquidation provided under section 88
are:-
 Where any company is being wound up whether under the orders of a court or Tribunal or
otherwise, every person appointed as a liquidator/receiver of assets of a company shall give the
intimation of his appointment to the Commissioner within 30 days of his appointment.
 The Commissioner shall ascertain the amount which in the opinion of the Commissioner would be
sufficient to provide for any tax, interest or penalty which is then, or is likely thereafter to become,
payable by the company.
 He shall communicate the details of amount to the liquidator within 3 months of the receipt of
intimation of appointment of liquidator.
 When any private company is wound up and any tax, interest or penalty determined under the
CGST Act on the company for any period, whether before or in the course of or after its liquidation,
cannot be recovered, then every person who was a director of such company at any time during
the period for which the tax was due shall, jointly and severally, be liable for the payment of such
tax, interest or penalty.
However, director shall not be liable if he proves to the satisfaction of the Commissioner that the
non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty on his part
in relation to the affairs of the company.
Page 20.3
Question 9
Discuss the liability of the retiring partner of a firm to pay any tax, interest or penalty, if any, leviable on
the firm under CGST/ lGST/ SGST Act.
Answer
Where any partner retires from the firm, he or the firm, shall intimate the date of retirement of the said
partner to the Commissioner by a notice in that behalf in writing. Such partner shall be liable to pay tax,
interest or penalty due up to the date of his retirement whether determined or not, on that date.
However, if no such intimation is given within 1 month from the date of retirement, the liability of such
partner shall continue until the date on which such intimation is received by the Commissioner [Section
90].

Page 20.4

Question 10
With reference to the provisions of CGST Act, 2017, explain the liability of directors of private company?
Answer
The provisions relating to liability of directors of private company are contained in section 89 of the CGST
Act. It provides that notwithstanding anything contained in the Companies Act, 2013, where any tax,
interest or penalty due from a private company in respect of any supply of goods or services or both for
any period cannot be recovered, then, every person who was a director of the private company during
such period shall, jointly and severally, be liable for the payment of such tax, interest or penalty unless
he proves that the non-recovery cannot be attributed to any gross neglect, misfeasance or breach of duty
on his part in relation to the affairs of the company.
Where a private company is converted into a public company and the tax, interest or penalty in respect
of any supply of goods or services or both for any period during which such company was a private
company cannot be recovered before such conversion, then, above provisions shall apply to any person
who was a director of such private company in relation to any tax, interest or penalty in respect of such
supply of goods or services or both of such private company. However, this exception does not apply to
any personal penalty imposed on such director.
Question 11
In case of death of a person liable to pay tax, interest or penalty, who shall be liable to pay said dues?
Discuss as per the provisions of section 93(1) of the CGST Act, 2017.
Answer
tax, interest or penalty under CGST Act, dies, then:
 business is continued after his death: if a business carried on by the person is continued after
his death by his legal representative or any other person, such legal representative or other person,
shall be liable to pay tax, interest or penalty due from such person under this Act.
 business is discontinued after his death: if the business carried on by the person is discontinued,
whether before or after his death, his legal representative shall be liable to pay, out of the estate of
the deceased, to the extent to which the estate is capable of meeting the charge, the tax, interest or
penalty due from such person under this Act,
whether such tax, interest or penalty has been determined before his death but has remained unpaid or
is determined after his death.

Page 20.5
CHAPTER - 21
Offences and Penalties
Question 1
What are the various type of offences which may be committed by a taxable person liable to penalty?
Answer
There are 21 offences which may be committed by a taxable person and may be classified into following
categories based upon their nature:
Offences having nexus with invoice
(i) Issue of invoice or bill without making supply;
(ii) Issuing invoice or document using GSTIN of another person;
(iii) Making a supply without invoice or with false/ incorrect invoice;
Offences having nexus with payment of tax
(iv) Not paying any amount collected as tax for a period exceeding three months;
(v) Not paying tax collected in contravention of the CGST/SGST Act for a period exceeding 3 months;
(vi) Non deduction or lower deduction of tax deducted at source or not depositing tax deducted at
source under section 51;
(vii) Non collection or lower collection of or non-payment of tax collectible at source under section 52;
(viii) Availing/utilizing input tax credit without actual receipt of goods and/or services;
(ix) Availing/distributing ITC by an Input Service Distributor in violation of Section 20;
(x) Fraudulently obtains any refund of tax;
(xi) Suppressing turnover;
Offences having nexus with records and related information
(xii) Falsification/ substitution of financial records or furnishing of fake accounts/ documents or
furnishing false information/ return with intent to evade payment of tax;
(xiii) Failure to maintain accounts/ documents in the manner specified in the Act or failure to retain
accounts/ documents for the period specified in the Act;
(xiv) Failure to furnish information/ documents required by an officer in terms of the Act/ Rules or
furnishing false information/ documents during the course of any proceeding;
(xv) Tampering/ destroying any material evidence/ documents;
(xvi) Obstructing or preventing any official in discharge of his duty;
Offences having nexus with Registration
(xvii) Failure to register despite being liable to pay tax;
(xviii)Furnishing false information regarding registration particulars either at the time of applying for
registration or subsequently
Offences having nexus with Supply/Transport of goods
(xix) Transporting goods without prescribed documents;
(xx) Supplying/ transporting/ storing any goods liable to confiscation;
(xxi) Disposing of/ tampering with goods detained/ seized/ attached under the Act.

Page 21.1
Question 2
What is the quantum of penalty for an offence mentioned under section 122(1) and section 122(2)?
Answer
Section 122(1) provides that any taxable person who has committed any of the 21 offences mentioned
thereunder, shall be liable to a penalty which shall be higher of the following amounts:
(a) ₹ 10,000/-; or
(b) An amount equivalent to, any of the following (Applicable as the case may be) –
(i) Tax evaded; or
(ii) Tax not deducted under section 51 or short deducted or deducted but not paid to the
Government; or
(iii) Tax not collected under section 52 or short collected or collected but not paid to the
Government; or
(iv) Input tax credit availed of or passed on or distributed irregularly; or
(v) Refund claimed fraudulently
However, Section 122(2) provides that if a registered person supplying goods or services has not paid
any tax or short paid it or tax has been erroneously refunded to him, or ITC has been wrongly availed or
utilized, for any reason other than the reason of fraud or any willful misstatement or suppression of facts
to evade tax, penalty shall be leviable for an amount higher of following:
(a) ₹ 10,000/-; or
(b) 10% of the tax due from such person
and in case of fraud, or any willful misstatement or suppression of facts to evade tax, penalty shall be
equal to ten thousand rupees or the tax due from such person, whichever is higher.
Question 3
Is there any penalty prescribed for a person other than the taxable person under section 122?
Answer
Yes, section 122(3) provides for levy of penalty extending to ₹ 25,000/- for any person who-
• aids or abets any of the 21 offences,
• deals in any way (whether receiving, supplying, storing or transporting) with goods that are liable
to confiscation,
• receives or deals with supply of services in contravention of the Act,
• fails to appear before an authority who has issued a summon,
• fails to issue any invoice for a supply or account for any invoice in his books of accounts.
Question 4
Mr. X, an unregistered person under GST purchases the goods supplied by Mr. Y who is a registered
person without receiving a tax invoice from Mr. Y and thus helps in tax evasion by Mr. Y.
(i) What disciplinary action may be taken by tax authorities to curb such type of cases and on whom?
(ii) Suppose, in the above case, a disciplinary action is taken against Mr. X and an adhoc penalty of ₹

Page 21.2
20,000/- is imposed by issue of SCN without describing contravention for which penalty is going
to be imposed and without mentioning the provisions under which penalty is going to be imposed.
Should Mr. X proceed to pay for penalty or challenge SCN issued by department?
Answer
(i) Both Mr. X and Mr. Y will be offender and will be liable to penalty as under: Mr. X – Penalty under
section 122(3) which may extend to ₹ 25,000/-;
Mr. Y – Penalty under section 122(1), which will be higher of following, namely ₹ 10,000/- or 100%
of tax evaded.
(ii) The levy of penalty is subject to a certain disciplinary regime which is based on jurisprudence,
principles of natural justice and principles governing international trade and agreements. Such
general discipline is enshrined in section 126 of the Act. Accordingly—
• no penalty is to be imposed without issuance of a show cause notice and proper hearing in
the matter, affording an opportunity to the person proceeded against to rebut the allegations
levelled against him,
• the penalty is to depend on the totality of the facts and circumstances of the case, the penalty
imposed is to be commensurate with the degree and severity of breach of the provisions of the
law or the rules alleged,
• the nature of the breach is to be specified clearly in the order imposing the penalty,
• the provisions of the law under which the penalty has been imposed is to be specified.
Since SCN issued to Mr. X suffers from lack of clarity about nature of breach which has taken place
and about provision of law under which penalty has been imposed, SCN issued by department may
be challenged.
Question 5
Whether action can be taken for transportation of goods without valid documents or if goods are
attempted to be removed without proper record in books? If yes, explain the related provisions under
the CGST Act, 2017.
Answer
Yes, action can be taken for transportation of goods without valid documents or if goods are attempted
to be removed without proper record in books. If any person transports any goods or stores any such
goods while in transit without the documents prescribed under the Act or supplies or stores any goods
that have not been recorded in the books or accounts maintained by him, then such goods shall be liable
for detention along with any vehicle on which they are being transported [Section 129 of CGST Act].
Where owner comes forward: - Such goods shall be released on payment of the applicable tax and
penalty equal to 100% of the tax payable on such goods or upon furnishing of security equivalent to the
said amount. In case of exempted goods, penalty is 2% of value of goods or ₹25,000/- whichever is less.
Where owner does not come forward: - Such goods shall be released on payment of the applicable tax
and penalty equal to 50% of value of goods reduced by the tax amount paid thereon or upon furnishing
of security equivalent to the said amount. In case of exempted goods, penalty is 5% of value of goods or
₹ 25,000/- whichever is less.
Question 6

Page 21.3
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.
Answer
i. As per section 132(1)(d)(iii) of the CGST Act, 2017, failure to pay any amount collected as tax
beyond 3 months from due date of payment is punishable with specified imprisonment and fine
provided the amount of tax evaded exceeds at least ₹ 100 lakh. Therefore, failure to deposit ₹ 4
lakh collected as tax by ‘X’ will not be punishable with imprisonment.
Further, falsification of financial records by ‘X’ is punishable with imprisonment up to 6 months or
with fine or both vide section 132(1)(f)(iv) of the CGST Act, 2017 and the said offence is bailable in
terms of section 132(4) of the CGST Act, 2017 assuming that falsification of records is with an
intention to evade payment of tax due under the CGST Act, 2017.
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)(i) of the CGST Act, 2017.
Since the amount of tax evaded by ‘Y’ exceeds ₹ 500 lakh (₹ 550 lakh - ₹ 30 lakh), ‘Y’ is liable to
imprisonment upto 5 years and with fine. It has been assumed that amount of ₹ 520 lakh collected
as tax is not paid to the Government beyond 3 months from the due date of payment of tax. Further,
the imprisonment shall be minimum 6 months in the absence of special and adequate reasons to
the contrary to be recorded in the judgment vide section 132(3) of the CGST Act, 2017. Such offence
is non-bailable in terms of section 132(5) of the CGST Act, 2017.
If ‘X ’and ‘Y’ repeat the offence, they shall be punishable for second and for every subsequent
offence with imprisonment upto 5 years and with fine in terms of section 132(2) of the CGST Act,
2017. Such imprisonment shall also be minimum 6 months in the absence of special and adequate
reasons to the contrary to be recorded in the judgment.
Question 7
From the details given below, determine the maximum amount of fine in lieu of confiscation leviable
under section 130 of CGST, Act, 2017 on:
(i) The goods liable for confiscation.
(ii) On the conveyance used for carriage of such goods.
Details are as follows:
Cost of the goods for owner excluding GST 15,00,000

Market Value of Goods 20,00,000
GST on such goods 3,60,000
You are also required to explain relevant legal provisions in brief.

Page 21.4
Answer
(i) As per section 130(2) of the CGST Act, 2017, in case of goods liable for confiscation, the maximum
amount of fine leviable in lieu of confiscation is the market value of the goods confiscated, less the
tax chargeable thereon.
Therefore, the fine leviable = ₹ 20,00,000 - ₹ 3,60,000 = ₹ 16,40,000
The aggregate of fine and penalty shall not be less than the amount of penalty leviable under section
129(1).
(ii) In case of conveyance used for carriage of such goods and liable for confiscation, the maximum
amount of fine leviable in lieu of confiscation is equal to tax payable on the goods being transported
thereon [Third proviso to section 130(2) of the CGST Act, 2017].
Therefore, the fine leviable = ₹ 3,60,000
Question 8
From the following details, calculate the amount to be paid, for release of goods detained or seized under
section 129 of the CGST Act, 2017, if owner of the goods does not come forward for payment of applicable
tax and penalty
Details are as follows:

Value of goods 30,00,000
Applicable GST on such goods 5,40,000
GST already paid on such goods 3,60,000
Would your answer be different if goods were exempted from GST and value remains the same namely ₹
30,00,000?
Answer
If owner of the goods does not come forward for payment of applicable tax and penalty, the amount to
be paid for release of goods detained or seized under section 129 of the CGST Act, 2017, is applicable GST
and penalty equal to 50% of the value of the goods reduced by the tax amount paid thereon.
Therefore, in the given case, the amount payable = [₹ 5,40,000 + 50% of ₹ 30,00,000] – ₹ 3,60,000 = ₹
16,80,000
However, in case of exempted goods, amount to be paid for release of goods detained is equal to 5% of
the value of goods or ₹ 25,000, whichever is less.
= 5% of ₹ 30,00,000 or ₹ 25,000, whichever is less
= ₹ 1,50,000 or ₹ 25,000, whichever is less
= ₹ 25,000
Question 9
What are cognizable and non-cognizable offences under section 132 of CGST Act, 2017?
Answer
As per section 132(5) of CGST Act, 2017, following offences are cognizable offences, provided amount of

Page 21.5
tax evaded or input tax credit wrongly availed/ utilised or refund wrongly taken >₹ 5 crores, namely:
(a) Supply without issuance of invoice with the intention to evade tax
(b) Issuance of any invoice/ bill without supply leading to wrongful availment/ utilisation of ITC or
refund of tax
(c) Availment of ITC using invoice/ bill against which no supplies have been made
(d) Failure to pay the amount collected as tax to the Government beyond a period of 3 months from
the due date of payment.
Further, section 132(4) of CGST Act, 2017 provides that all offences specified under section 132 are non-
cognizable offences except the cognizable offences.
Question 10
Where an offence under the GST law is committed by a taxable person being a trust, who are deemed to
be guilty of the offence and under what circumstances? When do the relevant provisions become
inapplicable in respect of individuals concerned with the trust?
Answer
Section 137 of the CGST Act, 2017 stipulates that where an offence under the GST law is committed by a
taxable person being a trust, the managing trustee shall be deemed to be guilty of that offence and shall
be liable to be proceeded against and punished accordingly.
Further, where it is proved that the offence committed by the trust has been committed –
• with the consent or connivance of, or
• is attributable to any negligence on the part of any other individual concerned with the trust,
he shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and
punished accordingly.
The relevant provisions will become inapplicable in respect of individuals concerned with the trust, if
they prove that the offence was committed without their knowledge or that they had exercised all due
diligence to prevent the commission of such offence.

Page 21.6

Question 11
(a) Radhaswamy owns and supplies certain goods costing ₹ 30,00,000 in a conveyance hired from
Manikaran Transporters. Market value of said goods is ₹ 40,00,000 and tax chargeable thereon is
₹ 4,80,000.
The goods supplied by Radhaswamy and the conveyance [owned by Manikaran Transporters] used
for carriage of such goods are confiscated since Radhaswamy has supplied said goods in
contravention of the provisions of the CGST Act, 2017 with an intent to evade payment of tax.
However, the proper officer intends to give an option to Radhaswamy and Manikaran Transporters
to pay in lieu of confiscation, a fine leviable under section 130 of the CGST, Act, 2017.
Determine the maximum amount of the fine in lieu of confiscation on:
(i) the goods liable for confiscation.
(ii) the conveyance used for carriage of such goods.
(b) Raghuraman is a registered supplier in Madhya Pradesh. He failed to pay the GST amounting to ₹
7,400 for the month of January, 20XX. The proper officer imposed a penalty on Raghuraman for
failure to pay tax. Raghuraman believes that it is a minor breach and in accordance with the
provisions of section 126 of the CGST Act, 2017, no penalty is imposable for minor breaches of tax
regulations. Examine the correctness of Raghuraman’s claim.
Answer
(a) (i) In case of goods liable for confiscation, maximum amount of fine leviable in lieu of confiscation
in terms of first proviso to section 130(2) of the CGST Act, 2017 is the market value of the
goods confiscated, less the tax chargeable thereon. Therefore, in the given case, maximum fine
leviable: = ₹ 40,00,000 - ₹ 4,80,000 = ₹ 35,20,000
(ii) In case where conveyance used for carriage of such goods is liable for confiscation, the
maximum amount of fine leviable in lieu of confiscation in terms of third proviso to section
130(2) of the CGST Act, 2017 is equal to tax payable on the goods being transported thereon.
Therefore, in the given case, maximum fine leviable = ₹ 4,80,000
(b) No, Raghuraman’s claim is not tenable in law. Section 126(1) of the CGST Act, 2017 provides that
no officer shall impose any penalty under CGST Act, 2017, inter alia, for minor breaches of tax
regulations or procedural requirements. Further, explanation to section 126(1) of the CGST Act,
2017 stipulates that a breach shall be considered a ‘minor breach’ if the amount of tax involved is
less than ₹ 5,000.
In the given case, breach made by Raghuraman is not a ‘minor breach’ since the amount involved
is not less than ₹ 5,000. So, penalty is imposable under the CGST Act, 2017.
Question 12
(i) Shagun started supply of services in Vasai, Maharashtra from 01.01.20XX. Her turnover exceeded
₹ 20 lakh on 25.01.20XX. However, she didn’t apply for registration. Determine the amount of
penalty, if any, that may be imposed on Shagun on 31.03.20XX, if the tax evaded by her, as on said
date, on account of failure to obtain registration is ₹ 1,26,000.

Page 21.7
(ii) Sagar, managing director of Telecom Solutions Ltd., is issued a summon to appear before the
central tax officer to produce the books of accounts of Telecom Solutions Ltd. in an inquiry
conducted on said company. Determine the amount of penalty, if any, that may be imposed on
Sagar, if he fails to appear before the central tax officer.
Answer
(i) Where the aggregate turnover of a supplier making supply of services from a State/UT exceeds ₹
20 lakh in a financial year, he is liable to be registered in the said State/UT. The said supplier must
apply for registration within 30 days from the date on which he becomes liable to registration.
However, in the given case, although Shagun became liable to registration on 25.01.20XX, she didn’t
apply for registration within 30 days of becoming liable to registration.
Section 122(1)(xi) of the CGST Act, 2017 stipulates that a taxable person who is liable to be
registered under the CGST Act, 2017 but fails to obtain registration shall be liable to pay a penalty
of:
(a) ₹ 10,000
or
(b) an amount equivalent to the tax evaded [₹ 1,26,000 in the given case],
whichever is higher.
Thus, the amount of penalty that can be imposed on Shagun is ₹ 1,26,000.
(ii) Section 122(3)(d) of the CGST Act, 2017 stipulates that any person who fails to appear before the
officer of central tax, when issued with a summon for appearance to give evidence or produce a
document in an inquiry is liable to a penalty which may extend to ₹ 25,000. Therefore, penalty upto
₹ 25,000 can be imposed on Sagar, in the given case.
Question 13
XYZ carries goods from Vadodara, Gujarat to Pune, Maharashtra. The value of the goods is ₹ 80,000 which
are chargeable to tax @ 18% IGST and in transit, proper officer intercepted the same under section 68 of
the CGST Act, and found contravention.
Calculate the penalty payable under section 129 of CGST Act, 2017:
- If XYZ comes forward for payment of tax and penalty,
- If XYZ does not come forward for payment of tax and penalty.
Answer
The penalty payable under section 129 of the CGST Act, 2017 is
(a) 100% of the tax payable on goods detained or seized where the owner of the goods comes forward
for payment of tax and penalty;
(b) 50% of the value of the goods reduced by the tax amount paid thereon where the owner of the
goods does not come forward for payment of tax and penalty.
By virtue of section 20 of the IGST Act, 2017 provisions of penalty payable under section 129 of the CGST
Act, 2017 apply in case of IGST as well. However, where the penalty is leviable under the CGST Act, 2017
and the SGST/ UTGST Act, 2017, the penalty leviable under the IGST Act, 2017 shall be the sum total of
the said penalties. Therefore, penalty payable under IGST Act, 2017 is double the penalty payable under
section 129 of the CGST Act, 2017.
Therefore, in the given case the penalty payable will be computed as under:

Page 21.8
If XYZ comes forward for payment of tax and penalty (It has been assumed that XYZ is the owner of the
goods) –
= ₹ 80,000 × 18% (9% CGST and 9% SGST/ UTGST) × 100%
= ₹ 14,400
If XYZ does not come forward for payment of tax and penalty (It has been assumed that tax has been paid
on the goods) –
= [₹ 80,000 × 100% (50% under CGST plus 50% under SGST/ UTGST)] – [₹ 80,000 × 18%]
= ₹ 80,000 - ₹ 14,400
= ₹ 65,600
Note: In the above answer, the penalty payable has been computed in accordance with the provisions of
the IGST Act, 2017 as tax chargeable on the goods is IGST. However, the question can also be answered
on the basis of the provisions of section 129 of the CGST Act, 2017.
Question 14
Mangeshwar, registered under the CGST Act, 2017 has made a breach in payment of tax amounting to ₹
6,100. Assessing Authority has imposed a penalty as per law applicable to the breach. Invoking the
provisions of section 126, Mangeshwar argues that it is a minor breach and therefore, no penalty is
imposable.
In another instance, Mangeshwar has omitted certain details in documentation that is not easily
rectifiable. This has occurred due to the gross negligence of his accountant and he makes a plea that he
was unaware of it and therefore, no penalty should be levied.
Mangeshwar voluntarily writes accepting a major procedural lapse from his side and requests the officer
to condone the lapse as the loss caused to the revenue was not significant.
Also a lapse on the part of Mangeshwar has no specific penalty provision under the CGST Act, 2017. He
is very confident that no penalty should be levied without a specific provision under the Act.
Discuss what action may be taken by the Assessing Authority under law for each of the above breaches.
Answer
As per section 126(1) of the CGST Act, 2017, no penalty shall be leviable under the Act for minor breaches
of tax regulations. In terms of Explanation (a) to section 126(1), a breach shall be considered as “minor
breach”, if tax involved is less than ₹ 5,000. Therefore, breach made by Mangeshwar is not a ‘minor
breach’ since the amount involved is not less than ₹ 5,000. So, penalty is imposable.
Any omission or mistake in documentation which is easily rectifiable and made without fraudulent
intent/gross negligence is not liable for penalty in terms of section 126(1) of the CGST Act,
2017.However, penalty is imposable in the present case, since the omission in the documentation is not
easily rectifiable and has occurred due to gross negligence.
As per section 126(5) of the CGST Act, 2017, where there is a voluntary disclosure of breach, prior to its
discovery by the officer, the proper officer may consider this fact as a mitigating factor when quantifying
the penalty. Since Mangeshwar has voluntarily disclosed the breach of procedural requirement to the
officer, the proper officer may consider this fact as a mitigating factor when quantifying the penalty.
Therefore, the quantum of penalty will depend on the facts and circumstances of the case.
As per section 125 of the CGST Act, 2017, when no specific penalty has been specified for contravention
of any of the provisions of the Act or any rules made there under, it shall be liable to a penalty which may
extend to ₹ 25,000. Therefore, general penalty upto ₹ 25,000 may be imposed on Mangeshwar.

Page 21.9
Question 15
Department initiated prosecution proceedings against a taxable person who had evaded GST of ₹ 4.2
crores. He has approached the Commissioner with a request for compounding the offence. After
considering the request, the Commissioner has directed him to pay an amount of ₹ 2.5 crores as
compounding amount. Indicate the minimum and maximum limits for compounding amount. Is the
amount fixed by the Commissioner in this case within the limits prescribed under the law? What is the
consequence of the decision of the commissioner allowing the request for compounding the offence?
Answer
As per section 138 of the CGST Act, 2017,
the minimum limit for compounding amount is higher of the following amounts:-
(i) 50% of tax involved, or
(ii) ₹ 10,000, and
the upper limit for compounding amount is higher of the following amounts: -
(i) 150% of tax involved, or
(ii) ₹ 30,000
In the present case, the minimum limit for compounding is ₹ 2.10 crores. [₹ 2.10 crores (50% x ₹ 4.2
crores) or ₹ 10,000, whichever is higher].
The maximum limit for compounding in this case is ₹ 6.3 crores [₹ 6.3 crore (150% x ₹ 4.2 crores) or ₹
30,000, whichever is higher].
Thus, the amount fixed by the Commissioner at ₹ 2.5 crores is within the limits prescribed under the law.
If the taxable person pays the compounding amount decided by the Commissioner, no further
proceedings shall be initiated under GST law against the accused person in respect of the same offence
and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.
Question 16
Ganesh Enterprises, a registered supplier under the GST law, has committed an offence that is
compoundable. The Department has instituted prosecution against the proprietor of Ganesh Enterprises
and he is of the opinion that he shall not be able to apply for compounding of the offence as the
prosecution has been launched. He seeks your advice whether he has the opportunity to apply for
compounding of the offence and the consequences arising therefrom.
Answer
A person accused of an offence is permitted to make an application for compounding of an offence even
after the institution of prosecution against him.
Therefore, in the given case, Ganesh Enterprises can apply for compounding of offence even though
prosecution has been instituted/launched against him.
On payment of compounding amount determined by the Commissioner, the criminal proceedings which
have been initiated against Ganesh Enterprises in respect of the said offence, shall stand abated.
The lower limit for compounding amount is to be the greater of the following amounts: -
 50% of tax involved, or
 ₹ 10,000.
Page 21.10
The upper limit for compounding amount is to be greater of the following amounts: -
 150% of tax involved or
 ₹ 30,000.
Question 17
Neurological Systems Private Limited has been subject to confiscation of goods on the ground that it has
not accounted for the goods that are liable to tax under the CGST Act, 2017. The directors would like to
know from you as to how such goods are to be released from the Department. You are required to advise
the directors regarding the provisions of law on this matter.
Answer
To get the confiscated goods released from the Department, the directors of Neurological Systems Private
Limited are advised as under:
Neurological Systems Private Limited shall get an option to pay redemption fine in lieu of confiscation.
Such fine should be less than or equal to ≤ [Market value of goods confiscated – Tax chargeable thereon]
Aggregate of such fine and penalty leviable should be more than or equal to ≥ Amount of penalty leviable
under section 129(1) of the CGST Act, 2017.
Neurological Systems Private Limited can get its confiscated goods released on payment of such
redemption fine plus the tax, penalty and charges payable in respect of such goods.
Question 18
Elaborate about cognizable and non-cognizable offences under the CGST Act, 2017. What is the difference
between these two while exercising powers by the GST authorities?
Answer
All offences specified under section 132 except the offences that are cognizable and non-bailable (as
mentioned below) are non-cognizable offences under the CGST Act, 2017.
Cognizable offences under the CGST Act, 2017 are the following offences, where amount of tax evaded or
input tax credit wrongly availed or utilised or refund wrongly taken more than (exceeding) ₹ 5 crores,
namely:
(a) Supply without issue of any invoice, in violation of provisions of GST, with intention to evade tax;
(b) Issue of any invoice/bill without any supply in violation of the provisions of GST law leading to
wrongful availment or utilisation of ITC/refund of tax;
(c) Avails ITC using such invoice/bill referred to in clause (b);
(d) Collects any amount as tax but fails to pay the same to the Government beyond a period of 3 months
from the date on which such payment becomes due;
In case of a cognizable offence, the officer authorised to arrest the person shall inform such person of the
grounds of arrest and produce him before a Magistrate within 24 hours.
In case of a non-cognizable offence, the arrested person shall be admitted to bail or in default of bail,
forwarded to the custody of the Magistrate.
The Deputy/Assistant Commissioner shall for the purpose of releasing an arrested person on bail or
otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police
station.

Page 21.11
CHAPTER - 22
Appeals and Revision
Question 1
Does CGST law provide for any appeal to a person aggrieved by any order or decision passed against him
by an adjudicating authority under the CGST Act? Explain the related provisions under the CGST Act.
Answer
Yes, any person aggrieved by any order or decision passed by an adjudicating authority under the CGST
Act has the right to appeal to the Appellate Authority under section 107. The appeal should be filed within
3 months from the date of communication of such order or decision. However, the Appellate Authority
has the power to condone the delay of up to 1 month in filing the appeal if there is sufficient cause for the
delay. The appeal can be filed only when the admitted liability and 10% of the disputed tax amount is
paid as pre-deposit by the appellant.
However, no appeal can be filed against the following orders in terms of section 121:
(a) an order of the Commissioner or other authority empowered to direct transfer of proceedings from
one officer to another officer;
(b) an order pertaining to the seizure or retention of books of account, register and other documents;
or
(c) an order sanctioning prosecution under the Act; or
(d) an order passed under section 80 (payment of tax in installments).
Question 2
Describe the provisions relating to Departmental appeal to Appellate Authority under section 107.
Answer
Section 107(2) provides that Department can file a “review application/appeal” with the Appellate
Authority.
The Commissioner may, on his own motion, or upon request from the SGST/UTGST Commissioner,
examine the record of any proceedings in which an adjudicating authority has passed any decision/order
to satisfy himself as to the legality or propriety of the said decision /order. The Commissioner may, by
order, direct any officer subordinate to him to apply to the Appellate Authority within 6 months from the
date of communication of the said decision/order for the determination of such points arising out of the
said decision/order as may be specified him.
The AA can condone the delay in filing of appeal by 1 month if it is satisfied that there was sufficient cause
for such delay [Section 107(4)].
Such application shall be dealt with by the AA as if it were an appeal made against the decision/order of
the adjudicating authority [Section 107(3)]. There is no requirement of making a pre-deposit in case of
departmental appeal.
Question 3
With reference to sections 107(6) and 112(8), specify the amount of mandatory pre-deposit which
should be made along with every appeal made before the Appellate Authority and the Appellate Tribunal.

Page 22.1
Does making the pre-deposit have any impact on recovery proceedings?
Answer
Section 107(6) provides that no appeal shall be filed before the Appellate Authority, unless the appellant
has paid—
(a) full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted
by him; and
(b) a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned order,
subject to a maximum of ₹ 25 crore.
Section 112(8) lays down that no appeal can be filed before the Appellate Tribunal, unless the appellant
deposits
(a) full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted
by him; and
(b) 20% of the remaining amount of tax in dispute, in addition to the amount deposited before the AA,
arising from the said order, subject to a maximum of ₹ 50 crore, in relation to which appeal has
been filed.
The above limits are applicable for the pre-deposits to be made under the CGST Act. Equal amount of pre-
deposit is payable under the respective SGST Act as well.
Where the appellant has made the pre-deposit, the recovery proceedings for the balance amount shall be
deemed to be stayed till the disposal of the appeal.
Question 4
With reference to section 108, elaborate whether a CGST/SGST authority can revise an order passed by
his subordinates.
Answer
Section 2(99) defines “Revisional Authority” as an authority appointed or authorised under the CGST Act
for revision of decision or orders referred to in section 108.
Section 108 of the Act authorizes such “revisional authority” to call for and examine any order passed by
his subordinates and in case he considers the order of the lower authority to be erroneous in so far as it
is prejudicial to revenue and is illegal or improper or has not taken into account certain material facts,
whether available at the time of issuance of the said order or not or in consequence of an observation by
the Comptroller and Auditor General of India, he may, if necessary, can revise the order after giving
opportunity of being heard to the person concerned. The “revisional authority” can also stay the
operation of any order passed by his subordinates pending such revision.
The “revisional authority” shall not revise any order if-
(a) the order has been subject to an appeal under section 107 or under section 112 or under section
117 or under section 118; or
(b) the period specified under section 107(2) has not yet expired or more than 3 years have expired
after the passing of the decision or order sought to be revised.
(c) the order has already been taken up for revision under this section at any earlier stage.
(d) the order is a revisional order

Page 22.2
Question 5
The Appellate Tribunal has the discretion to refuse to admit any appeal. Examine the correctness of the
above statement.
Answer
The statement is partially correct.
Though the Appellate Tribunal does have the power to refuse to admit an appeal, it cannot refuse to
admit ANY appeal. It can refuse to admit an appeal where –
 the tax or input tax credit involved or
 the difference in tax or the difference in input tax credit involved or
 the amount of fine, fees or penalty determined by such order, does not exceed ₹ 50,000.
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.
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. = ₹ 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 of tax 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 with the 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.
Question 7

Page 22.3
With reference to the provisions of section 121, specify the orders against which no appeals can be filed.
Answer
As per section 121, no appeal shall lie against any decision taken or order passed by a CGST officer if such
decision taken or order passed relates to any one or more of the following matters, namely:—
(a) an order of the Commissioner or other authority empowered to direct transfer of proceedings from
one officer to another officer; or
(b) an order pertaining to the seizure or retention of books of account, register and other documents;
or
(c) an order sanctioning prosecution under the CGST Act; or
(d) an order passed under section 80 (payment of tax in instalments).
Question 8
Mr. A had filed an appeal before the Appellate Tribunal against an order of the Appellate Authority where
the issue involved relates to place of supply. The order of Appellate Tribunal is also in favour of the
Department. Mr. A now wants to file an appeal against the decision of the Appellate Authority as he feels
the stand taken by him is correct.
You are required to advise him suitably with regard to filing of an appeal before the appellate forum
higher than the Appellate Tribunal.
Answer
As per section 117(1), an appeal against orders passed by the State Bench or Area Benches of the Tribunal
would lie to the High Court if the High Court is satisfied that such an appeal involves a substantial
question of law.
However, appeal against orders passed by the National Bench or Regional Benches of the Tribunal would
lie to the Supreme Court and not High Court. As per section 109(5) of the Act, only the National Bench or
Regional Benches of the Tribunal can decide appeals where one of the issues involved relates to the place
of supply.
Since the issue involved in Mr. A’s case relates to place of supply, the appeal in his case would have been
decided by the National Bench or Regional Bench of the Tribunal. Thus, Mr. A will have to file an appeal
with the Supreme Court and not with the High Court.
Question 9
Pursuant to audit conducted by the tax authorities under section 65, a show cause notice was issued to
Home Furnishers, Surat, a registered supplier, alleging that it had wrongly availed the input tax credit
without actual receipt of goods for the month of July. In the absence of a satisfactory reply from Home
Furnishers, Joint Commissioner of Central Tax passed an adjudication order dated 20th August (received
by Home Furnishers on 22nd August) confirming a tax demand of ₹ 50,00,000 (i.e., CGST 25,00,000 and
SGST 25,00,000) and imposing a penalty of equal amount under section 122.
Home Furnishers does not agree with the order passed by the Joint Commissioner. It decides to file an
appeal with the Appellate Authority against the said adjudication order. It has approached you for
seeking advice on the following issues in this regard:
(1) Can Home Furnishers file an appeal to Appellate Authority against the adjudication order passed
by the Joint Commissioner of Central Tax? If yes, till what date can the appeal be filed?

Page 22.4
(2) Does Home Furnishers need to approach both the Central and State Appellate Authorities for
exercising its right of appeal?
(3) Home Furnishers is of the view that there is no requirement of paying pre-deposit of any kind
before filing an appeal with the Appellate Authority. Give your opinion on the issue.
Answer
(1) An appeal against a decision/order passed by any adjudicating authority under the CGST Act or
SGST Act/ UTGST Act is appealable before the Appellate Authority [Section 107(1)]. Thus, Home
Furnishers can file an appeal to Appellate Authority against the adjudication order passed by the
Joint Commissioner of Central Tax.
Further, such appeal can be filed within 3 months from the date of communication of such
decision/order [Section 107(1)]. Thus, Home Furnishers can file the appeal to Appellate Authority
on or before 22nd November. Further, the Appellate Authority can also condone the delay in filing
of appeal by 1 month if it is satisfied that there was sufficient cause for such delay [Section 107(4)].
(2) GST law makes provisions for cross empowerment between CGST and SGST/UTGST officers to
ensure that a proper officer under the CGST Act is also treated as the proper officer under the
SGST/UTGST Act and vice versa. Thus, a proper officer can issue orders with respect to both, the
CGST as well as the SGST/UTGST laws.
GST law also provides that where a proper officer under one Act (say CGST) has passed an order,
any appeal/review/ revision/rectification against the said order will lie only with the proper
officers of that Act (CGST Act). Accordingly, if any order is passed by the proper officer under a
SGST Act, any appeal/ review/ revision/ rectification against the said order will lie only with the
proper officer under that SGST Act. Thus, Home Furnishers is required to file an appeal only with
the Central Tax Appellate Authority [Section 6 of CGST Act].
(3) Home Furnishers’ view is not correct in law. Section 107(6) provides that no appeal shall be filed
before the Appellate Authority, unless the appellant has paid—
(a) full amount of tax, interest, fine, fee and penalty arising from the impugned order, as is
admitted by him; and
(b) a sum equal to 10% of the remaining amount of tax in dispute arising from the impugned
order subject to a maximum of ₹ 25 crore*.
*Equivalent amount is required to be deposited with respect to SGST liability.
Since in the given case, Home Furnishers disagrees with the entire tax demanded, it has to make a
pre-deposit of 10% of the amount of tax in dispute arising from the impugned order, i.e., 10% of ₹
50,00,000 which is ₹ 5,00,000 (i.e. ₹ CGST 2,50,000 and SGST ₹ 2,50,000).
Question 10
With reference to the provisions of section 120, list the cases in which appeal is not to be filed and also
specify other relevant provisions in this respect.
Answer
(1) The Board may, on the recommendations of the GST Council, issue orders or instructions or
directions fixing monetary limits for regulating filing of appeal or application by the CGST officer.
(2) Non-filing of appeal/application by a CGST officer on account of such monetary limits fixed by the
Board shall not preclude such officer from filing appeal or application in any other case involving
the same or similar issues or questions of law.

Page 22.5
(3) No person, who is a party in application or appeal can contend that the CGST Officer has acquiesced
in the decision on the disputed issue by not filing an appeal or application (on account of monetary
limits).
(4) The Appellate Tribunal or Court hearing such appeal or application shall have regard to
circumstances for non-filing of appeal or application by the CGST officer on account of monetary
limits fixed by the Board.
Question 11
XY Company received an adjudication order passed by the Assistant Commissioner of Central Tax on 1st
November under section 73 wherein it was decided as follows:
CGST+SGST due ₹ 6,00,000

Interest @ 18% p.a. for number of delayed days
Penalty ₹ 60,000
The taxpayer filed an appeal before the Appellate Authority on 26th November.
Determine the amount of pre-deposit to be made by the company for filing the appeal.
Whether your answer would be different if the taxpayer appeals only against part of the demanded
amount say ₹ 4,00,000 and admits the balance liability of tax amounting to ₹ 2,00,000 and proportionate
penalty arising from the said order?
Answer
Section 107(6) provides that no appeal shall be filed before Appellate Authority, unless the appellant
pays*:-
(a) in full, tax, interest, fine, fee and penalty arising from impugned order, as is admitted by him; and
(b) 10% of remaining tax in dispute arising from the impugned order subject to a maximum of ₹ 25
crore, in relation to which the appeal has been filed.
*Equivalent amount is required to be deposited with respect to SGST liability.
Thus, in Case-I, XY Company has to make a pre-deposit of 10% of ₹ 6,00,000, which is ₹ 60,000 (i.e. CGST
₹ 30,000 and SGST ₹ 30,000) assuming that XY Company disagrees with the entire tax demanded.
However, when XY Company admits the liability of only ₹ 2,00,000 (CGST + SGST) and disputes the
balance tax demanded of ₹ 4,00,000, it has to make a pre-deposit of:
(i) ₹ 2,00,000 + ₹ 20,000 [proportionate penalty on tax admitted] + interest @ 18% p.a. payable on
the tax admitted for the period of delay, and
(ii) 10% of ₹ 4,00,000 which is ₹ 40,000.

Page 22.6

Question 12
Rule 112 of the CGST Rules lays down that the appellant shall not be allowed to produce before the
Appellate authority (AA) or the Tribunal any evidence, whether oral or documentary, other than the
evidence produced by him during the course of the proceedings before the adjudicating authority or, as
the case may be, the AA.
What are the exceptional circumstances specified in the rule where the production of additional evidence
will be allowed? Can AA or the Tribunal direct production of any document or examination of any
witness?
Answer
Exceptional circumstances specified in rule 112 of the CGST Rules, 2017 where the production of
additional evidence will be allowed are as follows:
(a) where the adjudicating authority/ appellate authority (AA) has refused to admit evidence which
ought to have been admitted.
(b) where the appellant was prevented by sufficient cause from producing the evidence which he was
called upon to produce by the adjudicating authority/ AA.
(c) where the appellant was prevented by sufficient cause from producing before the adjudicating
authority/ AA any evidence which is relevant to any ground of appeal; or
(d) where adjudicating authority/ AA has made the order appealed against without giving sufficient
opportunity to the appellant to adduce evidence relevant to any ground of appeal.
Yes, the AA or the Tribunal can direct the production of any document or examination of any witness to
enable it to dispose of the appeal.
Question 13
The original adjudicating authority confirmed a demand of GST of ₹ 42,50,000 with interest and imposed
a penalty of ₹ 4,25,000 in its order dated 1st March, 20XX. The assessee filed an appeal before appellate
authority challenging the demand as well as penalty. The internal audit party, after an audit of the records
of the assessee, submitted a note to the Commissioner that actual amount demanded should have been ₹
48,50,000. While the issue was pending before the appellate authority, based on the note, the
Commissioner stayed the order of the original authority and issued a show cause notice on 15 th
September, 20XX, proposing revision of the order of the original authority and revise the demand on the
basis of the audit note. Examine the correctness of the action taken by the Commissioner in accordance
with the provisions of GST law.
Answer
As per section 108 of the CGST Act, 2017, Revisional Authority cannot revise an order if, inter alia, such
order has been subject to an appeal before Appellate Authority or Tribunal or High Court or Supreme
Court.
The Revisional Authority may, however, pass an order on any point which has not been raised and
decided in an appeal before Appellate Authority/Tribunal/High Court/Supreme Court.
In the given case, the Commissioner wants to revise the order on the point which is the subject matter in
the appeal.
Therefore, the Commissioner cannot exercise the power of revision in respect of such order.

Page 22.7
Note: It is assumed that the given rectification is not an error which is apparent on the face of record.
However, if the rectification is done on the base of error which is apparent on the face of record, Section
161 of CGST Act 2017 shall apply and rectification order may be passed by the commissioner instead of
revisionary authority.
Question 14
Briefly examine whether the appeal/review application filed in the following independent cases is within
the time limit prescribed under the GST law:
(i) The adjudicating authority issued the adjudication order on 23rd April and the same is
communicated to the taxpayer - Mr. X - on 28th April. Mr. X, aggrieved by the order of the
adjudicating authority filed an appeal to the Appellate Authority on 26th July.
(ii) The adjudicating authority passed the order on 3rd March (communicated same day to the
Commissioner). The Commissioner directs his subordinate officer to file a review application with
the Appellate Authority. The subordinate officer filed the review application on 23rd September.
Answer
(i) A person aggrieved by any decision/order of an adjudicating authority can file an appeal to the
Appellate Authority within 3 months from the date of communication of such decision/order. The
Appellate Authority can condone the delay in filing of appeal by 1 month if it is satisfied that there
was a sufficient cause for such delay [Section 107 of the CGST Act, 2017].
In view of the aforesaid provisions, in the given case, the relevant date for computing the period of
3 months (for filing the appeal to Appellate Authority) is 28th April (date of communication of
order) and not 23rd April. Accordingly, an appeal can be filed by Mr. X to Appellate Authority within
3 months from the date of communication of order (28th April), i.e. 28th July.
Thus, Mr. X has filed the appeal within the time limit prescribed under the GST law.
(ii) The Commissioner may, by order, direct any officer subordinate to him to apply to the Appellate
Authority within 6 months from the date of communication of the decision/
order for the determination of such points arising out of the said decision/ order as may be
specified by him.
The Appellate Authority can condone the delay in filing of appeal by 1 month if it is satisfied that
there was sufficient cause for such delay [Section 107 of the CGST Act, 2017].
In the present case, the Commissioner directs his subordinate officer to file a review application
with the Appellate Authority. The subordinate officer should have filed the said application till 3rd
September (i.e. within 6 months from the date of communication of order). However, the
subordinate officer filed the application on 23rd September, i.e. after the expiry of period of 6
months from the date of communication of order. Thus, in the given case, appeal has not been filed
within the time limit prescribed under the GST law.
However, Appellate Authority can condone delay in filing of appeal upto 3rd October (up to 1
month) if it is satisfied that there was sufficient cause for such delay.
Question 15
Mr. Mahendran is aggrieved by the order of the Revisional Authority (RA) and wants to make an appeal
to the First Appellate Authority.
While commenting on the decision of Mr. Mahendran, you are also required to state the powers of the

Page 22.8
Revisional Authority to revise the orders passed by the subordinate officers under section 108 of the
CGST Act, 2017.
What is the time period for the Revisional Authority to exercise the power of revision?
Answer
The decision of Mr. Mahendran of making an appeal to the First Appellate Authority against the order of
the RA is not valid in law. Any person aggrieved by an order passed against him by RA under CGST Act
may appeal to the Appellate Tribunal, the second level of appeal
The powers of the RA to revise the orders passed by the subordinate officers under section 108 of the
CGST Act, 2017 are as under: -
(i) The RA may, on his own motion, or upon information received by him or on request from the SGST/
UTGST Commissioner, call for and examine the record of any proceedings.
(ii) On examination of the case records, if RA is of the view that the decision/order passed by any
officer subordinate to him is erroneous and illegal/improper or has not taken into account material
facts, he may stay the operation of such order for such period as he deems fit.
(iii) The RA, after giving the person concerned an opportunity of being heard and after making
necessary further inquiry, pass such order, as he thinks just and proper, including enhancing or
modifying or annulling the said order.
The RA can revise an order after the expiry of a period of 6 months from the date of communication of
the said order but not later than expiry of a period of 3 years from the passing of the said decision/order.
In case of an order subject to an appeal before Appellate Authority (AA)/Tribunal/High Court/ Supreme
Court, the RA can pass an order on any point which has not been raised and decided in the appeal, before
the expiry of a period of 1 year from the date of the order in such appeal or before the expiry of a period
of 3 years from the date of initial order, whichever is later.
Question 16
Anirudh Ltd. is registered in Telangana and paid IGST on a transaction considering the same to be inter-
State supply on the basis that the customer is situated in Delhi.
However, GST authorities have raised a dispute and have issued a show cause notice that since the
services are rendered within Telangana, it is an intra-State supply leviable to CGST and SGST.
Anirudh Ltd. has lost the case before the proper officer and also in first appeal before the Departmental
Appellate Authority.
Advise Anirudh Ltd. regarding the following:
(i) Can Anirudh Ltd. file an appeal against the order of the first Appellate Authority? If yes, before
which forum can Anirudh Ltd. file the said appeal?
(ii) Once a valid appeal is filed by Anirudh Ltd. before the appropriate forum, can the authorities insist
Anirudh Ltd. to deposit the CGST and SGST which the authorities are claiming that Anirudh Ltd.
ought to have paid but has not paid.
(iii) If Anirudh Ltd. loses at the 2nd appellate stage as well, is there any other Statutory forum available
for Anirudh Ltd. to file another appeal? If yes, before which forum?
(iv) Assuming Anirudh Ltd. loses at all levels, would there be any interest liability on Anirudh Ltd.?
Answer
(i) Yes, Anirudh Ltd. can file an appeal against the order of the first Appellate Authority to the Appellate

Page 22.9
Tribunal. National Bench/ Regional Benches of the Tribunal will have jurisdiction to hear the
appeal as place of supply is one of the issues in dispute.
(ii) No, Authority can’t insist, because once a valid appeal is filed i.e., on payment of requisite pre-
deposit, the recovery proceedings for the balance amount of the demand in dispute gets stayed till
the disposal of appeal.
(iii) Yes, Anirudh Ltd. can file another appeal against the decision of the National Bench/Regional Bench
of the Tribunal, directly before the Supreme Court.
(iv) No, there will be no interest liability on Anirudh Ltd. if it loses at all levels. A registered person who
has paid IGST on a transaction considered by him to be an inter-State supply, but which is
subsequently held to be an intra-State supply, is not required to pay any interest on the amount of
CGST and SGST payable because there is no shortfall of overall tax amount.

Page 22.10
CHAPTER - 23
Advance Ruling
Question 1
Which are the questions for which advance ruling can be sought?
Answer
Advance Ruling can be sought for the following questions:
(a) classification of any goods or services or both;
(b) applicability of a notification issued under provisions of the GST Act(s);
(c) determination of time and value of supply of goods or services or both;
(d) admissibility of input tax credit of tax paid or deemed to have been paid;
(e) determination of the liability to pay tax on any goods or services under the Act;
(f) whether applicant is required to be registered under the Act;
(g) whether any particular thing done by the applicant with respect to any goods or services amounts
to or results in a supply of goods or services, within the meaning of that term.
Question 2
What is the objective of having a mechanism of Advance Ruling?
Answer
The broad objective for setting up such an authority is to:
(i) provide certainty in tax liability in advance in relation to an activity being undertaken or proposed
to be undertaken by the applicant;
(ii) helps taxpayer in financial planning and making new investments
(iii) attract Foreign Direct Investment (FDI);
(iv) reduce litigation;
(v) pronounce ruling expeditiously in transparent and inexpensive manner
Question 3
To whom will the Advance Ruling be applicable?
Answer
The advance rulings are given in personem and not in rem, that is, not to the whole world and therefore,
rulings cannot apply to other similar cases. Section 103 provides that an advance ruling pronounced by
AAR or AAAR shall be binding only on the applicant who sought it in respect of any matter referred to in
section 97(2) and on the jurisdictional tax authority of the applicant. This clearly means that an advance
ruling is not applicable to similarly placed taxable persons in the State. It is only limited to the person
who has applied for an advance ruling.

Page 23.1
Advance Ruling
Question 4
What is the time period for applicability of Advance Ruling?
Answer
The law does not provide for a fixed time period for which the ruling shall apply. Instead, in section
103(2), it is provided that advance ruling shall be binding till the period when the law, facts or
circumstances supporting the original advance ruling have changed. Thus, a ruling shall continue to be
in force so long as the transaction continues and so long as there is no change in law, facts or
circumstances.
Question 5
Can an advance ruling given be nullified?
Answer
Section 104(1) provides that an advance ruling shall be held to be ab initio void if the AAR or AAAR finds
that the advance ruling was obtained by the applicant by fraud or suppression of material facts or
misrepresentation of facts. In such a situation, all the provisions of the GST Act(s) shall apply to the
applicant as if such advance ruling had never been made (but excluding the period when advance ruling
was given and up to the period when the order declaring it to be void is issued). An order declaring
advance ruling to be void can be passed only after hearing the applicant.
Question 6
Ranjan intends to start selling certain goods in Delhi. However, he is not able to determine (i) the
classification of the goods proposed to be supplied by him [as the classification of said goods has been
contentious] and (ii) the place of supply if he supplies said goods from Delhi to buyers in U.S.
Ranjan’s tax advisor has advised him to apply for the advance ruling in respect of these issues. He told
Ranjan that the advance ruling would bring him certainty and transparency in respect of the said issues
and would avoid litigation later. Ranjan agreed with his view, but has some apprehensions.
In view of the information given above, you are required to advise Ranjan with respect to following:
(i) The tax advisor asks Ranjan to get registered under GST law before applying for the advance ruling
as only a registered person can apply for the same. Whether Ranjan needs to get registered?
(ii) Ranjan is apprehensive that if at all advance ruling is permitted to be sought, he has to seek it every
year. Whether Ranjan’s apprehension is correct?
(iii) The tax advisor is of the view that the order of Authority for Advance Ruling (AAR) is final and is
not appealable. Whether the tax advisor’s view is correct?
(iv) Sambhav - Ranjan’s friend - is a supplier registered in Delhi. He is engaged in supply of the goods,
which Ranjan proposes to supply at the same commercial level that Ranjan proposes to adopt.
He intends to apply the classification of the goods as decided in the advance ruling order to be obtained
by Ranjan, to the goods supplied by him in Delhi. Whether Sambhav can do so?
Answer
(i) Advance ruling under GST can be sought by a registered person or a person desirous of obtaining
registration under GST law [Section 95(c)]. Therefore, it is not mandatory for a person seeking
advance ruling to be registered.

Page 23.2
Advance Ruling
(ii) Section 103(2) stipulates that the advance ruling shall be binding unless the law, facts or
circumstances supporting the original advance ruling have changed. Therefore, once Ranjan has
sought the advance ruling with respect to an eligible matter/question, it will be binding till the time
the law, facts and circumstances supporting the original advance ruling remain same.
(iii) No, the tax advisor’s view is not correct. As per section 100, if the applicant is aggrieved with the
finding of the AAR, he can file an appeal with Appellate Authority for Advance Ruling (AAAR).
Similarly, if the concerned/ jurisdictional officer of CGST/SGST does not agree with the findings of
AAR, he can also file an appeal with AAAR.
Such appeal must be filed within 30 days from the date on which the ruling sought to be appealed
against is communicated. The Appellate Authority may allow additional 30 days for filing the
appeal, if it is satisfied that there was a sufficient cause for delay in presenting the appeal.
(iv) Section 103 provides that an advance ruling pronounced by AAR is binding only on the applicant
who had sought it and on the concerned officer or the jurisdictional officer in respect of the
applicant. This implies that an advance ruling is not applicable to similarly placed other taxable
persons in the State. It is only limited to the person who has applied for an advance ruling.
Thus, Sambhav will not be able to apply the classification of the goods that will be decided in the
advance ruling order to be obtained by Ranjan, to the goods supplied by him in Delhi.
Question 7
Briefly explain the procedure to be followed by the Authority for Advance Ruling on receipt of the
application for Advance Ruling under section 98.
Answer
The procedure to be followed by the Authority for Advance Ruling (AAR) on receipt of the application for
advance ruling under section 98 is as under:-
1. Upon receipt of an application, the AAR shall send a copy of application to the officer in whose
jurisdiction the applicant falls and call for all relevant records.
2. The AAR may then examine the application along with the records and may also hear the applicant.
Thereafter he will pass an order either admitting or rejecting the application.
3. Application for advance ruling will not be admitted in cases where the question raised in the
application is already pending or decided in any proceedings in the case of an applicant under any
of the provisions of this Act.
4. If the application is rejected, it should be by way of a speaking order giving the reasons for rejection
and only after giving an opportunity of being heard to the applicant.
5. If the application is admitted, the AAR shall pronounce its ruling on the question specified in the
application. Before giving its ruling, it shall examine the application and any further material
furnished by the applicant or by the concerned departmental officer.
6. Before giving the ruling, AAR must hear the applicant or his authorized representative as well as
the jurisdictional officers of CGST/ SGST.
7. If there is a difference of opinion between the two members of AAR, they shall refer the point or
points on which they differ to the Appellate Authority for hearing the issue
8. The Authority shall pronounce its advance ruling in writing within 90 days from the date of receipt
of application.
9. A copy of the advance ruling duly signed by members and certified in prescribed manner shall be
sent to the applicant, the concerned officer and the jurisdictional officer.
Page 23.3
Advance Ruling
Question 8
Briefly explain whether an appeal could be filed before the Appellate Authority against order of Authority
for Advance Ruling (AAR), with reference to sections 100 and 101.
Answer
Yes, the concerned officer, jurisdictional officer or applicant aggrieved by any advance ruling may appeal
to the Appellate Authority for Advance Ruling (AAAR) within 30 days [extendible by another 30 days]
from the date on which such ruling is communicated to him in the prescribed form and manner.
The AAAR must pass an order confirming or modifying the ruling appealed against within a period of 90
days of the filing of an appeal, after hearing the parties to the appeal.
If members of AAAR differ on any point referred to in appeal, it shall be deemed that no advance ruling
can be issued in respect of the question under appeal. A copy of the advance ruling pronounced by the
AAAR is sent to applicant, concerned officer, jurisdictional officer and to the Authority.
Question 9
Discuss briefly provisions of CGST Act, 2017 regarding questions for which advance ruling can be sought.
Answer
As per section 97(2), advance ruling can be sought for the following questions:-
(a) classification of any goods or services or both
(b) applicability of a notification issued under the CGST Act
(c) determination of time and value of supply of goods or services or both
(d) admissibility of input tax credit of tax paid or deemed to have been paid
(e) determination of the liability to pay tax on any goods or services or both
(f) whether applicant is required to be registered
(g) whether any particular activity with respect to any goods and/or services, amounts to/results in a
supply of goods and/or services, within the meaning of that term.

Page 23.4
CHAPTER - 24
Miscellaneous Provisions
Question 1
Briefly explain how the GST compliance rating score is determined.
Answer
As per section 149(2), the GST compliance rating is determined on a scale of ten on the basis of prescribed
parameters.
Question 2
When shall the power to collect statistics be exercised under GST laws? Explain.
Answer
As per section 151, if the Commissioner considers that collection of statistics is necessary for the purpose
of better administration of the Act, he may direct that statistics be collected.
Question 3
When shall the particulars relating to any proceedings or prosecution be published under GST laws?
Discuss the relevant provisions.
Answer
When the Commissioner/authorised officer is of opinion that it is necessary or expedient in the public
interest to publish the name of any person and any other particulars relating to any proceedings or
prosecution under the CGST Act in respect of such person, it may cause to be published such name and
particulars [Section 159(1)].
No publication under this section shall be made in relation to any penalty imposed under the CGST Act
until the time for presenting an appeal to the Appellate Authority under section 107 has expired without
an appeal having been presented or the appeal, if presented, has been disposed of [Section 159(2)].
Question 4
Explain the provisions relating to rectification of errors apparent on the face of record under section 161.
Answer
Section 161 lays down that any authority, who has passed or issued any decision or order or notice or
certificate or any other document, may rectify any error which is apparent on the face of record in such
decision or order or notice or certificate or any other document, either on its own motion or where such
error is brought to its notice by any GST officer or by the affected person within a period of three months
from the date of issue of such decision or order or notice or certificate or any other document, as the case
may be.
However, no such rectification shall be made after a period of six months from the date of issue of such
decision or order or notice or certificate or any other document. Further, the said period of six months
shall not apply in such cases where the rectification is purely in the nature of correction of a clerical or
Page 24.1
arithmetical error, arising from any accidental slip or omission.

Principles of natural justice should be followed by the authority carrying out such rectification, if it
adversely affects any person.
Question 5
Write a short note on Anti-profiteering measure.
Answer
As per section 171, any reduction in rate of tax on any supply of goods or services or the benefit of input
tax credit shall be passed on to the recipient by way of commensurate reduction in prices. National Anti-
profiteering Authority may examine whether input tax credits availed by any registered person or the
reduction in the tax rate have actually resulted in a commensurate reduction in the price of the goods or
services or both supplied by him.
Question 6
Elaborate the duties of Anti-profiteering Authority.
Answer
The duties of the Anti-profiteering Authority are:
(i) to determine whether the reduction in tax rate or the benefit of input tax credit has been passed
on by the seller to the buyer (hereinafter collectively referred to as ‘benefit’) by reducing the prices
(ii) to identify the taxpayer who has not passed on the benefit
(iii) to order
(a) reduction in prices
(b) return to the recipient, an amount equivalent to the amount not passed on by way of
commensurate reduction in prices along with interest at the rate of 18% from the date of
collection of the higher amount till the date of the return of such amount or recovery of the
amount not returned, as the case may be.
If the eligible person does not claim return of the amount or is not identifiable, the amount
must be deposited in the Consumer Welfare Fund;
(c) imposition of penalty
(d) cancellation of registration
(iv) to furnish a performance report to the GST Council by the 10th of the month succeeding each
quarter [Rule 127 of the CGST Rules, 2017]
Question 7
State the various modes of service of a notice, decision, order, summons, or any other communication
under the CGST Act, on the taxable person or any other person to whom it is intended.
Answer
Section 169(1) provides that any decision, order, summons, notice or other communication under the
CGST Act and the rules made thereunder can be served by any one of the following methods:

Page 24.2
(a) Giving/tendering directly including by a courier to the addressee or authorised representative or

to any adult member of family residing with the taxable person; or
(b) By Registered post/speed post/courier with acknowledgement due at the last known place of
business or residence; or
(c) By Email to the e-mail address provided at the time of registration or as amended from time to
time; or
(d) By making the same available at common portal; or
(e) Publication in newspaper circulating in the locality in which the addressee is last known to have
resided, carried on business or personally worked for gain; or
(f) If none of the above modes is practicable then by Affixing at last known place of business or
residence and if such mode is not practicable for any reason, then by affixing a copy thereof on the
notice board of the office of the concerned officer or authority concerned.
Question 8
Section 158(1) lays down that the information obtained by a public servant from the record of any
proceeding under the CGST Act is confidential and cannot be disclosed.
Is there any exception to this rule? Discuss in brief.
Answer
Yes, the confidential information can be disclosed by the public servant for certain specific purposes in
terms of section 158(3). Such specific purposes are given in brief hereunder:
(i) For prosecution
(ii) For carrying out the objects of the CGST Act
(iii) For service of notice or recovery of demand
(iv) For furnishing information to Court in a proceeding where Government is a party
(v) For audit of tax receipts or refunds
(vi) For inquiry into the conduct of a GST officer
(vii) For enabling levy, realisation of any tax or duty
(viii) In lawful exercise of powers
(ix) For enquiry into a charge of misconduct by any professional
(x) For data entry on automated system
(xi) For fulfilling the requirement under any other law and in public interest.
Question 9
Explain the scope of circulars and instructions issued by the Board.
Answer
Section 168 empowers the Board (CBIC) to issue orders, instructions or directions to the CGST officers
for the purpose of uniformity in the implementation of the CGST Act. All officers and all other persons
employed in the implementation of the Act observe and follow such orders, instructions or directions.
The binding nature of such orders, instructions and directions has been a matter of debate and scrutiny.
The general understanding that prevails now is that a circular is binding on the officers, but not on the

Page 24.3
assessee. However, in case such circular states something contrary to the law, the law shall prevail over
the circular.
Question 10
‘The time limits provided under the CGST Act cannot be extended.’
Do you agree with the statement? Give your views with reference to section 168A.
Answer
The statement is not correct.
The Government has power to extend the time limits provided under the CGST Act. However, such
powers are not unbridled powers. Section 168A empowers the Government to extend the time limits
only when the actions cannot be completed or complied with due to force majeure. Here, force majeure
means war, epidemic, flood, drought, fire, cyclone, earthquake or any other calamity caused by nature
affecting the implementations of provisions of the CGST Act. This power can also be exercised
retrospectively.

Page 24.4
PART - II
Customs & FTP
(25 Marks)

CHAPTER - 1
Levy of and Exemptions from Customs Duty
Question 1
A machine was originally imported from Japan at ₹ 250 lakh in July on payment of all duties of customs.
The said machine was exported (sent-back) to supplier for repairs in December and re-imported without
any re-manufacturing or reprocessing in October next year after repairs. Since the machine was under
warranty period, the repairs were carried out free of cost.
However, the fair cost of repairs carried out (including cost of material ₹ 6 lakh) would have been ₹ 9
lakh. Actual insurance and freight charges (to and from) were ₹ 3 lakh. The rate of basic customs duty
is 10% and integrated tax is 12%. Ignore GST compensation cess.
Compute the amount of customs duty payable (if any) on re-import of the machine after repairs. The
ownership of the machine has not been changed during the period.
Note: The importer intends to avail exemption, if any, with regard to re- importation of goods which had
been exported for repairs abroad.
Answer
As per Notification No. 45/2017 Cus. dated 30.06.2017, duty payable on re- importation of goods which
had been exported for repairs abroad is the duty of customs which would be leviable if the value of re-
imported goods after repairs were made up of the fair cost of repairs carried out including cost of
materials used in repairs (whether such costs are actually incurred or not), insurance and freight charges,
both ways. However, following conditions need to be satisfied for availing this concession:
(a) goods must be re-imported within 3 years, extendable by further 2 years, after their exportation;
(b) exported goods and the re-imported goods must be the same;
(c) ownership of the goods should not change.
Since all the conditions specified above are fulfilled in the given case, the customs duty payable on re-
imported goods will be computed as under:
Particulars ₹
Value of goods re-imported after exports [₹ 9 lakh(including cost of materials) 12,00,000
+ ₹ 3 lakh]
Add: Basic customs duty @ 10% (A) 1,20,000
Add: Social Welfare Surcharge @ 10% on ₹ 1,20,000 (B) 12,000
Value for computing integrated tax 13,32,000
Integrated tax @ 12% (₹ 13,32,000 x 12%) - (C) 1,59,840
Customs duty and integrated tax payable [(A) +(B)+ (C)] 2,91,840
Question 2
Distinguish between Jetsam and Flotsam
Answer
Jetsam and Flotsam are goods which are jettisoned (i.e. thrown with speed) from the vessel into the sea
to reduce weight of vessel to prevent it from sinking. They are not abandoned goods. Jetsam gets sunk
whereas Flotsam does not sink but floats. Duty is payable on both unless they are entitled to be admitted

Page 1.1
free of duty.
Question 3
An importer imported consignment of goods chargeable to duty @ 40% ad valorem. The vessel arrived
on 31st May 2020. A bill of entry for warehousing the goods was presented on 2nd June 2020 and the
goods were duly warehoused. In the meantime, an exemption notification was issued on 15th October
2020 reducing the effective customs duty to 25% ad valorem.
Thereafter, the importer filed a bill of entry for home consumption on 20th October 2020 claiming 25%
duty. The customs Department charged higher rate of duty @ 40% ad valorem. Give your views on the
same, discussing the relevant provisions of the Customs Act, 1962.
Answer
According to section 15(1)(b) of the Customs Act, the relevant date for determination of rate of duty and
tariff value in case of goods cleared from a warehouse is the date on which a bill of entry for home
consumption in respect of such goods is presented. Therefore, the relevant date for determining the
duty in the given case will be 20th October 2020 (the date on which the bill of entry for home
consumption is presented) and thus, the relevant rate of duty will be 25%.
Question 4
Peerless Scraps, imported during August, by sea, a consignment of metal scrap weighing 6,000 M.T.
(metric tons) from U.S.A. They filed a bill of entry for home consumption. The Assistant Commissioner
passed an order for clearance of goods and applicable duty was paid by them. Peerless Scraps thereafter
found, on taking delivery from the Port Trust Authorities (i.e., before the clearance for home
consumption), that only 5,500 M.T. of scrap were available at the docks although they had paid duty for
the entire 6,000 M.T., since there was no short-landing of cargo. The short-delivery of 500 M.T. was also
substantiated by the Port-Trust Authorities, who gave a “weighment certificate” to Peerless Scraps.
On filing a representation to the Customs Department, Peerless Scraps has been directed in writing to
justify as to which provision of the Customs Act, 1962 governs their claim for remission of duty on the
500 M.T. not delivered by the Port-Trust.
You are approached by Peerless Scraps as “Counsel” for an opinion/advice. Examine the issues and
tender your opinion as per law, giving reasons.
Answer
As per provisions of section 23, where it is shown to the satisfaction of Assistant or Deputy Commissioner
that any imported goods have been lost or destroyed, otherwise than as a result of pilferage at any time
before clearance for home consumption, the Assistant or Deputy Commissioner shall remit the duty on
such goods. Therefore, duty shall be remitted only if loss has occurred before clearance for home
consumption.
In the given case, it is apparent from the facts that quantity of scrap received in India was 6000 metric
tonnes and 500 metric tonnes thereof was lost when it was in custody of Port Authorities i.e. before
clearance for home consumption was made. Also, the loss of 500 MT of scrap cannot be construed to be
pilferage, as loss of such huge quantity cannot be treated as “Petty Theft”.
Hence, Peerless Scraps may take shelter under section 23 justifying his claim for remission of duty.

Page 1.2
Question 5
What are the provisions relating to effective date of notifications issued under section 25 of the Customs
Act, 1962?
Answer
Date of effect of every notification issued will be the date of its issue by the Central Government for
publication in the Official Gazette, unless provided otherwise in the notification. Issue means signed by
competent authority and sent for publication to Government press.
The provision is made as there may be delay of one or two days in publishing in Gazette e.g. if the
notification is issued on 2nd November and published in Official Gazette on 4th November, the
notification will be effective from 2nd November.
The above rules do not apply to exemptions granted through special orders. Special orders are issued
separately for each case and communicated to the beneficiary directly by the Government.
Question 6
An importer imported certain inputs for manufacture of final product. A small portion of the imported
inputs were damaged in transit and could not be used in the manufacture of the final product. An
exemption notification was in force providing exemption in respect of specified raw materials imported
into India for use in manufacture of specified goods, which was applicable to the imports made by the
importer in the present case.
Briefly examine whether the importer could claim the benefit of the aforesaid notification in respect of
the entire lot of the inputs imported including those that were damaged in transit.
Answer
The facts of the case are similar to the case of BPL Display Devices Ltd. v. CCEx., Ghaziabad (2004) 174
ELT 5 (SC) wherein the Supreme Court has held that the benefit of the notifications cannot be denied in
respect of goods which are intended for use for manufacture of the final product but cannot be so used
due to shortage or leakage.
The Apex Court has held that no material distinction can be drawn between loss on account of leakage
and loss on account of damage. The benefit of said exemption cannot be denied as inputs were intended
for use in the manufacture of final product but could not be so used due to shortage/leakage/damage. It
has been clarified by the Supreme Court that words “for use” have to be construed to mean “intended for
use”.
Therefore, the importer can claim the benefit of the notification in respect of the entire lot of the inputs
imported including those that were damaged in transit.
Question 7
M/s Pure Energy Ltd. is engaged in oil exploration and has imported software containing seismic data.
The importer is entitled to exemption from customs duty subject to the condition that an “essentiality
certificate” granted by the Director General of Hydrocarbons is produced at the time of importation of
the goods. Though the importer applied for the certificate within the statutory time limit prescribed for
the same, the certificate was not made available to the importer within a reasonable time by the Director
General of Hydrocarbons. The customs department rejected the importer’s claim for exemption.
Examine briefly whether the department’s action is sustainable in law.

Page 1.3
Answer
This issue has been addressed by the Supreme Court in the case of Commissioner of Customs v. Tullow
India Operations Ltd. (2005) 189 ELT 401 (SC). The Apex Court has observed that if a condition is not
within the power and control of the importer and depends upon the acts of public functionaries, non-
compliance of such a condition, subject to just exceptions cannot be held to be a condition precedent
which would disable it from obtaining the benefit for all times to come.
In the given case also the certificate has not been granted within a reasonable time. Therefore, in view of
the above-mentioned judgement, the importer M/s Pure Energy Ltd. cannot be blamed for the lapse by
the authorities. The Directorate General of Hydrocarbons is under the Ministry of Petroleum and Natural
Gas and such a public functionary is supposed to grant the essentiality certificate within a reasonable
time so as to enable the importer to avail of the benefits under the notification.
Question 8
Explain, with reference to decided case law, whether clearances from Domestic Tariff Area (DTA) to
Special Economic Zone is chargeable to export duty under the SEZ Act, 2005 or the Customs Act, 1962.
Answer
In the case of Tirupati Udyog Ltd. v. UOI 2011 (272) E.L.T. 209 (A.P.), it is held that the clearances of goods
from DTA to Special Economic Zone are not chargeable to export duty either under the SEZ Act, 2005 or
under the Customs Act, 1962 on the basis of the following observations:-
• The charging section needs to be construed strictly. If a person is not expressly brought within the
scope of the charging section, he cannot be taxed at all.
• SEZ Act does not contain any provision for levy and collection of export duty on goods supplied by
a DTA unit to a Unit in a Special Economic Zone for its authorised operations. Since there is no
charging provision in the SEZ Act providing for the levy of customs duty on such goods, export duty
cannot be levied on the DTA supplier.
• Reading section 12(1) of the Customs Act, 1962 along with sections 2(18), 2(23) and 2(27) makes
it apparent that customs duty can be levied only on goods imported into or exported beyond the
territorial waters of India.
Since both the SEZ unit and the DTA unit are located within the territorial waters of India, supplies from
DTA to SEZ would not attract section 12(1) [charging section for customs duty].
The above view has also been confirmed in Essar Steel v. UOI 2010 (249) ELT 3 (Guj.) [maintained by SC]
wherein the Departmental appeal has been dismissed by Supreme Court on 12.07.2010 - 2010 (255) ELT
A115.
Question 9
M/s. XYZ, a 100% export oriented undertaking (100% E.O.U. in short) imported DG sets and furnace oil
duty free for setting up captive power plant for its power requirements for export production. This
benefit was available vide an exemptions notification. They used the power so generated for export
production but sold surplus power in domestic tariff area.
Customs Department has demanded duty on DG sets and furnace oil as surplus power has been sold in
domestic tariff area. The notification does not specifically restrict the use of imported goods for
manufacture of export goods.
Do you think the demand of the Customs Department is valid in law.

Page 1.4
Answer
The facts of the case are similar to the case of Commissioner v. Hanil Era Textile Ltd. 2005 (180) ELT
A044 (SC) wherein the Supreme Court agreed to the view taken by the Tribunal that in the absence of a
restrictive clause in the notifications that imported goods are to be solely or exclusively used for
manufacture of goods for export, there is no violation of any condition of notification, if surplus power
generated due to unforeseen exigencies is sold in domestic tariff area.
Therefore, no duty can be demanded from M/s XYZ for selling the surplus power in domestic tariff area
for the following reasons:
(i) They have used the DG sets and furnace oil imported duty free for generation of power, and
(ii) such power generated has been used for manufacturing goods for export, and
(iii) only the surplus power has been sold, as power cannot be stored.
Question 10
Referring to section 25 of the Customs Act, 1962, discuss the following:
(i) Special exemption
(ii) General exemption
Answer
(i) Special Exemption:
As per section 25(2) of the Customs Act, 1962, if the Central Government is satisfied that it is
necessary in the public interest so to do, it may, by special order in each case, exempt from payment
of duty, any goods on which duty is leviable only under circumstances of an exceptional nature to
be stated in such order. Further, no duty shall be collected if the amount of duty leviable is equal
to, or less than, ₹ 100. This type of exemption is called as ad hoc exemption. Order under section
25(2) is not required to be published in the Official Gazette.
(ii) General Exemption:
As per section 25(1) of the Customs Act, 1962, if the Central Government is satisfied that it is
necessary in the public interest so to do, it may, by notification in the Official Gazette, exempt
generally either absolutely or subject to such conditions (to be fulfilled before or after clearance)
as may be specified in the notification, goods of any specified description from the whole or any
part of duty of customs leviable thereon. Further, this exemption applies to all importers while
exemption under section 25(2) is for specific importer and specific goods under import.
Question 11
Write a brief note on the following with reference to the Customs Act, 1962:
(i) Remission of duty on imported goods lost
(ii) Pilfered goods
Answer
(i) Remission of duty on imported goods lost:
Section 23(1) of the Customs Act, 1962 provides for remission of duty on imported goods lost
(otherwise than as a result of pilferage) or destroyed, if such loss or destruction is at any time
before clearance for home consumption. Such loss or destruction covers loss by leakage. Duty is
Page 1.5
payable under this section but it is remitted by Assistant/Deputy Commissioner of Customs if the
importer is able to prove the loss or destruction. Thus, unless remitted, duty has to be paid and
burden of proof is on the importer. The provisions of this section are applicable for warehoused
goods also.
(ii) Pilfered goods:
Section 13 provides that if imported goods are pilfered after unloading thereof but before the
proper officer has made an order for clearance for home consumption or deposit in a warehouse,
no duty is payable on the goods, unless the pilfered goods are restored to importer. In such a case,
duty on pilfered goods is payable by the Port authorities. Also, the importer does not have to prove
pilferage. However, the loss must be only due to pilferage. Section 13 is not applicable for
warehoused goods.
Question 12
Distinguish between Pilfered goods and Lost/destroyed goods
Answer
Pilfered goods Lost/Destroyed goods

1. Covered by section 13 Covered by section 23(1)
2. No duty payable on such goods Duty paid on such goods to be remitted
3. Department gets compensation from the No such compensation
custodian [Section 45(3)]
4. Petty theft by human being Loss/Destruction by fire, flood etc (Act of
God)
5. Restoration possible Restoration is not possible
6. Occurrence is after unloading and before Occurrence may be at any time before
Customs clearance order for home clearance for home consumption
consumption or warehousing
7. Occurrence in warehouse not recognized Occurrence in warehouse is recognized
8. Duty need not be calculated Duty should be calculated for
determining the remission amount
9. No need to prove pilferage. It is quite obvious Should be proved and remission sought for
Question 13
Goods manufactured or produced in India, which were earlier exported and thereafter imported into
India will be treated at par with other goods imported into India. Is the proposition correct or any
concession is provided on such import? Discuss briefly.
Answer
The given proposition is correct i.e., goods produced in India, which were earlier exported and thereafter
imported into India will be treated at par with other goods imported into India [Section 20 of the Customs
Act, 1962]. However, the following concessions are being provided in this regard:
(i) Maximum import duty will be restricted to duty drawback or refund availed or integrated tax not
paid at the time of export.
(ii) Where the goods were originally exported for repairs, the duty on re- importation is restricted to
Page 1.6
the fair cost of repairs including cost of materials used in repairs whether such costs are actually
incurred or not, insurance and freight charges, both ways done abroad.
The above two concessions are given subject to the condition that:
(a) the re-importation is done within 3 years or 5 years if time is extended.
(b) the exported goods and re-imported goods must be the same.
In case of point (ii) above, the ownership of the goods should also not have changed.
However, these concessions would not be applicable if-
• re-imported goods had been exported by EOU or a unit in FTP
• re-imported goods had been exported from a public/private warehouse
• re-imported goods which fall under Fourth schedule to the Central Excise Act, 1944.
[Notification No. 45/2017 Cus dated 30.06.2017]
(iii) When exported goods come back for repairs and re-export, the re- imported goods other than the
specified goods can avail exemption from paying of import duty subject to the following conditions:
(i) the re-importation is for repairs only
(ii) the time limit is 3 years. In case of Nepal, such time-limit is 10 years.
(iii) the goods must be re-exported after repairs
(iv) the time limit for export is 6 months (extendable to one year).
[Notification No. 158/95 Cus. dated 14.11.1995 as amended vide Notification No. 60/2018 Cus
dated 11.09.2018]
Question 14
Write a brief note on stages of imposition of taxes and duties.
Answer
Three stages of imposition of taxes and duties
All taxes and duties are imposed in three stages, which are levy, assessment and collection:
(a) Levy is the stage where the declaration of liability is made and the persons or the properties in
respect of which the tax or duty is to be levied is identified and charged.
(b) Assessment is the procedure of quantifying the amount of liability. The liability to pay tax or duty
does not depend upon assessment.
(c) The final stage is where the tax or duty is actually collected. The collection of tax or duty may for
administrative or other reasons be postponed to a later time.
Question 15
Discuss the provisions relating to denaturing or mutilation of goods.
Answer
Section 24 of the Customs Act, 1962 empowers Central Government to make rules for permitting to
denature/mutilate the imported goods, which are ordinarily used for more than one purpose, so as to
render them unfit for one or more of such purpose.
If any imported goods can be used for more than one purpose and duty is leviable on the basis of its

Page 1.7
purpose of utilisation, then denaturing or mutilation of such goods is useful. By denaturing, goods are
made unfit for other purposes. After denaturing process, goods can be used only for one purpose and
accordingly duty can be levied.
Denaturing of Spirit Rules, 1972 specify procedure for denaturing spirit.
Question 16
Briefly explain the provisions relating to abatement of duty on damaged or deteriorated goods under
section 22 of the Customs Act, 1962.
Answer
Where it is shown to the satisfaction of the Assistant Commissioner of Customs or Deputy Commissioner
of Customs -
(a) that any imported goods had been damaged or had deteriorated at any time before or during the
unloading of the goods in India; or
(b) that any imported goods, other than warehoused goods, had been damaged at any time after the
unloading thereof in India but before their examination under section 17, on account of any
accident not due to any wilful act, negligence or default of the importer, his employee or agent; or
(c) that any warehoused goods had been damaged at any time before clearance for home consumption
on account of any accident not due to any wilful act, negligence or default of the owner, his
employee or agent,
such goods shall be chargeable to duty in accordance with the provisions of sub-section (2) [Sub-section
(1)].
The duty to be charged on the goods referred to in sub-section (1) shall bear the same proportion to the
duty chargeable on the goods before the damage or deterioration which the value of the damaged or
deteriorated goods bears to the value of the goods before the damage or deterioration [Sub-section (2)].
For the purposes of this section, the value of damaged or deteriorated goods may be ascertained by either
of the following methods at the option of the owner:
(a) the value of such goods may be ascertained by the proper officer, or
(b) such goods may be sold by the proper officer by public auction or by tender, or with the consent of
the owner in any other manner, and the gross sale proceeds shall be deemed to be the value of such
goods [Sub-section (3)].
Question 17
Briefly explain the following with reference to the provisions of the Customs Act, 1962:
(i) Indian customs waters
(ii) India
Answer
(i) Indian customs waters [Section 2(28)]
Indian customs waters means the waters extending into the sea up to the limit of Exclusive
Economic Zone under section 7 of the Territorial Waters, Continental Shelf, Exclusive Economic
Zone and other Maritime Zones Act, 1976 and includes any bay, gulf, harbour, creek or tidal river.
If a person has committed any offence punishable under customs law within the Indian customs

Page 1.8
waters, he may be arrested. Also, goods may be confiscated and vessel be stopped in the Indian
customs waters if the same is found to be used in the smuggling. Further, prohibited goods can also
be confiscated if brought within the Indian customs waters.
(ii) India [Section 2(27)]
India includes the territorial waters of India.
Meaning and significance of territorial waters of India
As per Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones
Act, 1976, territorial waters of India extend to 12 nautical miles into sea from the appropriate base
line.
Goods are deemed to have been imported if the vessel enters the imaginary line on the sea at the
12th nautical mile i.e. if the vessel enters the territorial waters of India. Therefore, a vessel not
bound to India should not enter these waters.
India includes not only the surface of sea in the territorial waters, but also the air space above and
the ground at the bottom of the sea.
Question 18
Distinguish between Indian territorial waters and Indian custom waters.
Answer
Indian territorial waters
As per Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act,
1976, territorial waters of India extend to 12 nautical miles into sea from the appropriate base line.
Goods are deemed to have been imported if the vessel enters the imaginary line on the sea at the 12th
nautical mile i.e. if the vessel enters the territorial waters of India. Therefore, a vessel not bound to India
should not enter these waters.
Indian customs waters
Indian customs waters means the waters extending into the sea up to the limit of Exclusive Economic
Zone under section 7 of the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other
Maritime Zones Act, 1976 and includes any bay, gulf, harbour, creek or tidal river.
If a person has committed any offence punishable under customs law within the Indian customs waters,
he may be arrested. Also, goods may be confiscated and vessel be stopped in the Indian customs waters
if the same is found to be used in the smuggling. Further, prohibited goods can also be confiscated if
brought within the Indian customs waters.
Question 19
Write a brief note on the constitutional provisions governing the levy of customs duties.
Answer
List I [referred as Union List] mentioned in seventh schedule of Indian Constitution enumerates the
matters in respect of which the Parliament has an exclusive right to make laws. Entry 83 of Union List
has given the power to the Union to frame laws to levy duties of Customs including export duties.
Article 286 of the Constitution provides for restrictions as to imposition of tax on certain supply of goods
or services or both. The said Article provides as follows-

Page 1.9
No law of a State shall impose, or authorise the imposition of, a tax on the supply of goods or services or
both, where such supply takes place-
(a) outside the State; or
(b) in the course of the import of the goods or services or both into, or export of the goods or services
or both out of, territory of India.
Further, the said Article provides that Parliament may by law formulate principles for determining when
a supply becomes, import of export.
Thus, the power to levy customs duties on import/export, as well as the power to legislate the principles
to determine whether a transaction qualifies as import/export, lies solely with the Union, i.e. the
Parliament of India.
Question 20
Examine the validity of the following statements:
(a) A beneficial owner of imported goods is a person on whose behalf the goods are being imported.
(b) Customs area does not include a warehouse.
(c) Customs station includes international courier terminal.
Answer
(a) The statement is valid.
Section 2(3A) defines beneficial owner to mean any person on whose behalf the goods are being
imported or exported or who exercises effective control over the goods being imported or
exported.
(b) The statement is not valid.
The definition of customs area includes within its ambit a warehouse too.
The customs area is defined to mean the area of a customs station or a warehouse and includes any
area in which imported goods or export goods are ordinarily kept before clearance by customs
authorities.
(c) The statement is valid.
International courier terminal and foreign post office are included within the scope of customs
station as defined under section 2(13) of the Customs Act, 1962.
As per the amended section 2(13), a customs station means any customs port, customs airport,
international courier terminal, foreign post office or land customs station.
Question 21
In January, 2020, Rock & Rock India Ltd. imported a consignment from U.S.A (by sea). The value of
consignment was ₹ 7,50,000 and total duty payable was ₹ 1,50,000.
Company filed bill of entry for home consumption but before inspection and clearance for home
consumption it found that the goods were damaged.
On filing a representation to the Customs Department, proper officer refused the claim for abatement
because goods were already unloaded. The proper officer is in agreement with the claim that the value
of goods has come down to only ₹ 1,50,000.
Examine the issue with reference to the relevant statutory provisions and calculate the amount of total
duty payable:
Page 1.10
Would your answer be different in the above case if the goods get deteriorated after unloading and
examination but before clearance for home consumption, and value comes down to ₹ 7,00,000?
Answer
The abatement of duty is allowed where it is shown to the satisfaction of the Assistant/Deputy
Commissioner of Customs that, inter alia, any imported goods, other than warehoused goods, had been
damaged at any time after the unloading thereof in India but before their examination, on account of any
accident not due to any wilful act, negligence or default of the importer.
Thus, in view of the above-mentioned provisions, the stand taken by the proper officer of refusing the
claim for abatement is not valid in law.
The duty to be charged on the damaged goods shall be reduced in proportion to the reduction in the value
of goods on account of damage.
Thus, in the given case, the amount of total duty payable
= [₹ 1,50,000/₹ 7,50,000] x ₹ 1,50,000 = ₹ 30,000
The abatement of duty is allowed in case of deterioration only if such deterioration occurs before or
during the unloading of goods. Since in this case, imported goods have deteriorated before clearance for
home consumption but after unloading, abatement of duty will not be allowed and full duty will have to
be paid.

Page 1.11

Question 22
Precise Finishing Ltd. imported consignment of graphic design system and one electronic flat knitting
machine. The graphic design system is a computer system required to design the artwork which shall be
knitted by the flat knitting machine. Graphic design system is not an integral part of electronic flat
knitting machine.
In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, an exemption
had been granted in respect of electronic flat knitting machine and falling within Chapter 85 of the First
Schedule to the Customs Tariff Act, 1975. The exemption does not include any specific mention of
accessories to the machine. Precise Finishing Ltd. has claimed exemption of the said notification in
respect of Graphic Design System also as accessory of Flat Knitting Machine.
The Customs Department rejected the importer's claim for exemption on Graphic Design System.
Examine whether the Department's action is sustainable in law.
Answer
The graphic design system is not an integral part of the electronic flat knitting machine. It is an accessory
to the machine.
Hence, electronic flat knitting machine and graphic design system cannot be treated as one single unit
and should be classified and assessed separately.
In the given case, the exemption had been granted under the customs law specifically in respect of the
electronic flat knitting machine falling under Chapter 85 of the First Schedule to the Customs Tariff Act,
1975 and not to its accessory – the graphic design system.
Therefore, the benefit of the exemption notification available in respect of the electronic flat knitting
machine will not be available to graphic design system. The Department’s action is sustainable in law.
Question 23
Elaborate the meaning and historical background of "customs". Also elucidate the constitutional
entries/provisions which provide the power to make laws relating to customs duty, and who possesses
the power to make such laws.
Answer
The term ‘customs’ derives its colour and essence from the term ‘custom’, which means a habitual
practice or course of action that characteristically is repeated in like circumstances.
Duties on import and export of goods were levied through legislations during the British period before
which, during monarchical governance, said duty was collected at the city gates at the time of goods
coming in and going out. The legislations of the British period were replaced by the enactment and
promulgation of the Customs Act, 1962 and the Customs Tariff Act, 1975
The power to make laws is conferred on the Parliament and the legislature of a State by Article 245 of
the Constitution of India.
Further, entry 83 of the List I [Union List] of the Seventh Schedule to Article 246 of the Constitution of
India grants the power to frame laws relating to customs duty.
The power to make laws relating to customs duty vests exclusively with the Parliament.

Page 1.12
CHAPTER - 2
Types of Duty
Question 1
Write a short note on the applicability of safeguard measures under the Customs Tariff Act, 1975 on
articles imported by EOU/SEZ unit and cleared as such into domestic tariff area (DTA).
Answer
Section 8B of Customs Tariff Act, 1975, provides for levy of safeguard measures on articles imported by
an 100% EOU/unit in a SEZ that are cleared as such into DTA. In such cases, safeguard measures shall be
applied on that portion of the article so cleared as was leviable when it was imported into India.
Question 2
What will be the dates of commencement of the definitive anti-dumping duty in the following cases under
section 9A of the Customs Tariff Act, 1975 and the rules made thereunder:
(i) where no provisional duty is imposed;
(ii) where provisional duty is imposed;
(iii) where anti-dumping duty is imposed retrospectively from a date prior to the date of imposition of
provisional duty.
Answer
The Central Government has power to levy anti-dumping duty on dumped articles in accordance with
the provisions of section 9A of the Customs Tariff Act, 1975 and the rules framed thereunder.
(i) In a case where no provisional duty is imposed, the date of commencement of anti-dumping duty
will be the date of publication of notification, imposing anti-dumping duty under section 9A(1), in
the Official Gazette.
(ii) In a case where provisional duty is imposed under section 9A(2), the date of commencement of
anti-dumping duty will be the date of publication of notification, imposing provisional duty under
section 9A(2), in the Official Gazette.
(iii) In a case where anti-dumping duty is imposed retrospectively under section 9A(3) from a date
prior to the date of imposition of provisional duty, the date of commencement of anti-dumping
duty will be such prior date as may be notified in the notification imposing anti-dumping duty
retrospectively, but not beyond 90 days from the date of such notification of provisional duty.
Question 3
With reference to the Customs Tariff Act, 1975, discuss the validity of the imposition of customs duties
in the following cases:
(a) Both countervailing duty and anti-dumping duty have been imposed on an article to compensate
for the same situation of dumping.
(b) Countervailing duty has been levied on an article for the reason that the same is exempt from duty
borne by a like article when meant for consumption in the country of origin.
(c) Definitive anti-dumping duty has been levied on articles imported from a member country of
World Trade Organization as a determination has been made in the prescribed manner that import

Page 2.1
Types of Duty
of such article into India threatens material injury to the indigenous industry.
Answer
(a) Not valid. As per section 9B of the Customs Tariff Act, 1975, no article shall be subjected to both
countervailing and anti-dumping duties to compensate for the same situation of dumping or export
subsidization.
(b) Not valid. As per section 9B of the Customs Tariff Act, 1975, countervailing or anti-dumping duties
shall not be levied by reasons of exemption of such articles from duties or taxes borne by the like
articles when meant for consumption in the country of origin or exportation or by reasons of
refund of such duties or taxes.
(c) Valid. As per section 9B of the Customs Tariff Act, 1975, no definitive countervailing duty or anti-
dumping duty shall be levied on the import into India of any article from a member country of the
World Trade Organisation or from a country with whom Government of India has a most favored
nation agreement, unless a determination has been made in the prescribed manner that import of
such article into India causes or threatens material injury to any established industry in India or
materially retards the establishment of any industry in India.
Question 4
With reference to section 9AA of Customs Tariff Act, 1975, state briefly the provisions of refund of anti-
dumping duty.
Answer
According to the provisions of section 9AA of the Customs Tariff Act, 1975, where an importer proves to
the satisfaction of the Central Government that he has paid any anti-dumping duty imposed on any
article, in excess of the actual margin of dumping in relation to such article, he shall be entitled to refund
of such excess duty. However, the importer will not be entitled for refund of provisional anti-dumping
duty under section 9AA as the same is refundable under section 9A(2) of the said Act. Refund of excess
anti-dumping duty paid is subject to provisions of unjust enrichment – Automotive Tyre Manufacturers
Association v. Designated Authority 2011 (263) ELT 481 (SC).
Question 5
With reference to section 9A(1A) of the Customs Tariff Act, 1975, mention the ways that constitute
circumvention of antidumping duty imposed on an article which may warrant action by the Central
Government.
Answer
As per section 9A(1A) of the Customs Tariff Act, 1975, following are the ways that would constitute
circumvention (avoiding levy of duty by unscrupulous means) of antidumping duty imposed on an article
that may warrant action by the Central Government:
(i) altering the description or name or composition of the article subject to such anti-dumping duty,
(ii) import of such article in an unassembled or disassembled form,
(iii) changing the country of its origin or export, or
(iv) any other manner, whereby the anti-dumping duty so imposed is rendered ineffective.
In such cases, investigation can be carried out by Central Government and then anti-dumping can be

Page 2.2
Types of Duty
imposed on such articles.
Question 6
When shall the safeguard measures under section 8B of the Customs Tariff Act, 1975 be not imposed?
Discuss briefly.
Answer
The safeguard measures under section 8B of the Customs Tariff Act, 1975 is not imposed on the import
of the following types of articles:
(i) Articles originating from a developing country, so long as the share of imports of that article from
that country does not exceed 3% of the total imports of that article into India;
(ii) Articles originating from more than one developing country, so long as the aggregate of imports
from developing countries each with less than 3% import share taken together does not exceed
9% of the total imports of that article into India;
(iii) Articles imported by a 100% EOU or units in a Special Economic Zone unless it is specifically made
applicable on them or the article imported is either cleared as such into DTA or used in the
manufacture of any goods that are cleared into DTA. In such cases, safeguard measures shall be
applied on that portion of the article so cleared or so used as was leviable when it was imported
into India.
Question 7
What are the conditions required to be fulfilled by the importer to make the imported goods eligible for
preferential rate of duty prescribed by the Central Government by notification under section 25 of the
Customs Act, 1962?
Answer
The Government may by notification under section 25 of the Customs Act, 1962 prescribe preferential
rate of duty in respect of imports from certain preferential areas. The importer will have to fulfill the
following conditions to make the imported goods eligible for preferential rate of duty:
(i) At the time of importation, he should make a specific claim for the preferential rate.
(ii) He should also claim that the goods are produced or manufactured in such preferential area.
(iii) The area should be notified under section 4(3) of the Customs Tariff Act, 1975 to be a preferential
area.
(iv) The origin of the goods shall be determined in accordance with the rules made under section 4(2)
of the Customs Tariff Act, 1975.
Determination of Origin’ is important to allow concessional rate of customs duty. Generally, as per the
rules (a) if the goods are un-manufactured, it should be grown or produced in that area (b) If it is fully
manufactured in that country, it should be manufactured from material produced or with un-
manufactured materials from that country. (c) if it is partially manufactured in that country, final process
should be completed in that country and at least specified percentage of expenditure on material or
labour should be in that country.
Question 8

Page 2.3
Types of Duty
Write a note on "Emergency power to impose or enhance import duties under section 8A of the Customs
Tariff Act, 1975".
Answer
Section 8A of Customs Tariff Act, 1975 provides that the where the Central Government is satisfied that
the basic customs duty leviable on any article should be increased and that circumstances exist which
render it necessary to take immediate action, it may, by notification amend the First Schedule of the
Customs Tariff to increase the import duty leviable on such article to such extent as it thinks necessary.
Question 9
Determine the customs duty payable under the Customs Tariff Act, 1975 including the safeguard duty of
30% under section 8B of the said Act with the following details available on hand:
Assessable value of Sodium Nitrite imported from a developing country from 26th ₹ 30,00,000
October, 2019 to 25th October, 2020 (both days inclusive)
Share of imports of Sodium Nitrite from the developing country against total imports 4%
of Sodium Nitrite to India
Basic custom duty 10%
Integrated tax 12%
Social welfare surcharge 10%
Note: Ignore GST compensation cess.
Answer
Computation of customs duty and integrated tax payable thereon

Assessable value of sodium nitrite imported 30,00,000
Add: Basic custom duty @ 10% (₹ 30,00,000 × 10%) 3,00,000
Safeguard duty @ 30% on ₹30,00,000 [Safeguard duty is imposable in the given case 9,00,000
since share of imports of sodium nitrite from the developing country is more than
3% of the total imports of sodium nitrite into India (Proviso to section 8B(2) of the
Customs Tariff Act, 1975)]
Social welfare surcharge @ 10% x ₹ 3,00,000 30,000
Total 42,30,000
Integrated tax (₹ 42,30,000 × 12%) [Note] 5,07,600
Total customs duty payable (₹ 3,00,000 + ₹ 9,00,000 + ₹ 30,000 + ₹ 5,07,600) 17,37,600
Note: It has been clarified by DGFT vide Guidance note that value for calculation of integrated tax shall
also include safeguard duty amount.
Question 10
Differentiate between protective duty and safeguard duty.
Answer
Protective Duty:

Page 2.4
Types of Duty
Protective duties are intended to give protection to indigenous industries. If resort to protective duties
is not made there could be a glut of cheap imported articles in the market making the indigenous goods
unattractive.
The protection through protective duties is given considering the following factors:
(a) The protective duties should not be very stiff so as to discourage imports.
(b) It should be sufficiently attractive to encourage imports to bridge the gap between demand and
supply of those articles in the market.
The protective duties are levied by the Central Government upon the recommendation made to it by the
Tariff Commission and upon it being satisfied that circumstances exist which render it necessary to take
immediate action to provide protection to any industry established in India.
The protective duty shall be effective only upto and inclusive of the date if any, specified in the First
Schedule.
Safeguard Duty:
Central Government after conducting enquiry can impose the safeguard measures if it is satisfied that,
(a) Any article is imported into India in increased quantities; and
(b) Such increased importation is causing or threatening to cause serious injury to domestic industry.
The measures are imposed by issuing a notification in the Official Gazette.
The safeguard measures are imposed for the purpose of protecting the interests of any domestic industry
in India aiming to make it more competitive.
The Central Government may impose following safeguard measures to curb the increased quantity of
imports of an article for preventing serious injury to domestic industry:
(a) imposition of safeguard duty; or
(b) application of tariff-rate quota; or
(c) other measures as the Central Government deems appropriate.
The measures imposed under this section shall be in force for a period of 4 years from the date of its
imposition.
Question 11
Briefly examine the nature and significance of the levy of anti-dumping duty under the Customs Tariff
Act, 1975.
Answer
When the export price of a product imported into India is less than the Normal Value of ‘like articles’ sold
in the domestic market of the exporter, it is known as dumping.
Anti-dumping action can be taken only when there is an Indian industry which produces “like articles”
when compared to the allegedly dumped imported goods. Further, this duty is country specific i.e. it is
imposed on imports from a particular country.
Under the General Agreement on Tariffs and Trade (GATT) provisions, anti- dumping duties higher than
the margin of dumping cannot be imposed. However, a lesser duty which is adequate to remove the injury
to the domestic industry, is permissible. In India, the Government is obliged to restrict the anti- dumping
duty to the lower of the two i.e., dumping margin and the injury margin.
Section 9A(1)of the Customs Tariff Act, 1975 provides that where any article is exported by an exporter
or producer from any country or territory (hereinafter in this section referred to as the exporting country

Page 2.5
Types of Duty
or territory) to India at less than its normal value, then, upon the importation of such article into India,
the Central Government may, by notification in the Official Gazette, impose an anti-dumping duty not
exceeding the margin of dumping in relation to such article.
Question 12
Chaintop Industries has challenged the imposition of anti-dumping duty retrospectively on the grounds
that it is unconstitutional. Explain whether it would succeed in its contention.
Answer
Section 9A(3) of the Customs Tariff Act, 1975 provides that the anti- dumping duty can be imposed with
retrospective effect provided the Government is of the opinion that:-
(a) there is a history of dumping which caused injury or that the importer was, or should have been,
aware that the exporter practices dumping and that such dumping would cause injury, and
(b) the injury is caused by massive dumping of an article imported in a relatively short time, which in
the light of timing and volume of the imported article dumped and other circumstances is likely to
seriously undermine the remedial effect of the anti-dumping duty liable to be levied.
The duty can be levied retrospectively by issuing a notification but not beyond 90 days from the date of
notification.
Thus, Chaintop Industries would succeed in its contention only if all of the above conditions are not
satisfied.
Question 13
Determine the total duties payable under Customs Act if Mr. Rao imported rubber from Malaysia at
landed price (exclusive of duties) of ₹25 lakh. It has been notified by the Central Government that share
of imports of rubber from the developing country against total imports to India exceeds 5%. Safeguard
duty notified on this product is 30%, IGST u/s 3(7) is 12% and BCD is 10%.
Answer
Computation of total duties payable under the Customs Act
S.N. Particulars (₹)

1 Landed price 25,00,000
2 Add: Basic customs duty @ 10% 2,50,000
3 Add: Safeguard duty @ 30% on ₹ 25,00,000 7,50,000
4 Add: Social welfare surcharge (SWS) @ 10 % on ₹ 2,50,000 25,000
[While calculating SWS, safeguard duty is excluded]
5 Add: Integrated tax @ 12% of ₹ 35,25,000 (₹ 25,00,000 + ₹ 2,50,000 + ₹ 7,50,000 4,23,000
+ ₹ 25,000)
[Integrated tax is levied on the sum total of the assessable value of the imported
goods, customs duties and applicable SWS]
6 Total customs duties and tax payable 14,48,000
[₹ 2,50,000 + ₹ 7,50,000 + ₹ 25,000 + ₹ 4,23,000]
Question 14
Page 2.6
Types of Duty
During the year 2020, the customs authorities have noticed that there is an increased quantity of Product
XYZ being imported into the country. Determine whether the Central Government should consider
levying safeguard duty or anti-dumping duty with appropriate reasons. Also enumerate any
exemptions/reliefs available from such duty.
Answer
In the given case, since Product XYZ is being imported into the country in increased quantity, Central
Government should consider levying safeguard Duty and not anti-dumping duty.
Anti-dumping duty is imposed when any article is exported from any country to India at less than its
normal value, which is not the case here.
However, safeguard duty can be imposed only when Central Government is satisfied that such increased
importation is causing/threatening to cause serious injury to the domestic industry
Exemptions/reliefs:
(a) Safeguard duty shall not be imposed on articles originating from developing country if the share of
imports of that article from that country ≤ 3% of the total imports of that article into India.
(b) Safeguard duty shall not be imposed on articles originating from more than one developing country
if the aggregate of imports from developing countries each with less than 3% import share taken
together ≤ 9% of the total imports of that article into India.
(c) Safeguard duty shall not be applicable on articles imported by a 100% EOU/ SEZ unit unless
specifically made applicable;
(d) Safeguard duty shall not be applicable on articles imported by a 100% EOU/ SEZ unit unless the
article imported is either cleared as such/ used in the manufacture of any goods that are cleared,
into DTA.
(e) Central Government may exempt notified quantity of any article, when imported from any country
into India, from whole/part of the safeguard duty.

Page 2.7
Types of Duty

Question 15
KTU Limited has imported certain goods for sale in India from Country Z, which are liable for anti-
dumping duty. Country Z sell the like goods in its domestic market in the ordinary course of trade at USD
300 per piece. The imported goods are sold in domestic Indian industry @ USD 275 per piece. KTU
Limited has imported the goods at USD 180 per piece. Landed value of the imported goods is USD 190
per piece.
Compute the anti-dumping duty payable by KTU Limited for 800 pieces of these goods it has imported
during the year assuming conversion rate @ ₹ 72 per USD.
Answer
The quantum of anti-dumping duty is:
(i) margin of dumping or
(ii) injury margin whichever is lower.
Margin of dumping is the difference between export price and normal value of the imported article.
Injury margin is the difference between the fair selling price [non-injurious price (NIP)] due to the
domestic industry and the landed value of the dumped imports.
Export price in relation to an article, means the price of an article exported from the exporting country
or territory. KTU Limited has imported the goods at USD 180 per piece. Thus, export price is USD 180 per
piece.
Normal value in relation to an article, means comparable price, in the ordinary course of trade, for the
like article when destined for consumption in the exporting country or territory as determined in
accordance with the rules. Since Country Z sell the like goods in its domestic market in the ordinary
course of trade at USD 300 per piece, thus normal value in the given case is USD 300 per piece.
Fair Selling Price (FSP) [Non-Injurious Price] is that level of price, which the industry is, expected to have
charged under normal circumstances in the Indian market during the period defined. Since the imported
goods are sold in domestic Indian Industry @ USD 275 per piece, thus Fair selling price in the present
case is USD 275 per piece.
Landed Value is taken as the assessable value under the Customs Act and the applicable basic customs
duties except CVD, SAD and special duties. Landed value in the given case is USD 190 per piece.
In the given case, anti-dumping duty per piece is:
(i) Margin of dumping is USD 120 [USD 300- USD 180] or
(ii) Injury margin is USD 85 [USD 275 – USD 190] whichever is lower i.e. USD 85
Anti-dumping duty for 800 pieces (in rupees) = USD 85 x 800 pieces x ₹ 72 = ₹ 48,96,000.
Question 16
PCB Limited has imported printed circuit boards for sale in India from Country X, which are liable for
anti-dumping duty. You are provided with the following details.
(i) Country X does not sell these goods in its domestic market.
However, it exports the same printed circuit boards at USD 200 per piece to another third country.
(ii) The printed circuit board is sold in domestic industry @ USD 175 per piece.
(iii) PCB Limited has imported the printed circuit boards at USD 100 per piece.
(iv) Landed value of the printed circuit boards is USD 125 per piece.
Page 2.8
Types of Duty
Compute the anti-dumping duty payable by PCB Limited for 1,000 pieces of printed circuit boards it has
imported during the year assuming conversion rate @ ₹ 75 per USD.
Answer
The quantum of anti-dumping duty is:
(i) margin of dumping or (ii) injury margin, whichever is lower.
Margin of dumping is the difference between export price and normal value of the imported article and
injury margin is the difference between the fair selling price [non-injurious price (NIP)] due to the
domestic industry and the landed value of the dumped imports.
In the given case, anti-dumping duty per piece is:
(i) Margin of dumping is USD 100 [USD 200* - USD 100**]
or
(ii) Injury margin is USD 50 [USD 175*** – USD 125****]
whichever is lower i.e. USD 50
Anti-dumping duty for 1,000 pieces (in rupees) = USD 50 × 1,000 pieces x ₹ 75 = ₹ 37,50,000
*When there are no sales of the like article in the domestic market of the exporting country, normal value
is taken as the comparable representative price of the like article when exported from the exporting
country to an appropriate third country.
**Export price is price of the article exported from the exporting country.
***Fair Selling Price/Non-Injurious Price is that level of price, which the industry is, expected to have
charged under normal circumstances in the Indian market. It has been most logically assumed that the
“domestic industry” referred to in point (ii) of the question refers to the domestic Indian market.
****Landed value

Page 2.9
CHAPTER - 3
Classification of Imported and Export Goods
Question 1
Briefly explain “standard unit of quantity” with reference to the First Schedule to the Customs Tariff Act,
1975.
Answer
Standard Unit of Quantity is a unit of measure. It has been prescribed in column 3 of the First Schedule
to the Customs Tariff for each tariff item to facilitate the collection, comparison and analysis of trade
statistics. The unit of measure is indicated by abbreviations. Some abbreviations are cc-cubic centimeter,
cm- centimetre(s), g-gram(s), mt-metric tonne.
Question 2
Write a brief note on rule 1 of the Rules of Interpretation of the First Schedule to Customs Tariff Act,
1975.
Answer
Rule 1 of the general rules for interpretation states that the titles of sections, chapters and sub-chapters
in the First Schedule to the Customs Tariff Act, 1975 are provided for ease of reference only. For legal
purposes, classification shall be determined according to the terms of the headings and any relative
section or chapter notes and provided such headings or chapter notes do not otherwise require,
according to the rule 2 to 6.
Thus, the tiles of sections, chapters and sub-chapters cannot be used to determine classification of a
product.
Question 3
Your client manufactures Almond Milk which is an almond based drink. The manufacturing process of
almond milk is as follows:
• Selection of high quality California almonds;
• Blanching of almonds, roasting, and grinding into a paste
• Almond paste is blended with other ingredients like RO water, salt, vitamins and minerals.
• Sterlization of mixture by ultra-high temperature processing
• Homogenization
• Packaging in a septic package
As per the Rate Notification for goods issued under GST, following entries are relevant:
Rate: 12%
Entry 41 – 2009 - Fruit juices (including grape must) and vegetable juices, unfermented and not
containing added spirit, whether or not containing added sugar or other sweetening matter
Entry 48 – 2202 9920 – Fruit pulp or fruit juice based drinks
Entry 50 – 2202 9930 – Beverages containing milk

Page 3.1
Rate: 18%
Entry 24A – 2202 9100 or 2202 99 90 - Other non-alcoholic beverages other than tender coconut water
Your client is confused with the correct classification of Almond Milk under GST. He has approached you
for your opinion so as to enable him to discharge the tax correctly.
Following additional information may be relevant:
As per First Schedule to the Customs Tariff Act, 1975, the following entries of Chapter 20, 22 and 8 are
relevant:
Chapter 20 - Preparations of vegetables, fruit, nuts or other parts of plants
Tariff Item Description of goods

2009 Fruit juices (including grape must) and vegetable juices, unfermented and not
containing added spirit, whether or not containing added sugar or other sweetening
matter
Juice of any other single fruit or vegetable:
2009 8100 Cranberry (Vaccinium macrocarpon, Vaccinium, Oxycoccos, Vaccinium vitis-idaea) juice
2009 89 Other
2009 89 10 Mango
2009 89 90 Other
2009 90 00 Mixtures of juices
Chapter 22 - Beverages, spirits and vinegar

2202 Waters, including mineral waters and aerated waters, containing added sugar or other
sweetening matter or flavoured, section-iv 172 chapter-22 and other non-alcoholic
beverages, not including fruit or vegetable juices of heading 2009
2202 10 10 Aerated Waters
2202 10 20 Lemonade
2202 10 90 Other
Other
2202 91 00 Other Non-alcoholic Beer
2202 99 Other
2202 99 10 Soya milk drinks, whether or not sweetened orflavored
2202 99 20 Fruit pulp or fruit juice based drink
2202 99 30 Beverages containing milk
2202 99 90 Other
Chapter 8 - Edible fruit and nuts; peel of citrus fruit or melons

0802 Other nuts, fresh or dried, whether or not shelled orpeeled
Almonds:
0802 11 00 In Shell
0802 12 00 Shelled
Further, explanatory notes to Chapter 20 specify that:
The fruit and vegetable juices of this heading are generally obtained by pressing fresh, healthy and ripe
fruit or vegetables. This may be done (as in the case of citrus fruits) by means of “mechanical extractors"
Page 3.2
operating on the same principle as the household lemon-squeezer, or by pressing which may or may not
be preceded either by crushing or grinding (for apples in particular) or by treatment with cold or hot
water or with steam (e.g., tomatoes, black currants and certain vegetables such as carrots and celery).
Answer
The first step in the classification of Almond Milk is to determine if the same would fall under Chapter 20
or 22 of the First Schedule of Customs Tariff Act, 1975. On a plain reading of Heading of Chapter 20 along
with Explanatory Notes, it emerges that Chapter 20 is applicable to juices of ripe fruits and vegetables.
Therefore, it is important to determine if the “almond” qualifies to be a fruit or not.
While in common parlance, we refer ‘almonds’ as dry fruits, however if we analyze Chapter 8 of the First
Schedule of Customs Tariff Act, 1975, it appears that ‘almonds’ are referred to as ‘nuts’ under sub-heading
0802.
Therefore, the ‘almonds’ do not classify as ‘fruit’ for the purpose of classification under the HSN system.
Accordingly, the classification under Chapter 20 is completely ruled out. Now, the 3 entries relevant
under Chapter 22 are:
(a) 2202 99 20 – Fruit pulp or fruit juice based drink – As stated above, since almond is not a fruit but
a nut for the purpose of classification, this entry is ruled out.
(b) 2202 99 30 – Beverages containing milk – Admittedly, as per the process specified above, the
Almond Milk does not contain any milk. Therefore, this entry is also ruled out.
(c) 2202 9100 or 2202 99 90 - Other non-alcoholic beverages other than tender coconut water – The
Almond milk will be classifiable under 2202 99 90 as Others.
Therefore, the Almond Milk will be chargeable to 18% GST.
This view is also supported by CBIC’s Circular No. 113/32/2019 GST dated 11.10.2019 which states that:
“Almond Milk is made by pulverizing almonds in a blender with water and is then strained. As such
almond milk neither constitutes any fruit pulp or fruit juice. Therefore, it is not classifiable under tariff
item 2202 99 20.
Almond milk is classified under the residual entry in the tariff item 2202 99 90 and attract GST rate of
18%”
Question 4
Briefly explain the provisions of rule 2(a) of Rules of Interpretation of the First Schedule to the Customs
Tariff Act, 1975 on classification of incomplete/unfinished articles.
Answer
The provisions of rule 2(a) of Rules of Interpretation of the First Schedule to the Customs Tariff Act, 1975
on classification of incomplete/unfinished articles are as under:-
If any particular heading refers to a finished/complete article, the incomplete/unfinished form of that
article shall also be classified under the same heading provided the incomplete/unfinished goods have
the essential characteristics of the finished goods.
Reference to an article will also include the article complete or finished (or failing to be classified as
complete or finished) presented un-assembled or dis-assembled.
Question 5

Page 3.3
What is the purpose of including General Rules of Interpretation of First Schedule in Customs Tariff? Do
they form part of the Tariff Schedule? Explain the Akin Rule of interpretation.
Answer
The Customs Tariff has a set of six General Rules for Interpretation of the First Schedule and three General
Explanatory Notes. The six General Rules of Interpretation and three General Explanatory Notes are
integral part of the Tariff Schedule. The purpose of their inclusion in Customs Tariff is to standardize the
manner in which the nomenclature in the schedule is to be interpreted so as to reduce classification
disputes.
Rule 4 of the Rules of Interpretation is called as akin rule. This rule lays down that goods which cannot
be classified in accordance with rules 1, 2 and 3 of the Rules of Interpretation shall be classified under
the heading appropriate to the goods to which they are most akin. In other words, akin rule’ is a residual
rule which is to be applied when classification is not possible by applying any of the earlier rules. It is a
rule of last resort.
Question 6
Write a note on “Project Imports” under the Customs Tariff Act, 1975.
Answer
Project Imports are the imports of machinery, instruments, and apparatus etc., falling under different
classifications, required for initial set up of a unit or for substantial expansion of an existing unit.
Heavy customs duty on imported machinery for projects make the initial project cost very high and
project may become unviable. Hence, concept of ‘project import’ is introduced to bring machinery etc.
required for initial setup or substantial exemption at concessional customs duty.
In a project several different items are required, each of which is importable at different rates of customs
duties. Thus, this simple method is adopted, as otherwise, classifying each machinery and its parts in
different heads and valuing them would have been cumbersome and would have delayed clearances,
which would cause demurrages. Further, individual exemption notification will apply even for items
grouped under the said heading of the customs tariff liable to duty at the project rate as per recent
Supreme Court judgement.
The items eligible for project import are specified in Heading 9801 of the Customs Tariff Act, 1975. These
are: all items of machinery including prime movers, instruments, apparatus and appliances, control gear
and transmission equipment, auxiliary equipment (including those for research and development,
testing and quality control); as well as components or raw materials for manufacture of these items and
their components; required for initial setting up of a unit or substantial expansion of a specified (1)
industrial project (2) Irrigation project (3) Power projects (4) Mining project (5) Project for exploration
of oils or other minerals and (6) Other projects as may be notified by Central Government.
The spare parts, raw material and consumables stores upto 10% of the value of goods can be imported.
Few of the eligible projects are:
(i) Industrial plant
(ii) Irrigation project
(iii) Power project
(iv) Mining project
(v) Oil & mineral exploration project
(vi) Other projects as notified by the Central Government
Page 3.4
Question 7
Explain rule 3 of the rules for Interpretation of the Customs Tariff.
Answer
The application of this rule arises when the goods consists of more than one material or substance.
When by application of rule 2(b) or for any other reason, goods are, prima facie, classifiable under two
or more headings, classification shall be effected as follows:
Rule 3(a) – Specific over general:
(i) The heading which provides the most specific description shall be preferred to headings providing
a more general description.
(ii) However, when two or more headings each refer to part only of the materials or substances
contained in mixed or composite goods or to part only of the items in a set up for retail sale, those
headings are to be regarded as equally specific in relation to those goods, even if one of them gives
a more complete or precise description of the goods.
Rule 3(b) – Essential character principle: Mixtures, composite goods consisting of different materials
or made up of different components, and goods put up in sets for retail sale, which cannot be classified
with reference to (a), shall be classified as if they consisted of material which gives them their essential
character, in so far as this criterion is applicable.
Rule 3(c) – Latter the better: When goods cannot be classified by reference to (a) or (b), they shall be
classified under the heading which occurs last in numerical order among those which equally merit
consideration.
Question 8
Briefly explain the meaning of abbreviation “%” in relation to the rate of duty
Answer
The abbreviation “%” in any column of the Schedule in relation to the rate of duty means that the duty
shall be computed at the percentage specified on the value of the goods as defined in section 14 of the
Customs Act.

Page 3.5
CHAPTER - 4
Valuation under the Customs Act, 1962
Question 1
M/s IES Ltd. (assessee) imported certain goods at US $ 20 per unit from an exporter who was holding
30% equity in the share capital of the importer company. Subsequently, the assessee entered into an
agreement with the same exporter to import the said goods in bulk at US $ 14 per unit. When imports at
the reduced price were effected pursuant to this agreement, the Department rejected the transaction
value stating that the price was influenced by the relationship and completed the assessment on the basis
of transaction value of the earlier imports i.e., at US $ 20 per unit under rule 4 of the Customs Valuation
(Determination of Value of Imported Goods) Rules 2007.
State briefly, whether the Department's action is sustainable in law?
Answer
No, the Department’s action is not sustainable in law. Rule 2(2) of Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007, inter alia, provides that persons shall be deemed to be "related"
if one of them directly or indirectly controls the other. The word “control” has not been defined under
the said rules. As per common parlance, control is established when one enterprise holds at least 51%
of the equity shareholding of the other company. However, in the instant case, the exporter company held
only 30% of shareholding of the assessee. Thus, exporter company did not exercise control over the
assessee. So, the two parties cannot be said to be related.
The fact that assessee had made bulk imports could be a reason for reduction of import price. The burden
to prove under-valuation lies on the Revenue and in absence of any evidence from the Department to
prove under-valuation, the price declared by the assessee is acceptable.
In the light of foregoing discussion, it can be inferred that Department’s action is not sustainable in law.
Question 2
Answer the following with reference to the provisions of section 14 of the Customs Act, 1962 and the
rules made thereunder:
(i) What shall be the value, if there is a price rise of the imported goods in international market
between the date of contract and the date of actual importation but the importer pays the contract
price?
(ii) Whether the payment for post-importation process is includible in the value if the same is related
to imported goods and is a condition of the sale of the imported goods?
Answer
(i) The value of the imported goods or export goods is its transaction value, which means the price
actually paid or payable for the goods. Where a contract has been entered into, the transaction
value shall be the price stated in the contract, unless it is not legally acceptable.
Price rise between date of contract and date of actual import is irrelevant, as the price actually paid
or payable shall be taken to be the value. Thus, price stated in the contract (unless unacceptable)
shall be taken.
(ii) As per explanation to Rule 10(1) of the Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007, the payment for post-importation process is includible in the value of the

Page 4.1
imported goods if the same is related to such imported goods and is a condition of the sale thereof.
Question 3
Mother Mary Hospital and Research Centre imported a machine from Delta Scientific Equipments,
Chicago for in house research. The price of the machine was settled at US $ 5,000. The machine was
shipped on 10.04.2020. Meanwhile, the Hospital Authorities negotiated for a reduction in the price. As a
result, Delta Scientific Equipments agreed to reduce the price by $ 850 and sent the revised price of $
4,150 under a telex dated 15.04.2020. The machine arrived in India on 18.04.2020. The Commissioner of
Customs has decided to take the original price as the transaction value of the goods on the ground that
the price is reduced only after the goods have been shipped.
Do you agree to the stand taken by the Commissioner? Give reasons in support of your answer.
Answer
No, the Commissioner’s approach is not correct in law.
As per section 14 of the Customs Act, the transaction value of the goods is the price actually paid or
payable for the goods at the time and place of importation. Further, the Supreme Court in the case Garden
Silk Mills v. UOI has held that importation gets complete only when the goods become part of mass of
goods within the country. Therefore, since in the instant case the price of the goods was reduced while
they were in transit, it could not be contended that the price was revised after importation took place.
Hence, the goods should be valued as per the reduced price, which was the price actually paid at the time
of importation.
Question 4
‘A’ had imported goods from Finland. Due to deep draught at the port, such goods were not taken to the
jetty in the port but were unloaded at the outer anchorage. The charges incurred for such unloading and
transport of the goods from outer anchorage to the jetty in barges (small boats) were ₹ 1,35,000. ‘A’
claims that such charges form part of the loading and unloading charges and should be deemed to be
included in the CIF value of such goods, made under rule 10(2)(b) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007.
Discuss the tenability of ‘A’s’ claim.
Answer
As per Rule 2(da), “place of importation” means the customs station, where the goods are brought for
being cleared for home consumption or for being removed for deposit in a warehouse. Therefore, the
outer anchorage where the goods are unloaded would not be the place of importation. Rule 10(2)(a)
stipulates that for the purposes of section 14(1) of the Customs Act, 1962 and Valuation rules, value of
imported goods shall be the value of such goods and shall include, the cost of transport, loading,
unloading and handling charges associated with the delivery of the imported goods to the place of
importation.
Therefore, in cases where the big mother vessels cannot enter the harbour for any reason and goods are
brought to the docks by smaller vessels like barges, the cost incurred by the importer for bringing the
goods to the landmass or place of consumption, such as barge charges will also be included in the cost of
transportation. Therefore, ‘A’s claim is not tenable in law.
Question 5
Page 4.2
A material was imported by air at CIF price of 5,000 US $. Freight paid was 1,500 US $ and insurance cost
was 500 US $. The banker realized the payment from importer at the exchange rate of ₹ 71 per dollar.
Central Board of Indirect taxes and Customs notified the exchange rate as ₹ 70 per US $. Find the value
of the material for the purpose of levying duty.
Answer
Computation of assessable value
Particulars Amount
CIF value 5,000 US $
Less: Freight 1,500 US $
Less: Insurance 500 US $
Therefore, FOB value 3,000 US $
Assessable value for Customs purpose
FOB value 3,000 US $
Add: Freight (20% of FOB value) [Note 1] 600 US $
Add: Insurance (actual) 500 US $
CIF for customs purpose 4,100 US $
Exchange rate as per CBIC [Note 2] ₹ 70 per US $
Assessable value (₹ 70 x 4,100 US $) ₹ 2,87,000
Notes:
1. If the goods are imported by air, the freight cannot exceed 20% of FOB price [Fifth proviso to rule
10(2) of the Customs (Determination of Value of Imported Goods) Rules, 2007].
2. Rate of exchange determined by CBIC is considered [clause (a) of the explanation to section 14 of
the Customs Act, 1962].
Question 6
From the particulars given below, find out the assessable value of the imported goods under the Customs
Act, 1962:
US $
I. Cost of the machine at the factory of the exporter 10,000
II. Transport charges from the factory of exporter to the port for shipment 500
III. Handling charges paid for loading the machine in the ship 50
IV. Buying commission paid by the importer 50
V. Freight charges from exporting country to India 1,000
VI. Exchange rate to be considered: 1$ = ₹ 70
VII. Actual insurance charges paid are not ascertainable
Answer
Computation of assessable value of the imported goods
US $
I. Cost of the machine at the factory 10,000

Page 4.3
II. Transport charges up to port 500

III. Handling charges at the port 50.00
FOB 10,550.00
IV. Freight charges up to India 1,000
V. Insurance charges @ 1.125% of FOB [Note 1] 118.69
CIF 11,668.69
CIF in Indian rupees @ ₹ 70/ per $ ₹ 8,16,808.30
Assessable Value ₹ 8,16,808.30
Assessable Value (rounded off) 8,16,808
Notes:
(1) Insurance charges have been included @ 1.125% of FOB value of goods [Third proviso to rule 10(2)
of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007].
(2) Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007].
Question 7
Compute export duty from the following data:
(i) FOB price of goods: US $ 1,00,000.
(ii) Shipping bill presented electronically on 26.04.2020.
(iii) Proper officer passed order permitting clearance and loading of goods for export (Let Export
Order) on 04.05.2020.
(iv) Rate of exchange and rate of export duty are as under:
(v) Rate of exchange is notified for export by Central Board of Indirect taxes and Customs.
(Make suitable assumptions wherever required and show the workings.)
Answer
Computation of export duty
Particulars Amount (US $)

FOB price of goods [Note 1] 1,00,000
Amount (₹)
Value in Indian currency (US $ 1,00,000 x ₹ 70) [Note 2] 70,00,000
Export duty @ 8% [Note 3] 5,60,000
Notes:
1. As per section 14(1) of the Customs Act, 1962, assessable value of the export goods is the
transaction value of such goods which is the price actually paid or payable for the goods when sold
for export from India for delivery at the time and place of exportation.
2. As per third proviso to section 14(1) of the Customs Act, 1962, assessable value has to be calculated
with reference to the rate of exchange notified by the CBIC on the date of presentation of shipping
bill of export.
3. As per section 16(1)(a) of the Customs Act, 1962, in case of goods entered for export, the rate of
duty prevalent on the date on which the proper officer makes an order permitting clearance and

Page 4.4
loading of the goods for exportation, is considered.
Question 8
A consignment of 800 metric tonnes of edible oil of Malaysian origin was imported by a charitable
organization in India for free distribution to below poverty line citizens in a backward area under the
scheme designed by the Food and Agricultural Organization. This being a special transaction, a nominal
price of US$ 10 per metric tonne was charged for the consignment to cover the freight and insurance
charges. The Customs House found out that at or about the time of importation of this gift consignment
there were following imports of edible oil of Malaysian origin:
S. No. Quantity imported in metric tonnes Unit price in US $ (CIF)

1. 20 260
2. 100 220
3. 500 200
4. 900 175
5. 400 180
6. 780 160
The rate of exchange on the relevant date was 1 US $ = ₹ 70.00 and the rate of basic customs duty was
10% ad valorem. Ignore Integrated tax and GST Compensation Cess. Calculate the amount of duty leviable
on the consignment under the Custom Act, 1962 with appropriate assumptions and explanations, where
required.
Answer
Determination of transaction value of the subject goods:
In the instant case, while determining the transaction value of the goods, following factors need
consideration:
1. In the given case, US $10 per metric tonne has been paid only towards freight and insurance
charges and no amount has been paid or payable towards the cost of goods. Thus, there is no
transaction value for the subject goods. Consequently, we have to look for transaction value of
identical goods under rule 4 of Customs Valuation (Determination of Value of Imported Goods)
Rules, 2007 [Customs Valuation (DVIG) Rules, 2007].
2. Rule 4(1)(a) of the aforementioned rules provides that subject to the provisions of rule 3, the value
of imported goods shall be the transaction value of identical goods sold for export to India and
imported at or about the same time as the goods being valued. In the six imports given during the
relevant time, the goods are identical in description and of the same country of origin.
3. Further, clause (b) of rule 4(1) of the said rules requires that the comparable import should be at
the same commercial level and in substantially same quantity as the goods being valued. Since,
nothing is known about the level of the transactions of the comparable consignments, it is assumed
to be at the same commercial level.
4. As far as the quantities are concerned, the consignments of 20 and 100 metric tonnes cannot be
considered to be of substantially the same quantity. Hence, remaining 4 consignments are left for
our consideration.
5. However, the unit prices in these 4 consignments are different. Rule 4(3) of Customs Valuation
(DVIG) Rules, 2007 stipulates that in applying rule 4 of the said rules, if more than one transaction
value of identical goods is found, the lowest of such value shall be used to determine the value of
imported goods. Accordingly, the unit price of the consignment under valuation would be US $ 160
Page 4.5
per metric tonne.

Computation of amount of duty payable
CIF value of 800 metric tonnes = 800 x 160 = US $ 1,28,000
At the exchange rate of $ 1 = ₹ 70
CIF Value (in Rupees) = ₹ 89,60,000
Assessable Value = ₹ 89,60,000
10% of Ad Valorem duty on ₹ 89,60,000 = ₹ 8,96,000
Add: Social Welfare Surcharge @ 10% (rounded off) = ₹ 89,600
Total custom duty payable = ₹ 9,85,600
Question 9
Foreign Trade International Ltd. has imported one machine from England. It has given the following
particulars:
(i) Price of machine 8,000 UK Pounds

(ii) Freight paid (air) 2,500 UK Pounds
(iii) Design and development chargespaid in UK 500 UK Pounds
(iv) Commission payable to local agent of exporter @
2% of price of machine,in Indian Rupees
(v) Date of bill of entry 24.10.2020 (Rate BCD 10%; Exchange
rate as notified by CBIC ₹ 100 per UK
Pound)
(vi) Date of arrival of aircraft 20.10.2020 (Rate of BCD 20%;
Exchange rate as notified by CBIC ₹
98 per UK Pound)
(vii) Integrated tax is 12%
(viii) Insurance charges have been actually paid but
details are not available.
Compute the total customs duty and integrated tax payable by Foreign Trade International Ltd.
Note: Ignore GST Compensation Cess.
Answer
Computation of total duty and integrated tax payable
Particular Amount
Price of machine 8,000 UK pounds
Add: Design and development charges [Note 1] 500 UK pounds
Total 8,500 UK pounds
(₹)
Total in rupees @ ₹ 100 per pound [Note 2] ₹ 8,50,000.00
Add: Local agency commission [Note 1]
(2% of 8000 UK pounds) = 160 UK pounds x ₹ 100 ₹ 16,000.00

Page 4.6
FOB value as per Customs 8,66,000.00

Add: Air freight (8,66,000 x 20%) [Note 3] 1,73,200.00
Add: Insurance @ 1.125% of customs FOB [Note 4] 9,742.50
CIF Value 10,48,942.50
Assessable value (rounded off) 10,48,942.00
Add: Basic custom duty @ 10% [Note 5] 1,04,894.20
Add: Social Welfare Surcharge @ 10% on ₹ 1,04,894.20 10,489.42
Total 11,64,325.62
Add: Integrated tax @ 12% [Note 7] 1,39,719.07
Total duty and integrated tax payable (Rounded off) (₹ 1,04,894.20 + ₹ 2,55,102
10,489.42 + ₹ 1,39,719.07)
Notes:
1. Design and development charges paid in UK and commission paid to local agent (since it is not
buying commission) are includible in the assessable value [Rule 10 of the Customs (Determination
of Value of Imported Goods) Rules, 2007]
2. The rate of exchange notified by the CBIC on the date of presentation of bill of entry has been
considered [Section 14 of the Customs Act, 1962].
4. Where the insurance charges are not ascertainable, such cost is taken as 1.125% of FOB value of
the goods [Third proviso to Rule 10(2) of the Customs (Determination of value of Imported Goods)
Rules, 2007].
5. Section 15 of the Customs Act, 1962 provides that rate of duty shall be the rate in force on the date
of presentation of bill of entry or the rate in force on the date of arrival of aircraft, whichever is
later.
6. Integrated tax is levied on the sum total of the assessable value of the imported goods, customs
duties and applicable social welfare surcharge.
Question 10
Compute the total duty and integrated tax payable under the Customs Law on an imported equipment
based on the following information:
(i) Assessable value of the imported equipment US $ 10,100
(ii) Date of bill of entry is 25.04.2020. Basic customs duty on this date is 10% and exchange rate
notified by the Central Board of Indirect taxes and Customs is US $ 1 = ₹ 65.
(iii) Date of entry inwards is 21.04.2020. Basic customs duty on this date is 20% and exchange rate
notified by the Central Board of Indirect taxes and Customs is US $ 1 = ₹ 70.
(iv) Integrated tax: 12%
(v) Social Welfare surcharge 10%
Make suitable assumptions where required and show the relevant workings and round off your answer
to the nearest rupee.

Page 4.7
Answer
Computation of total customs duty and integrated tax payable
Particulars ₹
Assessable value ($ 10,100 x 65) [Note-1] 6,56,500.00
Add: Basic custom duty @ 10% [Note-2] 65,650.00
Add: Social Welfare Surcharge @ 10% on ₹ 65,650 6,565.00
Total 7,28,715.00
Add: Integrated tax @ 12% [Note-3] 87,445.80
Total Customs duty and integrated tax payable (rounded offto nearest rupee) 1,59,660
Notes:
1. Rate of exchange notified by CBIC as prevalent on the date of filing of bill of entry would be the
applicable rate [Proviso to section 14(1) of Customs Act,1962].
2. Rate of duty would be the rate as prevalent on the date of filing of bill of entry or entry inwards
whichever is later. [Proviso to section 15 of the Customs Act, 1962].
Question 11
Assessable value of an item imported is ₹ 1,00,000. Basic customs duty is 10%, integrated tax is 12%, and
social welfare surcharge is 10% on duty. Compute the amount of total customs duty and integrated tax
payable.
Answer
Particulars ₹
1. Assessable Value 1,00,000
2. Basic customs duty @ 10% 10,000
3. Add: Social Welfare surcharge* @ 10% on ₹ 10,000 1000
4. Sub-total 1,11,000
5. Integrated tax @ 12% of ₹ 1,11,000 13,320
6. Total customs duty and integrated tax payable [(2) + (3) + (5)] 24,320
*Social Welfare surcharge is presently exempt on IGST and GST compensation cess
Question 12
From the following particulars, calculate total customs duty and integrated tax payable:
(i) Date of presentation of bill of entry: 20.06.2020 [Rate of BCD 20%; Inter-bank exchange rate: ₹
61.60 and rate notified by CBIC ₹ 70].
(ii) Date of arrival of aircraft in India: 30.06.2020 [Rate of BCD 10%; Inter-bank exchange rate: ₹ 61.80
and rate notified by CBIC ₹ 73.00].

Page 4.8
(iii) Rate of Integrated tax: 12%. Ignore GST Compensation Cess.

(iv) CIF value 2,000 US Dollars; Air freight 500 US Dollars, Insurance cost 100 US Dollars.
(v) Social Welfare Surcharge 10%
Answer
Particulars Amount
CIF value 2000 US Dollars
Less: Freight 500
Insurance 100 600 US Dollars
FOB Value 1400 US Dollars
Add: Air Freight [Note1] 280
Insurance (actual amount) 100 380 US Dollars
1780 US Dollars
₹
Value @ ₹ 70.00 [Note 2] 1,24,600.00
Assessable Value 1,24,600.00
Basic Custom Duty @ 10% (a) [Note 3] 12,460.00
Add: Social Welfare Surcharge @ 10% on 12,460 (b) 1,246.00
Sub-total 1,38,306.00
Integrated tax (12% on₹ 1,38,306) (c) [Note 4] 16,596.72
Total duty and integrated tax (a +b + c) (rounded off) 30,303
Notes:
(1) If the goods are imported by air, the freight cannot exceed 20% of FOB price [Fifth proviso to Rule
(2) Rate of exchange notified by CBIC on the date of presentation of bill of entry would be the applicate
rate. [Proviso to Section 14(1) of the Customs Act, 1962].
(3) Rate of duty would be the rate as prevalent on the date of filing of bill of entry or arrival of aircraft,
whichever is later [proviso to section 15 of the Customs Act, 1962].
(4) Integrated tax is levied on the sum total of the assessable value of the imported goods, customs
Question 13
15,000 chalices were imported for charitable distribution in India by XY Charitable Trust. The Trust did
not pay either for the cost of goods or for the design and development charges, which was borne by the
supplier. Customs officer computed its FOB value at USD 20,000 (including design and development
charges), which was accepted by the Trust. Other details obtained were as follows:
S. N. Particulars Amount
1. Freight paid (air) (in USD) 4,500
2. Design & development charges paid in USA (in USD) 2,500
3. Commission payable to an agent in India (in ₹) 12,500
4. Exchange rate notified by CBIC and rate of basic duty is as follows:

Page 4.9
Date of Bill of Entry BCD Exchange Rate in

08.09.2020 20% ₹ 70
Date of arrival of aircraft BCD Exchange Rate in
30.09.2020 10% ₹ 72
The inter-bank rate was 1 USD = ₹ 73
5. Integrated tax 12%
6. Social Welfare surcharge as applicable
Compute the amount of total customs duty and integrated tax payable on importation of chalices. Make
suitable assumptions where required. Working notes should form part of your answer.
Note: Ignore GST Compensation Cess
Answer
Particulars Amount
FOB value computed by Customs Officer (including design and development 20,000 US $
charges)
Exchange rate [Note 1] ₹ 70 per $
₹
FOB value computed by Customs Officer (in rupees) 14,00,000.00
Add: Commission payable to agent in India 12,500.00
FOB value as per customs 14,12,500.00
Add: Air freight (₹ 14,12,500 × 20%) [Note 2] 2,82,500.00
Add: Insurance (1.125% of ₹14,12,500) [Note 3] 15,890.63
CIF value for customs purposes 17,10,890.63
Assessable value 17,10,890.63
Add: Basic custom duty @ 10% (₹17,10,890.63× 10%) – roundedoff [Note 4] 1,71,089
Add: Social Welfare surcharge @ 10% on ₹ 1,71,089 rounded off 17,109
Total 18,99,089
Integrated tax @ 12% (₹18,99,089× 12%) [Rounded off] [Note 5] 2,27,890
Total customs duty and integrated tax payable(₹ 1,71,089 + ₹ 17,109 + ₹ 4,16,088
2,27,890)
Note:
1. Rate of exchange notified by CBIC on the date of filing of bill of entry has to be considered [Third
proviso to section 14 of the Customs Act, 1962].
2. In case of goods imported by air, freight cannot exceed 20% of FOB value [fifth proviso to rule
3. Insurance charges, when not ascertainable, have to be included @ 1.125% of FOB value of goods
[Third proviso to rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods)
Rules, 2007].
4. Rate of duty will be the rate in force on the date of presentation of bill of entry or on the date of
arrival of the aircraft, whichever is later [Proviso to section 15 of the Customs Act, 1962].

Page 4.10
Question 14
Mr. Backpack imported second-hand goods from a UK supplier by air, which was contracted on CIF basis.
However, there were changes in prices in the international market between the date of contract and
actual importation. As a result of several negotiations, the parties agreed for a negotiated price payable
as follows:
Particulars Contract Price Changed Price Negotiated Price (₤)

(₤) (₤)
CIF Value 5000 5800 5500
Air Freight 300 600 500
Insurance 500 650 600
Other details for computing assessable value and duty payable are tabled below:
Particulars Amount
Vendor inspection charges (inspection carried out by foreign supplier on his own, ₤ 600
not required under contract or for making the goods ready for shipment)
Commission payable to local agent @ 1% of FOB in local currency
Date of bill of entry Basic customs duty Exchange rate in ₹ notified by CBIC
18.02.2020 10% 102
Date of arrival of aircraft Basic custom duty Exchange rate in ₹ notified by CBIC
15.02.2020 15% 98
Inter-bank rate 1 UK Pound = ₹ 106

Compute the assessable value and calculate basic customs duty payable by Mr. Backpack.
Answer
Computation of custom duty payable
Particulars Amount (£)

CIF value (negotiated price) [Note-1] 5,500
Less: Air freight 500
Less: Insurance 600
FOB value 4,400
Add: Vendor inspection charges [Note-2] Nil
FOB value as per Customs 4,400
Freight [Note-3] 500
Insurance [Note-4] 600
5,500
Exchange rate is ₹ 102 per £ [Note-5]
₹
Value in rupees 5,61,000.00
Add: Commission payable to local agent [1% of FOB value][Note-6] = (US $ 4,400 4,488.00
x ₹ 102) × 1%
Total 5,65,488.00

Page 4.11

Add: Basic custom duty @ 10% [Note-7] – rounded off 56,548.80
Social Welfare Surcharge (10% of ₹56,548.80) [rounded off] 5,655.00
Customs duty payable [rounded off] 62,204.00
Notes:
1. As per Section 14 of the Customs Act, 1962, the value of the imported goods is the transaction value,
which means the price actually paid or payable for the goods. In this case, since the contract was
re-negotiated and the importer paid the re-negotiated price, the transaction value would be such
re- negotiated price and not the contract price.
2. Only the payments actually made as a condition of sale of the imported goods by the buyer to the
seller are includible in the assessable value under rule 10(1)(e) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007. Charges of vendor inspection on the
goods carried out by foreign supplier on his own and not required for making the goods ready for
shipment, are not includible in the assessable value of the imported goods [Bombay Dyeing & Mfg.
v. CC 1997 (90) ELT 276 (SC)].
3. Actual amount incurred towards freight will be considered since freight is not more than 20% of
FOB value [Fifth proviso to rule 10(2) of Customs Valuation Rules].
4. Actual insurance charges paid are includible in the assessable value as per rule 10(2)(b) of the
Customs Valuation Rules.
5. Rate of exchange notified by CBIC on the date of filing of bill of entry will be considered as per third
proviso to section 14 of the Customs Act, 1962.
6. Commission paid to local agent (since it is not buying commission) is includible in the assessable
value on the presumption that local agent has been appointed by the exporter [Rule 10(1)(a)(i) of
the Customs Valuation Rules].
7. As per proviso to section 15 of the Customs Act, 1962, rate of duty will be the rate in force on the
date of presentation of bill of entry or on the date of arrival of the aircraft, whichever is later.
Question 15
F. Ltd. imported a machine from UK in May, 2020. The details in this regard are as under:
(i) FOB value of the machine: 10,000 UK Pound
(ii) Freight (Air): 3,000 UK Pound
(iii) Licence fee, the buyer was required to pay in UK: 400 UK Pound
(iv) Buying commission paid in India ₹ 20,000
(v) Date of bill of entry was 20.05.2020 and the rate of exchange notified by CBIC on this date was ₹
99.00 per one pound. Rate of BCD was 7.5%.
(vi) Date of arrival of aircraft was 25.05.2020 and the rate of exchange notified by CBIC on this date
was ₹ 98.50 per pound and rate of BCD was 10%.
(vii) Integrated tax was 12% and ignore GST Compensation Cess.
(viii) Insurance premium details were not available.
You are required to compute the total customs duty and integrated tax payable on the importation of
machine. You may make suitable assumptions wherever required.
Answer

Page 4.12
Computation of assessable value and total customs duty and integrated tax payable by F Ltd.
Particular Amount (£)

FOB value 10,000
Add: License fee required to be paid in UK [Note – 1] 400
Customs FOB value 10,400
Exchange rate is ₹ 99 per £ [Note – 2]
₹
Value in rupees 10,29,600.00
Add: Air freight [Restricted to 20% of ₹ 10,29,600 (customs FOBvalue)] [Note – 3] 2,05,920.00
Insurance @ 1.125% of ₹ 10,29,600 [Note – 4] 11,583.00
Buying commission is not includible in the assessable value [Note – 5] -
CIF Value 12,47,103.00
Rate of duty is 10% [Note – 6]
Add: Basic custom duty @ 10% (₹ 12,47,103 × 10%) [rounded off] (A) 1,24,710
Add: Social Welfare Surcharge (10% of ₹1,24,710)[rounded off] (B) 12,471
Value for integrated tax 13,84,284
Add: Integrated tax @ 12% [rounded off] (C) [Note – 7] 1,66,114
Total customs duty and integrated tax payable [(A) + (B) + (C)] 3,03,295
Note:
1. Engineering and design charges paid in UK, licence fee relating to imported goods payable by the
buyer as a condition of sale, materials and components supplied by the buyer free of cost and actual
insurance charges paid are all includible in the assessable value - Rule 10(1)(c) of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007 [hereinafter referred to as
Customs Valuation Rules].
2. Rate of exchange notified by CBIC on the date of filing of bill of entry has to be considered [Third
proviso to section 14 of the Customs Act, 1962].
3. In case of goods imported by air, freight cannot exceed 20% of FOB value [Fifth proviso to rule
10(2) of the Customs Valuation Rules].
4. Insurance charges, when not ascertainable, have to be included @ 1.125% of FOB value of goods
[Third proviso to rule 10(2) of the Customs Valuation Rules].
5. Buying commission is not included in the assessable value [Clause (a)(i) of sub-rule (1) of rule 10
of the Customs Valuation Rules].
6. Rate of duty will be the rate in force on the date of presentation of bill of entry or on the date of
arrival of the aircraft, whichever is later [Proviso to section 15 of the Customs Act, 1962].
Question 16
Briefly explain the following with reference to the Customs (Determination of Value of Imported Goods)
Rules, 2007:
(i) Goods of the same class or kind

Page 4.13
(ii) Computed value
Answer
(i) As per rule 2(1)(c) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007,
goods of the same class or kind, means imported goods that are within a group or range of imported
goods produced by a particular industry or industrial sector and includes identical goods or similar
goods.
(ii) As per rule 2(1)(a) of the said rules, computed value means the value of imported goods
determined in accordance with rule 8. The value of imported goods is taken as computed value
when valuation is not possible as per any of rules earlier than rule 8 and cost is ascertainable.
As per rule 8, subject to the provisions of rule 3, the value of imported goods shall be based on a
computed value, which shall consist of the sum of –
(a) the cost or value of materials and fabrication or other processing employed in producing the
imported goods;
(b) an amount for profit and general expenses equal to that usually reflected in sales of goods of
the same class or kind as the goods being valued which are made by producers in the country
of exportation for export to India;
(c) the cost or value of all other expenses under sub-rule (2) of rule 10.
Question 17
Whether the assessable value of the warehoused goods which are sold before being cleared for home
consumption, should be taken as the price at which the original importer has sold the goods?
Answer
Section 14 of the Customs Act provides that the value of the imported goods shall be the transaction value
of goods which is the price actually paid or payable for the goods when sold for export to India for
delivery at the time and place of importation. The sale of goods after warehousing them in India cannot
be considered a sale for export to India. It cannot be stated that the export of goods is not complete even
after the imported goods were cleared for warehousing in the country of import. Hence, the price at
which the imported goods are sold after warehousing them in India does not qualify to be the transaction
value as per section 14. This has been clarified vide Circular No. 11/2010 Cus. dated 03.06.2010.
Note: The above is only applicable for levy of BCD and Social welfare surcharge. IGST is leviable as per
Section 3(8A) of the Customs Tariff Act, 1975.
Question 18
Explain when are the costs and services as given in rule 10 of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007 be added to the value of the identical goods under rule 4.
Answer
As per rule 4(1)(c) of the Customs Valuation (Determination of Value of Imported Goods Rules, 2007)
where imported goods are being valued as per rule 4, the value of the identical goods is adjusted to take
into account the difference attributable to the commercial level or to the quantity or both. According to
rule 4(2) where costs and charges referred to in rule 10 are included in the value of identical goods,
adjustment has to be made of the difference in such costs and charges between the imported goods and
the identical goods.
Page 4.14
Therefore, if the value of the identical goods does not include certain specific costs and charges relating
to the imported goods, these are to be included as per rule 10.
Question 19
Examine the validity of the following statements with reference to the Customs Act, 1962 giving brief
reasons:
(i) Service charges paid to canalizing agent are not includible in the assessable value of imports. Such
agent imports the goods from foreign sellers and enters into an agreement to sell such goods with
buyers in India in high seas.
(ii) Charges for “vendor inspection” on the second hand goods carried out by foreign supplier on his
own and not required for making the goods ready for shipment, are not includible in the assessable
value of the imported goods.
Answer
(i) The statement is not valid. Since the canalizing agent is not the agent of the importer nor does he
represent the importer abroad, purchases in bulk by canalizing agency from foreign seller and
subsequent sale by it to Indian importer on high seas sale basis are independent of each other.
Hence, the commission or service charges paid to the canalizing agent are includible in the
assessable value as these cannot be termed as buying commission [Hyderabad Industries Ltd. v.
UOI 2000 (115) ELT 593 (SC)].
(ii) The statement is valid. As per rule 10(1)(e) of the Customs (Determination of Value of Imported
Goods) Rules, 2007, only the payments actually made as a condition of sale of the imported goods
by the buyer to the seller are includible in the assessable value.
Thus, charges of vendor inspection on the goods carried out by foreign supplier on his own and not
required for making the goods ready for shipment, are not includible in the assessable value of the
imported goods [Bombay Dyeing & Mfg. v. CC 1997 (90) ELT 276 (SC)].
Question 20
An importer entered into a contract for supply of crude sunflower seed oil @ U.S. $ 435 C.I.F./Metric ton.
Under the contract, the consignment was to be shipped in the month of July. The period was extended by
mutual agreement and goods were shipped on 5th August at old prices.
In the meanwhile, the international prices had gone up due to volatility in market and other imports
during the month of August were at higher prices. Department sought to increase the assessable value
on the basis of the higher prices of contemporaneous imports.
Decide whether the contention of the Department is correct, with reference to a decided case law, if any.
Answer
No, the contention of the Department is not correct.
The facts of the given case are similar to the case of CCus., Vishakhapatnam v. Aggarwal Industries Ltd.
2011 (272) E.L.T. 641 (SC). The Supreme Court, in the instant case, observed that since the contract
entered into for supply of crude sunflower seed oil @ US $ 435 CIF/metric ton could not be performed
on time, the extension of time for shipment was agreed upon by the contracting parties.
The Supreme Court pointed out that the commodity involved had volatile fluctuations in its price in the
international market, but having delayed the shipment; the supplier did not increase the price of the

Page 4.15
commodity even after the increase in its price in the international market.
Further, there was no allegation regarding the supplier and importer being in collusion. Thus, the appeal
was allowed in the favour of the assessee and the contract price was accepted as the ‘transaction value’.
Question 21
BSA & Company Ltd. has imported a machine from U.K. From the following particulars furnished by it,
arrive at the assessable value for the purpose of customs duty payable.
Particulars Amount
1. Price of the machine 10,000 U.K. Pounds
2. Freight (air) 3,000 U.K. Pounds
3. Engineering and design charges paid to afirm in U.K. 500 U.K. Pounds
4. License fee relating to imported goods payable by the buyer as a 20% of Price of
condition of sale machine
6. Materials and components supplied in UKby the buyer free of cost
valued at ₹ 20,000
7. Insurance paid to the insurer in India ₹ 6,000
8. Buying commission paid by the buyer tohis agent in U.K. 100 U.K. Pounds
Other particulars:
(i) Inter-bank exchange rate: ₹ 98 per U.K. Pound.
(ii) CBIC had notified for purpose of section 14 of the Customs Act, 1962, exchange rate of ₹ 100 per
U.K. Pound.
(iii) Importer paid ₹ 5,000 towards demurrage charges for delay in clearing the machine from the
Airport.
(Make suitable assumptions wherever required and show workings with explanations)
Answer
Computation of assessable value of machine imported by BSA & Co.
Particulars Amount (£)

Price of the machine 10,000
Add: Engineering and design charges paid in UK [Note 1] 500
Licence fee relating to imported goods payable bythe buyer as a condition of
sale (20% of Price of machine) [Note 1] 2,000
Total 12,500
Amount (₹)
Value in Indian currency [£12,500 x ₹100] [Note 2] 12,50,000
Add: Materials and components supplied by the buyerfree of cost [Note 1] 20,000
FOB 12,70,000
Add: Freight [Note 3] 2,54,000
Insurance paid to the insurer in India [Note 1] 6,000
CIF value 15,30,000
Assessable value 15,30,000

Page 4.16
Notes:
1. Engineering and design charges paid in UK, licence fee relating to imported goods payable by the
buyer as a condition of sale, materials and components supplied by the buyer free of cost and actual
insurance charges paid are all includible in the assessable value [Rule 10 of the Customs
(Determination of Value of Imported Goods) Rules, 2007].
2. As per Explanation to section 14(1) of the Customs Act, 1962, assessable value should be calculated
with reference to the rate of exchange notified by the CBIC.
4. Buying commission is not included in the assessable value [Rule 10(1)(a) of the Customs
5. Only ship demurrage charges on chartered vessels are included in the cost of transport of the
imported goods. Thus, demurrage charges for delay in clearing the machine from the Airport will
not be includible in the assessable value [Explanation to Rule 10(2) of the Customs (Determination
of Value of Imported Goods) Rules, 2007].
Question 22
Briefly explain with reference to the provisions of the Customs Act, the relevant date for determination
of rate of duty and tariff valuation for imports through a vehicle where bill of entry is filed prior to the
arrival of the vehicle.
Answer
As per section 15(1) of the Customs Act, 1962, the relevant date for determination of rate of duty and
tariff valuation of goods entered for imports through a vehicle is the date of presentation of bill of entry
OR date of arrival of the vehicle, whichever is later.
Therefore, the relevant date for determination of rate of duty and tariff valuation for imports through a
vehicle where bill of entry is filed prior to the arrival of the vehicle will be the date of the arrival of the
vehicle.
Question 23
With reference to the provisions of the Customs Valuation (Determination of Value of Imported Goods)
Rules, 2007, explain briefly the chief reasons on the basis of which the proper officer can raise doubts on
the truth or accuracy of the declared value.
Answer
As per explanation to rule 12 of the Customs Valuation (Determination of Value of Imported Goods)
Rules, 2007, the chief reasons on the basis of which the proper officer can raise doubts on the truth or
accuracy of the declared value may include:
(a) the significantly higher value at which identical or similar goods imported at or about the same
time in comparable quantities in a comparable commercial transaction were assessed;
(b) the sale involves an abnormal discount or abnormal reduction from the ordinary competitive price;
(c) the sale involves special discounts limited to exclusive agents;
(d) the misdeclaration of goods in parameters such as description, quality, quantity, country of origin,
year of manufacture or production;

Page 4.17
(e) the non declaration of parameters such as brand, grade, specifications that have relevance to value;
(f) the fraudulent or manipulated documents.
Question 24
Jagat Corporation Limited imported some goods from US. The details of the transaction are as follows:
Authority Rate of exchange

CBIC 1 US $ = ₹ 70
RBI 1 US $ = ₹ 71
CIF value of the goods is $ 1,50,000

Rate of basic custom duty is 10%
Rate of social welfare surcharge is 10%
Integrated tax is 18%. Ignore GST Compensation Cess.
Calculate total customs duty and integrated tax payable thereon.
Answer
Computation of total custom duty and integrated tax payable
Particulars Amount
CIF Value $ 1,50,000.00
Assessable value (in ₹) = $ 1,50,000 x ₹ 70 (Note -1) ₹ 1,05,00,000.00
Add: Basic custom duty @ 10% (₹ 1,05,00,000 x 10%) ₹ 10,50,000.00
Add: Social Welfare surcharge [₹ 10,50,000 x 10%] ₹ 1,05,000
Sub-total 1,16,55,000.00
Add: Integrated tax (₹ 1,16,55,000 x 18%) (Note-2) ₹ 20,97,900.00
Total custom duty and integrated tax payable(rounded off) ₹ 32,52,900
Notes:
(1) The applicable exchange rate is the rate notified by CBIC [Explanation to section 14(1) of the
customs Act, 1962].
Question 25
ABC Industries Ltd. imports an equipment by air. CIF price of the equipment is 6,000 US$, freight paid is
1,200 US$ and insurance cost is 1,800 US$. The banker realizes the payment from importer at the
exchange rate of ₹ 61 per US$. Central Board of Indirect taxes and Customs notifies the exchange rate as
₹ 70 per US$ while rate of exchange notified by RBI is ₹ 72 per US$. ABC Industries Ltd. expends ₹ 56,000
in India for certain development activities with respect to the imported equipment.
Basic customs duty is 10%, Integrated tax is leviable @ 12% and social welfare surcharge is 10% on duty.
Ignore GST Compensation Cess.
You are required to compute the amount of total duty and integrated tax payable by ABC Industries Ltd.
under Customs law.

Page 4.18
Answer
Computation of customs duty and integrated tax payable by ABC Industries Ltd.
Particulars Amount
CIF value 6,000 US $
Less: Freight 1,200 US $
Less: Insurance 1,800 US $
FOB value 3,000 US $
Add: Freight (20% of FOB value) [Note 1] 600 US $
Add: Insurance (actual) 1,800 US $
CIF 5,400 US $
Assessable value = ₹ 70 x 5,400 US $ ₹ 3,78,000
Add: Basic customs duty @ 10% ₹ 37,800
Add: Social Welfare Surcharge @ 10% ₹ 3,780
Sub-total ₹ 4,19,580
Integrated tax @ 12% of ₹ 4,19,580[Note 5] ₹ 50,349.60
Total customs duty and integrated tax payable [₹ 37,800 + ₹ 3,780 + ₹ ₹ 91,929.60
50,349.60]
Total customs duty and integrated tax payable (rounded off) ₹ 91,930
Notes:
2. Rate of exchange determined by CBIC is considered [Clause (a) of the explanation to section 14 of
the Customs Act, 1962].
3. Rule 10(1)(b)(iv) of the Customs Valuation (Determination of Value of Imported Goods) Rules,
2007 inter alia provides that value of development work undertaken elsewhere than in India is
includible in the value of the imported goods. Thus, development charges of ₹ 56,000 paid for work
done in India have not been included for the purposes of arriving at the assessable value.
Question 26
Compute the total customs duty and integrated tax payable under Customs law on an imported machine,
based on the following information:
US $
(i) Cost of the machine at the factory of the exporter 20,000
(ii) Transport charges from the factory of exporter to the portfor shipment 800
(iii) Handling charges paid for loading the machine in the ship 50
(iv) Freight charges from exporting country to India 5,000
(v) Buying commission paid by the importer 100
(₹)
(vi) Lighterage charges paid by the importer at port ofimportation 12,000

Page 4.19
(vii) Freight incurred from port of entry to Inland Container depot 60,000
(viii) Ship demurrage charges paid at port of importation 24,000
Date of bill of entry 20.01.2020 (Rate BCD 20%; Exchange rate as notified by
CBIC ₹ 70 per US $)
Date of entry inward 25.03.2020 (Rate of BCD 10%; Exchange rate as notified by
CBIC ₹ 75 per US $)
Integrated tax 12%
Answer
Computation of customs duty and integrated tax payable on the imported goods
Particulars US $
Cost of the machine at the factory 20,000
Transport charges up to port 800
Handling charges at the port 50
FOB 20,850
FOB value in Indian rupees @ ₹ 70 per $ [Note 1] 14,59,500
Freight charges up to India [US $ 5,000 x ₹ 70] 3,50,000
Lighterage charges paid by the importer [Note 2] 12,000
Ship demurrage charges on chartered vessels [Note 2] 24,000
Insurance charges @ 1.125% of FOB [Note 3] 16,419.38
CIF 18,61,919.38
Add: Basic customs duty @ 10% [Note 4] [a] 1,86,192
Add: Social Welfare surcharge @ 10% [b] 18,619.20
Total 20,66,730.58
Add: Integrated tax @ 12% of ₹ 20,66,730.58 [c] [Note 5] 2,48,007.67
Total custom duty and integrated tax payable [(a) + (b) + (c)] rounded off 4,52,819
Notes:
(1) Rate of exchange notified by CBIC on the date of presentation of bill of entry is considered
[Explanation to section 14 of the Customs Act, 1962].
(2) Cost of transport of the imported goods includes ship demurrage charges and lighterage charges
[Explanation to Rule 10(2) of Customs Valuation (Determination of Value of Imported Goods)
Rules, 2007].
(3) Insurance charges is included @ 1.125% of FOB value of goods [Third proviso to rule 10(2) of
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007].
(4) Rate of duty is the rate prevalent on the date of presentation of bill of entry or the rate prevalent
on the date of entry inwards, whichever is later [Section 15 of the Customs Act, 1962].
duties and applicable Social welfare surcharge.
(6) Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of Customs Valuation
(7) Freight incurred from port of entry to Inland Container depot is not includible in assessable value
[Rule 10(2)(a) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007].
Page 4.20
Question 27
Kaveri Enterprises imported some goods from Italy. On the basis of certain information obtained through
computer printouts from the Customs House, Department alleged that during the period in question,
large number of consignments of such goods were imported at a much higher price than the price
declared by Kaveri Enterprises. Therefore, Department valued such goods on the basis of transaction
value of identical goods as per rule 4 of the Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 and demanded the differential duty along with penalty and interest from the Kaveri
Enterprises. However, Department did not provide these printouts to Kaveri Enterprises.
Kaveri Enterprises contended that Department’s demand was without any basis in law, without any
legally admissible evidence and opposed to the principles of natural justice as the computer printouts
which formed the basis of such demand had not been supplied to them. Resultantly, they had no means
of knowing as to whether any imports of comparable nature were made at the relevant point of time.
You are required to examine the contention of Kaveri Enterprises, with the help of a decided case law, if
any.
Answer
The facts of the given case are similar to the case of Gira Enterprises v. CCus. 2014 (307) ELT 209 (SC)
decided by the Supreme Court. In the instant case, the Supreme Court observed that since Revenue did
not supply the copy of the computer printout, which formed the basis of the conclusion that the
appellants under-valued the imported goods, the appellants obviously could not and did not have any
opportunity to demonstrate that the transactions relied upon by the Revenue were not comparable
transactions.
The Supreme Court held that mere existence of alleged computer printout was not proof of existence of
comparable imports. Even if assumed that such printout did exist and content thereof were true, such
printout must have been supplied to the appellant and they should have been given reasonable
opportunity to establish that the import transactions were not comparable.
In view of the above-mentioned judgment, contention of Kaveri Enterprises is correct.
Question 28
M/s Impex imported some consignment of goods on 01.06.2020. A bill of entry for warehousing of goods
was presented on 05.06.2020 and the materials were duly warehoused. The goods were subject to duty
@ 50% ad valorem. In the meanwhile, on 01.07.2020, an exemption notification was issued reducing the
effecting customs duty @ 30%, ad valorem. M/s Impex filed their bill of entry for home consumption on
01.08.2020 claiming duty @ 30% ad valorem. However, Customs Department charged duty @ 50% ad
valorem being the rate on the date of clearance into the warehouse.
Explain with reference to the provisions of the Customs Act, 1962:
(i) the rate of duty applicable for clearance for home consumption in this case.
(ii) whether the rate of exchange on 01.08.2020 could be adopted for purpose of conversion of foreign
currency into local currency?
Answer
(i) Section 15(1)(b) of the Customs Act, 1962 provides that in the case of goods cleared from a
warehouse, rate of duty applicable is the rate of duty in force on the date on which a bill of entry
for home consumption in respect of such goods is presented.
Page 4.21
In the given case, since M/s Impex has filed the bill of entry for home consumption on 01.08.2020,
rate of duty is the rate prevalent on the said date viz. 30%.
(ii) Third proviso to section 14 of the Customs Act, 1962 provides that the rate of exchange notified by
the CBIC as prevalent on the date of presentation of bill of entry for warehousing is the applicable
rate of exchange for conversion of foreign currency into local currency.
Therefore, in the given case, rate of exchange that would be prevalent on date of presentation of
bill of entry for warehousing i.e. 05.06.2020 and not the one prevalent on date of presentation of
bill of entry for home consumption i.e., 01.08.2020, would be adopted.
Question 29
Differentiate between deductive value and computed value.
Answer
Deductive Value means the value determined in accordance with rule 7.
(1) Subject to the provisions of rule 3, if the goods being valued or identical or similar imported goods
are sold in India, in the condition as imported at or about the time at which the declaration for
determination of value is presented, the value of imported goods shall be based on the unit price
at which the imported goods or identical or similar imported goods are sold in the greatest
aggregate quantity to persons who are not related to the sellers in India, subject to the following
deductions: —
(i) either the commission usually paid or agreed to be paid or the additions usually made for
profits and general expenses in connection with sales in India of imported goods of the same
class or kind;
(ii) the usual costs of transport and insurance and associated costs incurred within India;
(iii) the customs duties and other taxes payable in India by reason of importation or sale of the
goods.
(2) If neither the imported goods nor identical nor similar imported goods are sold at or about the
same time of importation of the goods being valued, the value of imported goods shall, subject
otherwise to the provisions of sub-rule (1), be based on the unit price at which the imported goods
or identical or similar imported goods are sold in India, at the earliest date after importation but
before the expiry of ninety days after such importation.
(3) (a) If neither the imported goods nor identical nor similar imported good are sold in India in the
condition as imported, then, the value shall be based on the unit price at which the imported
goods, after further processing, are sold in the greatest aggregate quantity to persons who
are not related to the seller in India.
(b) In such determination, due allowance shall be made for the value added by processing and
the deductions provided for in items (i) to (iii) of sub- rule (1).
Computed Value means the value of imported goods determined in accordance with rule 8.
Subject to the provisions of rule 3, the value of imported goods shall be based on a computed value, which
shall consist of the sum of:
(a) the cost or value of materials and fabrication or other processing employed in producing the
imported goods;
(b) an amount for profit and general expenses equal to that usually reflected in sales of goods of the
same class or kind as the goods being valued which are made by producers in the country of

Page 4.22
exportation for export to India;

(c) the cost or value of all other expenses under sub-rule (2) of rule 10.
Question 30
What is residual method of valuation? Discuss with reference to the Customs Valuation (Determination
of Value of Imported Goods) Rules, 2007.
Answer
Rule 9 – Residual Method
(1) Subject to the provisions of rule 3, where the value of imported goods cannot be determined under
the provisions of any of the preceding rules, the value shall be determined using reasonable means
consistent with the principles and general provisions of these rules and on the basis of data
available in India.
Provided that the value so determined shall not exceed the price at which such or like goods are
ordinarily sold or offered for sale for delivery at the time and place of importation in the course of
international trade, when the seller or buyer has no interest in the business of other and price is
the sole consideration for the sale or offer for sale.
(2) No value shall be determined under the provisions of’ this rule on the basis of—
(i) the selling price in India of the goods produced in India;
(ii) a system which provides for the acceptance for customs purposes of the highest of the two
alternative values;
(iii) the price of the goods on the domestic market of the country of exportation;
(iv) the cost of production other than computed values which have been determined for identical
or similar goods in accordance with the provisions of rule 8;
(v) the price of the goods for the export to a country other than India;
(vi) minimum customs values; or
(vii) arbitrary or fictitious values.
The residuary method can be considered if valuation is not possible by any other method.
Question 31
Enumerate the various costs and services that are to be added under rule 10 of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 to arrive at the “transaction value”.
Answer
Rule 10 – Cost and Services
(1) In determining the transaction value, there shall be added to the price actually paid or payable for
the imported goods:
(a) the following to the extent they are incurred by the buyer but are not included in the price
actually paid or payable for the imported goods, namely:
(i) commissions and brokerage, except buying commissions;
(ii) the cost of containers which are treated as being one for customs purposes with the
goods in question;

Page 4.23
(iii) the cost of packing whether for labour or materials.

(b) The value, apportioned as appropriate, of the following goods and services were supplied
directly or indirectly by the buyer free of charge or at reduced cost for use in connection with
the production and sale for export of imported goods, to the extent that such value has not
been included in the price actually paid or payable, namely:
(i) materials, components, parts and similar items incorporated in the imported goods;
(ii) tools, dies, moulds and similar items used in the production of the Imported goods;
(iii) materials consumed in the production of the imported goods;
(iv) engineering, development, art work, design work, and plans and sketches undertaken
elsewhere than in India and necessary for the production of the imported goods.
(c) royalties and licence fees related to the imported goods that the buyer is required to pay,
directly or indirectly, as a condition of the sale of the goods being valued, to the extent that
such royalties and fees are not included in the price actually paid or payable;
(d) The value of any part of the proceeds of any subsequent resale, disposal or use of the
imported goods that accrues, directly or indirectly, to the seller;
(e) all other payments actually made or to be made as a condition of sale of the imported goods,
by the buyer to the seller, or by the buyer to a third party to satisfy an obligation of the seller
to the extent that such payments are not included in the price actually paid or payable.
Explanation- Where the royalty, licence fee or any other payment for a process, whether patented
or otherwise, is includible referred to in clauses (c) and (e), such charges shall be added to the price
actually paid or payable for the imported goods, notwithstanding the fact that such goods may be
subjected to the said process after importation of such goods.
(2) For the purposes of sub-section (1) of section 14 of the Customs Act, 1962 and these rules, the
value of the imported goods shall be the value of such goods, and shall include –
(a) the cost of transport, loading, unloading and handling charges associated with the delivery
of the imported goods to the place of importation;
(b) the cost of insurance to the place of importation:
However, where the cost referred to in clause (a) is not ascertainable, such cost shall be 20% of the
free on board value of the goods:
Further that where the free on board value of the goods is not ascertainable but the sum of free on
board value of the goods and the cost referred to in clause (b) is ascertainable, the cost referred to
in clause (a) shall be 20% of such sum:
Where the cost referred to in clause (b) is not ascertainable, such cost shall be 1.125% of free on
board value of the goods:
Where the free on board value of the goods is not ascertainable but the sum of free on board value
of the goods and the cost referred to in clause (a) is ascertainable, the cost referred to in clause (b)
shall be 1.125% of such sum:
In the case of goods imported by air, where the cost referred to in clause (a) is ascertainable, such
cost shall not exceed 20% of free on board value of the goods:
In the case of goods imported by sea or air and transshipped to another customs station in India,
the cost of insurance, transport, loading, unloading, handling charges associated with such
transshipment shall be excluded.
Explanation- The cost of transport of the imported goods referred to in clause (a) includes the ship
demurrage charges on charted vessels, lighterage or barge charges.

Page 4.24
Question 32
In the context of Customs Valuation (Determination of Price of Imported Goods) Rules, 2007, explain the
meaning of:
(i) Similar goods
(ii) Identical goods
Answer
(i) Similar goods means imported goods
(i) which although not alike in all respects, have like characteristics and like component
materials which enable them to perform the same functions and to be commercially
interchangeable with the goods being valued having regard to the quality, reputation and the
existence of trade mark;
(ii) produced in the country in which the goods being valued were produced; and
(iii) produced by the same person who produced the goods being valued, or where no such goods
are available, goods produced by a different person, but shall not include imported goods
where engineering, development work, art work, design work, plan or sketch undertaken in
India were completed directly or indirectly by the buyer on these imported goods free of
charge or at a reduced cost for use in connection with the production and sale for export of
these imported goods.
(ii) Identical goods means imported goods
(i) which are same in all respects, including physical characteristics, quality and reputation as
the goods being valued except for minor differences in appearance that do not affect the
value of the goods;
(ii) produced in the country in which the goods being valued were produced; and
(iii) produced by the same person who produced the goods, or where no such goods are available,
goods produced by a different person, but shall not include imported goods where
engineering, development work, art work, design work, plan or sketch undertaken in India
were completed directly or indirectly by the buyer on these imported goods free of charge
or at a reduced cost for use in connection with the production and sale for export of these
imported goods.
Question 33
Briefly discuss the provisions relating to date for determining the rate of duty and tariff valuation of
imported goods.
Answer
Section 15 of the Customs Act, 1962 specifies the relevant date for determining the rate of duty and tariff
valuation of imported goods. They are different for different situations as given below:
(a) Goods are entered for home consumption under section 46 – The relevant date for the three
modes of transport as laid down by section 15(1)(a) read with proviso would be as follows:
(i) For goods imported by vehicle at land customs station – the relevant date is the date of filing
the B/E under section 46 or date of arrival of vehicle, whichever is later.
(ii) For goods imported by a vessel at a customs port – the relevant date is the date of filing the

Page 4.25
B/E under section 46 or date of entry inwards to vessel under section 31, whichever is later.
(iii) For goods imported by aircraft at a customs airport – the relevant date is the date of filing
the B/E under section 46 or date of arrival of aircraft, whichever is later.
(b) Goods cleared from a warehouse under section 68 – the relevant date is the date on which a
bill of entry for home consumption in respect of such goods is presented.
(c) In the case of any other goods – the relevant date is the date of payment of duty.
These provisions relating to determination of relevant date do not apply to baggage and imports by post,
in which sections 78 and 83 apply respectively.
Question 34
Product ‘Z’ was imported by Mr. X by air. The details of the import transaction are as follows:
Particulars US $
Price of ‘Z’ at exporter’s factory 8,500
Freight from factory of the exporter to load airport (airport in the country of exporter) 250
Loading and handling charges at the load airport 250
Freight from load airport to the airport of importation in India 4,500
Insurance charges 2,000
Though the aircraft arrived on 22.08.2020, the bill of entry for home consumption was presented by Mr.
X on 20.08.2020.
The other details furnished by Mr. X are:
20.08.2020 22.08.2020
Rate of basic customs duty 20% 10%
Exchange rate notified by CBIC ₹ 70 per US$ ₹ 72 per US$
Exchange rate prescribed by RBI ₹ 71 per US$ ₹ 72 per US$
Integrated tax leviable under section 3(7) of the 18% 12%
Customs Tariff Act, 1975
Compute
(i) value of product ‘Z’ for the purpose of levying customs duty
(ii) customs duty and tax payable
Answer
Computation of assessable value of product ‘Z’
Particulars Amount
Ex-factory price of the goods 8,500 US $
Freight from factory of the exporter to load airport (airport 250 US $
in the country of exporter)
Loading and handling charges at the loadairport 250 US $
Freight from load airport to the airport of importation in 4,500 US $
India
Total cost of transport, loading and handling charges 5,000 US $
associated with the delivery of the imported goods to the

Page 4.26
placeof importation
Add: Cost of transport, loading, unloading and handling charges associated with 1,800 US $
the delivery of the imported goods to the place of importation (restricted
to 20%of FOB value) [Note 1]
Insurance (actual) 2,000 US $
CIF for customs purpose 12,300 US $
Value for customs purpose 12,300 US $
Amount (₹)
Assessable value (₹ 70 x 12,300 US $) 8,61,000
Add: Basic customs duty @ 10% [Note 3] 86,100
Add: SWS @ 10% 8,610
Value for the purpose of levying integrated tax [Note 4] 9,55,710
Add: Integrated tax @ 12% 1,14,685.2
Total duty & tax payable (rounded off) 2,09,395
Notes:
(1) In the case of goods imported by air, the cost of transport, loading, unloading and handling charges
associated with the delivery of the imported goods to the place of importation shall not exceed
20% of the FOB value of the goods. [Fifth proviso to rule 10(2) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 (CVR)].
FOB value in this case is the ex-factory price of the goods (8,500 US $) plus the cost of transport
from factory to load airport (250 US $) plus loading and handling charges at the load airport (250
US $) which is 9,000 US $.
(2) Rate of exchange determined by CBIC is to be considered [Clause (a) of the explanation to section
14 of the Customs Act, 1962].
(3) Section 15 of the Customs Act, 1962 provides that rate of duty shall be the rate in force on the date
of presentation of bill of entry or the rate in force on the date of arrival of aircraft, whichever is
later.
(4) Integrated tax is levied on the sum total of the assessable value of the imported goods and customs
duties [Section 3(8) of the Customs Tariff Act, 1962]. SWS leviable on integrated tax have been
exempted.
Question 35
An importer from Cochin imports goods from an exporter in US. The vessel carrying the goods reaches
Mumbai port first and from there goods are transshipped to Cochin port.
Determine the assessable value of the imported goods under the Customs Act, 1962 from the following
particulars:
S. N. Particulars Amount
1. Cost of the machine at the factory of the exporter US $ 20,000
2. Transport charges from the factory of exporter tothe port for shipment US $ 1,000
3. Handling charges paid for loading the machine inthe ship US $ 100
4. Buying commission paid by the importer US $ 100
5. Freight charges from exporting country to India US $ 2,000

Page 4.27
6. Actual insurance charges paid are not ascertainable ---

7. Charges for design and engineering workundertaken for the machine in US US $ 5,000
8. Unloading and handling charges paid at the placeof importation ₹ 1,500
9. Transport charges from Mumbai to Cochin port ₹ 25,000
10. Exchange rate to be considered: 1$ = ₹ 70
Answer
Computation of assessable value of imported goods

Price of the machine at the factory of the exporter 20,000
Add: Transport charges up to the port in the country ofthe exporter [Note 1] 1,000
Handling charges at the port in the country of theexporter [Note 1] 100
Charges for design and engineering workundertaken for the machine in US [Note 2] 5,000
Buying commission [Note 3] Nil
FOB value 26,100.00
Add: Freight charges up to India 2,000.00
Insurance charges @ 1.125% of FOB [Note 4] 293.63
Transport charges from Mumbai to Cochin port[Note 5] Nil
CIF value 28,393.63
Add: Unloading and handling charges paid at the placeof importation [Note 6] Nil
Assessable value 28,393.63
Assessable value in Indian rupees @ ₹ 70/per $ ₹ 19,87,554.10
Assessable value (rounded off) ₹ 19,87,554
Notes:
(1) The cost of transport, loading, unloading and handling charges associated with the delivery of the
imported goods to the place of importation are includible in the assessable value [Rule 10(2)(a) of
the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR)].
(2) Design and engineering work undertaken elsewhere than in India and necessary for the production
of the imported goods is includible in the assessable value [Rule 10(1)(b)(iv) of the CVR].
(3) Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of the CVR].
(4) If insurance cost is not ascertainable, the same shall be added @ 1.125% of FOB value of the goods
[Third proviso to rule 10(2) of the CVR].
(5) Cost of insurance, transport, loading, unloading, handling charges associated with transshipment
of imported goods to another customs station in India is not included in the assessable value [Sixth
proviso to rule 10(2) of the CVR].
(6) As per rule 10(2) of the CVR, only charges incurred for delivery of goods “to” the place of
importation are includible in the transaction value.
The loading, unloading and handling charges associated with the delivery of the imported goods at the
place of importation are not to be added to the CIF value of the goods.
Question 36
ABC Industries Ltd. of Mumbai imported one machine through vessel from Japan, in the month of

Page 4.28
November, 2020.
The following particulars are made available:
S. N. Particulars Amount (¥)

(i) Cost upto port of exportation incurred by exporter 6,00,000
(ii) Loading charges at port of exportation 25,000
(iii) Freight charges from port of export to port of import in India. 1,00,000
Following additional amounts paid by ABC Industries Ltd:
S. N. Particulars Amount (₹)

(i) Designing charges, necessary for such machine, paid to consultancy firm 8,00,000
in New Delhi
(ii) Commission paid (not the buying commission) to local agent of exporter. 1,25,000
(iii) Actual landing charges paid at the place of importation. 15,000
(iv) Actual insurance charges paid to the place of importation are not -
ascertainable.
(v) Lighterage charges paid at the port of importation 20,000
Other Information:
(i) Rate of basic customs duty is 10%

(ii) Rate of social welfare surcharge is 10%
(iii) Integrated tax leviable under section 3(7) of Customs Tariff Act, 1975 is 12%.
(iv) Ignore GST compensation cess.
(v) Rate of exchange to be taken is 1 Japanese Yen (¥) = ₹ 0.71
Arrive at the total customs duty, including integrated tax payable under section 3(7) of the Customs Tariff
Act, 1975 with appropriate working notes.
Answer
Computation of assessable value of the imported goods
Japanese Yen
Cost upto port of exportation 6,00,000
Add: Loading charges at the port of exportation [Note-1] 25,000
Total in Japanese Yen 6,25,000
₹
Total in Indian rupees @ ₹ 0.71 per Japanese Yen 4,43,750.00
Add: Commission paid to local agent of exporter [Note-3] 1,25,000.00
Add: Freight charges from port of export to port of import in India [Note-1] 71,000.00
[1,00,000 Japanese Yen x 0.71 = ₹ 71,000]
Add: Lighterage charges paid by the importer at port of importation [Note-1] 20,000
Add: Insurance charges @ 1.125% of FOB [₹ 5,68,750 x 1.125%] [Note-4] 6,398.43
CIF value 6,66,148.43
Assessable Value (rounded off) 6,66,148
Add: Basic customs duty @ 10% of ₹ 6,66,148 (rounded off) (A) 66,615

Page 4.29
Add: Social welfare surcharge @ 10% of ₹ 66,615 rounded off) (B) 6,662
Total 7,39,425
Add: Integrated tax @ 12% of ₹ 7,39,425 (rounded off) (C) 88,731
Total custom duty and integrated tax payable [(A) + (B) + (C)] (rounded off) 1,62,008
Notes:
imported goods to the place of importation are includible in the assessable value [Rule 10(2) of the
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR)]. Further,
explanation to rule 10(2), inter alia, clarifies that cost of transport of the imported goods includes
lighterage charges.
(2) Design and engineering work is includible in the assessable value only when the same is
undertaken elsewhere than in India and necessary for the production of the imported goods [Rule
10(1) of the CVR].
(3) Buying commission is not included in the assessable value [Rule 10(1) of the CVR]. Commission
paid to local agent of exporter is includible in the assessable value since it is not buying
commission.
[Rule 10(2) of the CVR].
(5) Cost of insurance, transport, loading, unloading, handling charges associated with transshipment
of imported goods to another customs station in India is not included in the assessable value [Rule
10(2) of the CVR].
Question 37
Mr. X imported certain goods from a related person Mr. Q of US and transaction value has been rejected.
Rules 4 and 5 of the Import Valuation Rules are found inapplicable as no similar/ identical goods are
imported in India. Mr. X furnishes cost related data of imports and requests customs authorities to
determine value accordingly as per rule 8. The relevant data are
1. Cost of materials incurred by Mr. Q $ 2000
2. Fabrication charges incurred by Mr. Q $ 1000
3. Other chargeable expenses incurred by Mr. Q $ 400
4. Other indirect costs incurred by Mr. Q $ 250
5. Freight from Mr. Q 's factory to US port $ 250
6. Loading charges at US port $ 100
7. Normal net profit margin of Mr. Q is 20% of FOB
8. Air freight from US port to Indian port $ 1,500
9. Insurance from US port to Indian port $ 50
10. Exchange rate ₹ 70 per $
The customs authorities are of the opinion that since value as per rule 7 can be determined at ₹ 4,00,000,
there is no need to apply rule 8.
Can the request of Mr. X be legally acceptable? If so, compute the assessable value under the Customs Act,
1962.
Answer
Page 4.30
The value of the imported goods is determined under rule 8 of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007 (hereinafter referred to as Import Valuation Rules) if the same
cannot be determined under the earlier rules. However, the order of application of rules 7 and 8 can be
reversed at the request of the importer and with the approval of the proper officer.
Thus, request of Mr. X for determination of value under rule 8 is legally acceptable, if the same is also
approved by the proper officer.
Assuming that the request of Mr. X has been approved by the proper officer, the assessable value of the
imported goods under rule 8 will be the sum of-
(a) the cost of materials and fabrication or other processing;
(b) an amount for profit and general expenses
(c) the cost or value of all other expenses under rule 10(2) of the said rules.
Particulars Amount ($)

Cost of materials 2,000
Add: Fabrication charges 1,000
Other chargeable expenses 400
Other indirect costs 250
Cost of the goods at Mr. Q’s factory 3,650
Add: Net profit margin @ 20% of FOB, i.e. 25% of total cost 1,000
Total cost till US port = Cost of the goods at factory + Freight from factory to US
port and loading charges at US port = $ 4,000 [$ 3,650 + $ 250 + $ 100]
FOB value = Total cost till port + profit = $ 5,000 ($ 4,000 + $ 1,000)
Add: Freight & loading/unloading charges 1,000
[In case of import by air, the cost of transport, loading, unloading and handling
charges associated with the delivery of the imported goods to the place of
importation are restricted to 20% of FOB value]
Insurance charges 50
Assessable value 5,700
Assessable value in Indian Rupees (Exchange rate - ₹ 70 per $) 3,99,000

Page 4.31

Question 38
Determine the assessable value of imported goods in the following cases:
Case I
Particulars US $
FOB value 1,000
Freight, loading, unloading and handling charges associated with the delivery of the Not known
imported goods to the place of importation
Case II
Particulars US $
FOB value plus insurance charges 1,010
Freight, loading, unloading and handling charges associated with the delivery of the Not known
imported goods to the place of importation
Case III
Particulars US $
FOB value 1,000
Sea freight, loading, unloading and handling charges associated with the delivery of 60
the imported goods to the place of importation
Insurance charges Not known
Case IV
Particulars US $
FOB value plus sea freight and loading, unloading and handling charges associated 1,060
with the delivery of the imported goods to the place of importation
Insurance charges Not known
Case V
Particulars US $
FOB value 1,000
Air freight, loading, unloading and handling charges associated with the delivery of 250
the imported goods to the place of importation
Answer
Rule 10(2) of the Customs (Determination of Value of Imported Goods) Rules, 2007 (CVR) has been
substituted by a new sub-rule. The new sub-rule provides that for the purposes of sub-section (1) of
section 14 of the Customs Act, 1962 and these rules, the value of the imported goods shall be the value of
such goods, and shall include -
(a) the cost of transport, loading, unloading and handling charges associated with the delivery of the
imported goods to the place of importation;
(b) the cost of insurance to the place of importation:

Page 4.32
Provided that where the cost referred to in clause (a) is not ascertainable, such cost shall be 20% of the
free on board value of the goods.
Provided further that where the free on board value of the goods is not ascertainable but the sum of free
on board value of the goods and the cost referred to in clause (b) is ascertainable, the cost referred to in
clause (a) shall be 20% of such sum:
Provided also that where the cost referred to in clause (b) is not ascertainable, such cost shall be 1.125%
of free on board value of the goods.
Provided also that where the free on board value of the goods is not ascertainable but the sum of free on
board value of the goods and the cost referred to in clause (a) is ascertainable, the cost referred to in
clause (b) shall be 1.125% of such sum.
Provided also that in the case of goods imported by air, where the cost referred to in clause (a) is
ascertainable, such cost shall not exceed 20% of free on board value of the goods.
Provided also that in the case of goods imported by sea or air and transshipped to another customs
station in India, the cost of insurance, transport, loading, unloading, handling charges associated with
such transshipment shall be excluded.
Explanation-
The cost of transport of the imported goods referred to in clause (a) includes the ship demurrage charges
on charted vessels, lighterage or barge charges.
In the backdrop of the above provisions, the assessable value in the various cases will be computed as
under:
Case I
Particulars US $
FOB value 1,000
Add: Cost of transport, loading, unloading and handling charges associated with 200
the delivery of the imported goods to the place of importation [20% of FOB
value in terms of first proviso to rule 10(2) of CVR]
Cost of insurance [Includible in terms of rule 10(2)(b) of CVR] 10
Assessable value [CIF value] 1,210
Case II
Particulars US $
FOB value plus insurance charges 1,010
Add: Cost of transport, loading, unloading and handling charges associated with 202
the delivery of the imported goods to the place of importation [20% of sum
of FOB value of the goods and the cost of insurance in terms of second
proviso to rule 10(2) of CVR]
Case III
Particulars US $
FOB value 1,000
Add: Cost of sea transport, loading, unloading and handling charges associated 60
[Includible in terms of rule 10(2)(a) of CVR]

Page 4.33
Insurance [1.125% of sum of FOB value of the goods in terms of third proviso 11.25
to rule 10(2) of CVR]
Assessable value [CIF value] 1,071.25
Assessable value rounded off 1,071
Case IV
Particulars US $
FOB value plus sea freight and loading, unloading and handling charges associated 1,060
Add: Insurance [1.125% of sum of FOB value of the goods and sea freight and 11.925
loading, unloading and handling charges associated with the delivery of the
imported goods to the place of importation in terms of fourth proviso to rule
10(2) of CVR]
Assessable value CIF value 1071.925
Assessable value rounded off 1,072
Case V
Particulars US $
FOB value 1,000
Add: Cost of air transport, loading, unloading and handling charges associated 200
with the delivery of the imported goods to the place of importation is
restricted to 20% of FOB value when transportation of goods is through air
[Fifth proviso to rule 10(2) of CVR]
Cost of insurance 10
Question 39
Sphinx Merchandise Ltd. has exported some goods to USA by air. The FOB price of goods exported is US
$ 1,00,000.
Compute the export duty payable by Sphinx Merchandise Ltd. with the help of following details provided.
Rate of exchange Rate of exchange

Particulars Date Rate of duty
notified by CBIC prescribed by RBI
Presentation of
17.06.20XX 12% 1 US $ = 65 1 US $ = 64
shipping bill
Let export order 19.07.20XX 10% 1 US $ = 64 1 US $ = 65
Answer
Computation of export duty

Assessable value [Note 1] 1,00,000
Amount (₹)
Assessable value = US $ 1,00,000 x ₹ 65 [Note 2] 65,00,000
Export duty @ 10% [Note 3] 6,50,000

Page 4.34
Notes:
1. The transaction value, i.e. FOB price of export goods, is considered as assessable value in terms of
section 14(1) of the Customs Act, 1962.
2. As per third proviso to section 14(1) of the Customs Act, 1962, assessable value has to be calculated
with reference to the rate of exchange notified by CBEC on date of presentation of shipping bill of
export.
3. The rate of duty prevalent on the date of let export order is considered for computing export duty in
terms of section 16(1)(a) of the Customs Act, 1962.
Question 40
Kankan Corp had imported a machine from USA for ₹ 365 lakh on payment of appropriate customs duty
in February. However, in July, the machine had to be sent back to the supplier for repair (not amounting
to manufacture) from the factory of Kankan Corp. This machine was repaired and thereafter, re-imported
by Kankan Corp in November next year. The supplier has agreed to provide discount of 60% of the fair
cost of repairs, resulting in Kankan Corp paying USD 12,000.
Following further particulars are available:
Particulars Date Rate of Duty Inter Bank Rate notified by

Exchange rate CBEC
Bill of Entry 21st February 12% 61.40 62
Aircraft arrival 26th February 15% 62.50 63.25
Integrated tax is leviable @ 12%.
Outwards (Amt. in ₹) Inwards (Amt. in ₹)

Insurance 23,000 27,000
Air Freight 93,500 1,06,500
Determine total duty payable with appropriate notes for your computation assuming that Kankan Corp
is not an EOU.
Answer
Notification No. 45/2017 Cus. dated 30.06.2017 stipulates that in case of re-importation of goods
exported for repairs, duty is payable on fair cost of repairs carried out, insurance and freight charges -
both ways, subject to fulfillment of following conditions:
(a) The time limit for re-importation is 3 years
(b) The exported goods and the re-imported goods must be the same.
(c) The ownership of the goods should not have changed.
Since all the specified conditions are fulfilled in the given case, total duty payable will be computed as
under:
Computation of total duty payable by Kankan Corp.
Particulars
Fair cost of repairs (in dollars) = $12,000/40% $ 30,000
₹
Fair cost of repairs (in rupees) = $30,000 × ₹ 62 [Note-1] 18,60,000.00
Add: Inward and outward insurance [₹ 23,000 + ₹ 27,000] 50,000.00

Page 4.35
Add: Inward and outward air freight [₹ 93,500 + ₹ 1,06,500] 2,00,000.00

Add: Basic customs duty (BCD) @15% [Note-2] 3,16,500.00
Add: Social Welfare Surcharge @ 10% of BCD 31,650.00
Value for computing IGST 24,58,150.00
IGST @ 12% 2,94,978.00
Total duty and tax payable = [₹ 3,16,500 + ₹ 31,650 + ₹ 2,94,978] 6,43,128
Notes:
1. Rate of exchange notified by the CBEC on date of presentation of bill of entry would be the
applicable rate in terms of third proviso to section 14(1) of the Customs Act, 1962.
2. Rate of duty is the rate in force on date of presentation of bill of entry or arrival of aircraft,
whichever is later in terms of proviso to section 15(1) of the Customs Act, 1962.
Question 41
Rudraksh Manufacturers, Kolkata, is engaged in manufacturing the textile articles. It has decided to
enhance its production capacity in the current year. Therefore, it imports a machine through vessel from
George Inc., USA at a price of $ 31,650 (including transport charges from the factory of George Inc. upto
US port of $ 2,500 and handling charges at US port of $ 1,750). Rudraksh Manufacturers has provided the
following additional information in respect of machine imported:
S.No. Particulars Amount

(i) Charges for design and engineering work undertaken for the machine in US US $ 1,750
(ii) Buying commission paid by Rudraksh Manufacturers US $ 150
(iii) Freight charges from USA to India US $ 3,000
(iv) Unloading and handling charges paid at the place of importation ₹ 2,250
(v) Exchange rate to be considered: 1$ = ₹ 60
The actual insurance charges paid are not ascertainable. You are required to determine the assessable
value of the imported machine under the Customs Act, 1962 from the given particulars.
Answer
Computation of assessable value of imported goods

Price of the machine (including transport charges from the factory of George Inc. 31,650
upto US port and handling charges at US port) [Note-1]
Add: Charges for design and engineering work undertaken for the machine in USA 1,750
[Note 2]
Buying commission [Note 3] Nil
FOB value 33,400.00
Add: Freight charges up to India [Note-1] 3,000.00
Insurance charges @ 1.125% of FOB [Note 4] 375.75
CIF value 36,775.75
Add: Unloading and handling charges paid at the place of importation [Note 5] Nil
Assessable value 36,775.75

Page 4.36
Assessable value in Indian rupees @ ₹ 60 per $ ₹ 22,06,545
Notes:
imported goods to the place of importation are includible in the assessable value [Rule 10(2)(a) of
the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR)].
(2) Design and engineering work undertaken elsewhere than in India and necessary for the production
of the imported goods is includible in the assessable value [Rule 10(1)(b)(iv) of the CVR].
(3) Buying commission is not included in the assessable value [Rule 10(1)(a)(i) of the CVR].
[Third proviso to rule 10(2) of the CVR].
(5) By virtue of rule 10(2) of the CVR, only charges incurred for delivery of goods “to” the place of
importation are includible in the transaction value. The loading, unloading and handling charges
associated with the delivery of the imported goods at the place of importation are not to be added
to the CIF value of the goods. [Circular No. 39/2017 Cus. dated 26.09.2017].
Question 42
Maxiline Corp, not being an EOU, had imported technical instruments from USA for ₹ 180 lakh on
payment of duty. It had to subsequently send back the same to the supplier for repair. The supplier has
agreed to provide discount of 50% of the fair cost of repairs, resulting in Maxiline Corp paying USD
15,000.
Following further particulars are available:
Particulars Date Rate of Duty Inter Bank Rate notified by

Exchange rate CBEC
Bill of Entry 21-02-2021 20% 60 62
Aircraft arrival 26-02-2021 15% 62 61
IGST u/s 3(7) of Customs Tariff Act, 1975 -12%.
Outwards (Amt. in ₹) Inwards (Amt. in ₹)

Insurance 20,000 30,000
Air Freight 80,000 1,20,000
Other details available on records:

(a) Goods are reimported within 3 years of despatch for repair.
(b) Both the exported and imported goods are the same.
(c) There is no change in the ownership of technical instruments.
(d) The export is not from a public/private warehouse and repairs does not amount to manufacture.
Determine total duty payable with appropriate notes for your computation.
Answer
In case of re-importation of goods exported for repairs, duty is payable on fair cost of repairs carried out,
insurance and freight charges, both ways, subject to fulfillment of specified conditions in terms of
Notification No. 94/96 Cus. dated 16.12.1996.
Following conditions are to be satisfied in this regard:

Page 4.37
(a) The time limit for re-importation is 3 years

(b) The exported goods and the re-imported goods must be the same.
(c) The ownership of the goods should not have changed.
Since all the specified conditions are fulfilled in the given case, total duty payable will be computed as
under:
Computation of total duty payable by Maxiline Corp.
Particulars
Fair cost of repairs (in dollars) = $15,000/50% $ 30,000
₹
Fair cost of repairs (in rupees) = $30,000 x ₹ 62 [Note-1] 18,60,000.00
Add: Inward and outward insurance [₹ 20,000 + ₹ 30,000] 50,000.00
Add: Inward and outward air freight [₹ 80,000 + ₹ 1,20,000] 2,00,000.00
Add: Basic customs duty (BCD) @15% [Note-2] 3,16,500.00
Add: SWS @ 10% of BCD 31,650.00
Value for computing IGST 24,58,150.00
IGST @ 12% 2,94,978.00
Total duty and tax payable = [₹ 3,16,500 + ₹ 31,650 + ₹ 2,94,978] (rounded off) 6,43,128
Notes:
1. Rate of exchange notified by the CBEC on date of presentation of bill of entry would be the
applicable rate in terms of third proviso to section 14(1) of the Customs Act, 1962.
2. Rate of duty is the rate in force on date of presentation of bill of entry or arrival of aircraft,
whichever is later in terms of proviso to section 15(1) of the Customs Act, 1962.
Question 43
Niketan Industries Ltd., New Delhi has imported certain machine (by sea) from Japan.
From the following particulars furnished by it, work out the assessable value of the machine and customs
duty payable by Niketan Industries Ltd. with appropriate working notes:
S. No. Particulars Amount in (₹)

(i) CIF value of the machine 4,23,379
(ii) Freight incurred from port of entry to Inland Container depot 25,000
(iii) Unloading and handling charges paid at the place of importation 40,000
(iv) Designing charges paid to Consultancy firm in Mumbai 10,000
1. Basic Customs Duty leviable @10% advalorem

2. Integrated tax leviable under section 3(7) of the Customs Tariff Act, 1975 is 18%.
3. Note: Ignore GST Compensation Cess.
Answer
Computation of assessable value and customs duty payable
Particulars ₹

Page 4.38
CIF value of machine 4,23,379

Unloading and handling charges at the place of importation [Note-1] Nil
Freight from port of entry to ICD [Note-2] Nil
Designing charges paid to consultancy firm in Mumbai [Note-3] Nil
Assessable Value 4,23,379
Add: Basic customs duty (BCD) @10% (rounded off) 42,338
Add: SWS @10% of BCD (rounded off) 4,234
Value for computing IGST 4,69,951
IGST @ 18% (rounded off) 84,591
Total duty and tax payable = [₹ 42,338 + ₹ 4,234 + ₹ 84,591] 1,31,163
Notes:
1. Only charges incurred for delivery of goods “to” the place of importation are includible in the
transaction value vide rule 10(2)(a) of Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007. The loading, unloading and handling charges associated with the delivery of the
imported goods “at” the place of importation are not to be added to the CIF value of the goods.
2. In case of goods imported by sea and transshipped to another custom station in India, the cost of
transport associated with such transshipment is excluded in terms of sixth proviso to rule 10(2) of
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
3. Rule 10(1)(b)(iv) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007
provides that only the design and engineering work undertaken elsewhere than in India is includible
in the assessable value.
Question 44
Jolly overseas Ltd. of Hyderabad has imported a machine from U.K (England) through the sea route by a
vessel. The details of the import transaction are as follows:
S. Particulars Amount in
No. U.K. (£)
(i) Cost of the machine at the factory of the exporter 20,000
(ii) Transport charges from the factory of exporter to the port for shipment 600
(iii) Handling charges paid for loading the machine on the ship at the port of 500
exportation
(iv) License fee relating to the imported goods payable by the importer as a 900
condition of sale
(v) Actual Freight charges from the port of export to the port of import are not -
ascertainable
(vi) Actual insurance charges paid 200
(vii) Landing charges paid at the place of importation are not ascertainable -
(viii) Handling charges associated with the delivery of the imported goods at the ₹ 15,000
place of importation
1 Bill of entry: Dated 21.01.2021
Exchange rate on that day:
(a) Notified by CBEC 1 UK £ = ₹ 101
(b) prescribed by RBI 1 UK £ = ₹ 100

Page 4.39
2 Entry inward: Dated 26.01.2021

Exchange rate on that day:
(a) Notified by CBEC 1 UK £ = ₹ 102
(b) prescribed by RBI 1 UK £ = ₹ 103
Compute the assessable value of the machine (in rupees) for the purpose of levy of Customs Duty.
Answer
Computation of assessable value of machine
Particulars Amount (UK £)

Cost of the machine at the factory of the exporter 20,000
Add: Licence fee relating to the imported goods payable by the importer as a 900
condition of sale [Note 1(i)]
Add: Cost of transport, loading, unloading and handling charges associated with the 4,400
delivery of the imported goods to the place of importation [20% of £ 22,000]
[Note 1(ii)]
Insurance charges [Taken at actuals] 200
CIF value 25,500
Add: Landing charges paid at the place of importation and handling charges Nil
associated with the delivery of the imported goods at the place of importation
[Note 1(iii)]
Assessable value 25,500
Assessable value in Indian rupees @ ₹101 per £ [Note 2] 25,75,500
Notes:
(1) As per rule 10 of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007-
(i) Licence fees related to the imported goods payable as a condition of the sale of the goods being
valued is includible in the assessable value
(ii) The cost of transport, loading, unloading and handling charges associated with the delivery of
the imported goods to the place of importation are includible in the assessable value.
Where such cost is not ascertainable, it shall be 20% of the free on board (FOB) value of the
goods.
FOB value will be sum total of cost of machine, transport charges from factory to port of
exportation, handling charges at the port of exportation and licence fee paid as a condition of
sale of imported goods, which will be £ 22,000 [£ 20,000 + £ 600 + £ 500+ £ 900]
(iii) Only charges incurred for delivery of goods “to” the place of importation are includible in the
transaction value. The loading, unloading and handling charges associated with the delivery of
the imported goods at the place of importation are not to be added to the CIF value of the goods.
(2) As per section 14 of the Customs Act, 1962, the rate of exchange notified by the CBEC on the date of
presentation of bill of entry is to be considered for the purpose of conversion of assessable value
into Indian currency.
Question 45
A Malaysian company donated 1,000 metric tons of palm oil to a charitable trust in India for free
distribution to the poor and the needy citizens. The trust in India had to meet the expenditure towards
Page 4.40
freight and insurance only which came to US $ 20 per metric ton. The Custom Department found that at
or about the same time of importation of this consignment, there were following imports of palm oil of
Malaysian origin into India.
S. No. Quantity imported in metric tons Unit price in US Dollars (CIF)

1. 500 400
2. 900 350
3. 780 300
The rate of exchange on the relevant date was 1 US $ = ₹ 65 and the rate of customs duty was 20% ad
valorem. Calculate the amount of customs duty payable on the consignment under the Customs Act, 1962
with appropriate assumptions and explanations. It would be sufficient if only basic customs duty is
calculated.
Answer
In the given case, there is no transaction value for the subject goods. Therefore, value has to be
determined based on the transaction value of contemporaneous imports of identical/similar goods in
accordance with rule 4 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007.
Rule 4(1)(a) of the aforementioned rules provides that subject to the provisions of rule 3, the value of
imported goods shall be the transaction value of identical goods sold for export to India and imported at
or about the same time as the goods being valued.
In the three imports given during the relevant time, the goods are identical in description and of the same
country of origin.
Further, clause (b) of rule 4(1) of the said rules requires that the comparable import should be at the
same commercial level and in substantially same quantity as the goods being valued.
The consignment of 500 tonnes cannot be considered to be of substantially the same quantity. Hence,
remaining 2 consignments will only be relevant.
If more than one transaction value of identical goods is found, the lowest of such value shall be used to
determine the value of imported goods.
Accordingly, the unit price of the consignment under valuation would be US $ 300 per metric tonne.
Computation of amount of duty payable
Particulars Amount
CIF value of 1000 metric tonnes [1,000 x $ 300] US $ 3,00,000
CIF Value (in Rupees) at the exchange rate of $ 1 = ₹ 65 ₹ 1,95,00,000
Assessable value ₹ 1,95,00,000
BCD @ 20% ₹ 3,90,000
Add: SWS @ 10% of BCD ₹ 39,000
Total custom duty payable ₹ 4,29,000
Question 46
Determine the Assessable value under customs law of an imported machine based on the following
information:
(1) Cost of machine
(Contract price = ₹ 1,00,000, Revised price = ₹ 2,00,000, Negotiated & Agreed price = ₹ 1,50,000)

Page 4.41
(2) Freight from the factory of the exporter to the port for shipment = ₹ 20,000
(3) Freight incurred from port of entry to inland container depot = ₹ 60,000
(4) Handling charges paid for loading the machine in the ship = ₹ 5,000
(5) Demurrage charge paid at port = ₹ 30,000
(6) Buying commission paid by importer = ₹ 5,000
(7) Commission paid to local agent appointed by exporter = ₹ 1,000
(8) Vendor inspection charges (not required under contract) = ₹ 8,000
Answer
Computation of assessable value of the imported machine under customs law
Particulars (₹)
Cost of machine [Note-1] 1,50,000
Add: Commission paid to local agent appointed by exporter [Note-4] 1,000
Add: Cost of transport, loading, unloading and handling charges associated with the 35,200
delivery of the imported goods to the place of importation - 20% of FOB [Note-2 & 5]
Add: Insurance @ 1.125 % of FOB [Note-3 & 5] 1,980
Assessable value 1,88,180
Notes:
1. As per section 14 of the Customs Act, 1962, the value of the imported goods is the transaction value,
i.e. the price actually paid or payable for the goods, which in this case is the negotiated and agreed
price.
2. The cost of transport, loading, unloading and handling charges associated with the delivery of the
imported goods to the place of importation are includible in the assessable value. Further, where
such cost is not ascertainable, it shall be 20% of the free on board (FOB) value of the goods which
would also include demurrage charges3 [Rule 10(2) of the Customs Valuation (Determination of
Value of Imported Goods) Rules, 2007].
3. Where insurance cost is not ascertainable, it shall be 1.125% of the free on board (FOB) value of the
goods [Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules,
2007].
4. Buying commission is not includible in the assessable value. However, commission paid to local
agent appointed by exporter is includible since it’s not a buying commission [Rule 10(1) of the
Customs Valuation (Determination of Value of Imported Goods) Rules, 2007].
5. FOB value will be sum total of cost of machine, freight from factory of exporter to port for shipment,
handling charges paid for loading the machine in the ship and commission paid to local agent
appointed by exporter, which will be ₹ 1,76,000 [(₹ 1,50,000 + ₹ 20,000 + ₹ 5000 + ₹ 1,000)].
6. Freight incurred from port of entry to Inland Container depot is not includible in assessable value
[Rule 10(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007].
7. Only the payments actually made as a condition of sale of the imported goods by the buyer to the
seller are includible in the assessable value. Vendor inspection charges not required under contract
are thus, not includible in the assessable value [Rule 10(1) of the Customs Valuation (Determination
of Value of Imported Goods) Rules, 2007].
Note: In the above answer, demurrage charges have not been added separately in the cost of transport,
loading, unloading and handling charges by taking a view that where unascertainable cost of transport

Page 4.42
etc. has been computed as 20% of FOB value, the same includes all elements of costs of transport.
However, it is also possible to take an alternative view that actual demurrage charges should be
separately added in the cost of transport by virtue of explanation to rule 10(2) of the Customs Valuation
(Determination of Value of Imported Goods) Rules, 2007 irrespective of whether the cost of transport
has been computed as 20% of FOB value or on the basis of actual values.
Question 47
Mr. X has imported a machine from Japan in June, 2020 for ₹ 50 lakh. However, the machine was exported
back in December, 2020 for repairs. The supplier has agreed to carry out the repairs as the machine was
still in warranty period, which would normally take 6 months. The fair cost of the repairs will cost ₹ 10
lakh. In the meantime, Mr. X has requested the supplier to provide him another machine so that he can
carry out his operations without hindrance. Acceding to the request, the supplier has provided him with
another machine which was imported during February, 2021. The value of the new machine is ₹ 55 lakh.
Freight charges incurred were ₹ 2 lakh. You are required to compute the assessable value and total duty
payable for the above transaction of replacement.
Customs duty is 10% and IGST is 12%. Social Welfare Surcharge to be taken at 10%.
Answer
Computation of assessable value and total duty payable
Special provisions relating to payment of concessional duty in case of re-importation of goods exported
for repairs are not applicable in the given case as the goods exported for repairs and the re-imported
goods are not the same.
Therefore, full customs duty will be payable on the machine received as replacement.
Amount (₹)
Value of new machine (FOB) 55,00,000
[It has been most logically assumed that value of the machine is its FOB value.]
Add: Freight charges 2,00,000
[It has been most logically assumed that freight charges pertain to transportation
of goods from load port to port of importation.]
Insurance charges @ 1.125% of FOB [₹ 55,00,000 x 1.125%] 61,875
[Insurance charges have been included @ 1.125% of FOB value since actual
charges are not ascertainable]
Assessable Value 57,61,875
Add: Basic customs duty @ 10% of ₹ 57,61,875 (rounded off) (A) 5,76,188
Social welfare surcharge @ 10% of ₹ 5,76,188 (rounded off) (B) 57,619
Total 63,95,682
Add: Integrated tax @ 12% of ₹ 63,95,682 (rounded off) (C) 7,67,482
Total duty payable [(A) +(B) + (C)] (rounded off) 14,01,289
Question 48
Detox Limited wants to import customized machine to be used in its business. Detox Ltd. provides the
following further details:
S. No. Particulars Amount

Page 4.43
(1) Cost of the machine USD 15,000

(2) Charges paid to canalising agent in India ₹ 25,000
(3) Freight charges (Air) USD 1,500
(4) Insurance charges USD 250
(5) Basic customs duty 10% on 12.06.2021 and
15% on 15.06.2021
(6) Social welfare surcharge 10%
(7) Integrated GST 12%
(8) Date of Bill of Entry - 12.06.2021, Rate notified by CBIC - ₹ 75 per USD, Rate notified by RBI
- ₹ 76 per USD
(9) Date of arrival of aircraft - 15.06.2021, Rate notified by CBIC - ₹ 77 per USD, Rate notified
by RBI - ₹ 78 per USD
You are required to compute the customs duty and integrated tax payable by Detox Ltd. on above import.
Answer
Computation of customs duty and integrated tax
Particulars Amount
Cost of machine USD 15,000
(₹)
Cost of machine in rupees @ ₹ 75 per USD 11,25,000.00
[Rate of exchange notified by the CBIC on the date of presentation of bill of entry]
Add: Charges paid to canalising agent in India 25,000.00
[Includible in assessable value as it’s not a buying commission]
Add: Air freight (USD 1,500 x ₹ 75) 1,12,500.00
[Actual freight is added since it does not exceed 20% of FOB value]
Add: Insurance (USD 250 x ₹ 75) 18,750.00
Add: Basic custom duty @15% (rounded off) 1,92,188
[Rate in force on the date of presentation of bill of entry or on the date of arrival of
aircraft, whichever is later.]
Add: Social Welfare Surcharge @ 10% of ₹ 1,92,188 (rounded off) 19,219
Total 14,92,657
Integrated tax @ 12% (rounded off) 1,79,119
Total customs duties [₹ 1,92,188 + ₹ 19,219] 2,11,407
Question 49
ABC Trade International Limited has imported one machine from USA. It has given the following
particulars:
(i) Price of the machine 10,000 USD

(ii) Freight paid (air) 2,500 USD
(iii) Design and development charges paid to supplier in USA 500 USD

Page 4.44
(iv) Commission payable to local agent of exporter, paid by ABC Trade 14,000
International Limited
(v) Date of bill of entry 24-10-2021
- Rate of Basic Customs Duty (BCD) 10%
- Exchange rate as notified by CBIC: ₹ 70 per USD
- Inter-bank exchange rate on the date of bill of entry: ₹ 72 per USD
(vi) Date of arrival of aircraft 20-10-2021
- Rate of Basic customs duty (BCD) 20%
- Exchange rate as notified by CBIC ₹ 68 per USD
- Inter-bank exchange rate on the date of arrival of aircraft: ₹71 per USD
(vii) IGST rate: 12%
(viii) Insurance charges have been actually paid but details are not available.
Compute the total customs duty and IGST payable by ABC Trade International Limited.
Note: Ignore GST compensation cess and social welfare surcharge.
Answer
Computation of customs duty and integrated tax
Particulars Amount
Price of machine USD 10,000
Add: Design and development charges paid to supplier in USA USD 500
[since undertaken elsewhere than in India]
Total USD 10,500
(₹)
Total in rupees @ ₹ 70 per USD 7,35,000
[Rate of exchange notified by the CBIC on the date of presentation of bill of entry]
Add: Commission payable to local agent of exporter 14,000
FOB value as per customs 7,49,000
Add: Air freight @ 20% of FOB value 1,49,800
[air freight restricted to 20% of FOB]
Add: Insurance @ 1.125% of FOB value [since actual not available] 8426.25
CIF value 9,07,226.25
Add: Basic custom duty @10% (rounded off)
[Rate in force on the date of presentation of bill of entry or on the date of arrival of 90,723
aircraft, whichever is later.]
Total 9,97,949.25
Integrated tax @ 12% (rounded off) 1,19,754
Total customs duty and IGST payable 2,10,477
Question 50
Great Year Ltd. imported a offset printing machine from Germany for ₹ 5.00 crores and the bill of entry
or home consumption was cleared in October, 2020 on payment of duty. However, due to certain
technical glitches, the said machine could not be started functioning and the said machine was sent-back

Page 4.45
to the supplier for repairs in November, 2020. The manufacturer of machinery in Germany had made
necessary repairs and had sent back the machine again to Great Year Ltd.
Accordingly, Great Year Ltd. re-imported the machine without any re-manufacturing or reprocessing in
March 2021. Since the machine was having manufacturing defect, the repairs were carried out by the
machine manufacturer without charging any amount for the repairs. However, the fair cost of repairs
carried out including cost of material consumed during repairs for ₹ 70 lakh, would have been ₹ 90 lakh.
Actual insurance and freight charges incurred were ₹ 7.5 lakh each side from India to Germany and from
Germany to India. Assume the rate of basic customs duty is 10%, social welfare surcharge is 10% and
integrated tax is 18%.
You are required to compute the amount of customs duty payable (if any) on re-importation of the
machine. Make the necessary assumptions, if required. Also, provide the exemption, if any, with regard
to re-importation of goods which had been exported for repairs abroad.
Answer
Duty payable on re-importation of goods which had been exported for repairs abroad is the duty of
customs which would be leviable if the value of re-imported goods after repairs were made up of the fair
cost of repairs carried out including cost of material s used in repairs (whether such costs are actually
incurred or not), insurance and freight charges, both ways. However, following conditions need to be
satisfied for availing this concession:
(a) goods must be re-imported within 3 years, extendable by further 2 years, after their exportation;
(b) exported goods and the re-imported goods must be the same;
(c) Ownership of the goods should not change.
Since all the conditions specified above are fulfilled in the given case, the customs duty payable on re-
imported goods will be computed as under:
Particulars ₹ in lakh
Value of goods re-imported after exports [₹ 90 lakh (including cost of materials) + 105.000
(insurance and freight charges, both ways ₹ 7.5 x 2) lakh]
Add: Basic customs duty @ 10% (A) 10.500
Add: Social welfare surcharge @ 10% on ₹ 10.5(B) 1.050
Value for computing integrated tax 116.550
Integrated tax @ 18% (₹ 117 lakh x 18%) - (C) 20.979
Customs duty and integrated tax payable [(A) +(B)+ (C)] 32.529

Page 4.46
CHAPTER - 5
Importation, Exportation and Transportation of Goods
Question 1
M/s Pipli Imports Ltd. imported certain goods, which were unloaded in the customs area on 01.10.2020.
When order for clearance was passed by proper officer on 05.10.2020, it was found that there was some
pilferage of such goods. As the imported goods were in the custody of Port Trust, the Department
demanded duty from the custodian under section 45(3) of the Customs Act, 1962, on such pilferage. The
Port Trust denied such demand contending that it was not an approved custodian falling under section
45 and possession of goods by it was by virtue of powers conferred under the Major Port Trust Act, 1963.
Hence, it is not liable for customs duty on pilfered goods.
M/s Pipli Imports Ltd. has also asked the Port Trust to make good the loss of goods. Examine, whether
the demands made by the Department and M/s Pipli Imports Ltd. are justified in law, referring to decided
case law.
Answer
The facts of the case are similar to the case of Board of Trustees v. UOI (2009) 241 ELT 513 (Bom HC DB),
wherein the High Court held that considering the language of section 45(3), the liability to pay duty is of
the person, in whose custody the goods remain as an approved person under section 45 of the Act.
Therefore, section 45(3) applies only to the private custodians who are required to be approved by
Principal Commissioner/ Commissioner of Customs under section 45(1). Accordingly, the major ports
and airports covered under Major Port Trust Act, 1963 who do not require any approval under section
45(1), are not covered by section 45(3). Thus, the Department cannot demand duty from Port Trust on
the pilferage under section 45(3) of the Customs Act, 1962.
Section 45(3) of the Customs Act, 1962 holds the custodian responsible only in respect of the customs
duty in respect of pilfered goods. It does not extend to the value of goods lost. However, the Port Trust,
as bailee of the goods, is liable for value of the goods to the importer.
Question 2
Mr. Krishna Bhansali, has imported some garments from Paris. He is unable to make self-assessment
under section 17(1) of the Customs Act, 1962 because of differential rates for different kinds of material
and hence has made a request in writing to the proper officer for provisional assessment pending
technical testing. Is he eligible to apply for provisional assessment? Discuss.
Answer
Yes, Mr. Krishna Bhansali can apply for provisional assessment under section 18 of the Customs Act,
1962. Section 18(1) provides that provisional assessment can be resorted to, inter alia, where the
importer or exporter is unable to make self- assessment under sub-section (1) of section 17 and makes
a request in writing to the proper officer for assessment. While ‘unable’ is not about willingness but
deficiency of information to make an accurate determination of the liability, in this case Mr. Bhansali
satisfies the criterion because he lacks the information necessary to classify the goods pending technical
testing.
Question 3

Page 5.1
Moris Lal has imported goods from Germany and is finally re-assessed u/s 18(2) of the Customs Act,
1962 for two such consignments. Particulars are as follows:
Date of provisional assessment 12th December, 2019

Date of final re-assessment 2nd February, 2020
Duty demand for 1st consignment ₹ 1,80,000
Refund for the 2nd consignment ₹ 4,20,000
Date of refund made by the department 28th April, 2020
Date of payment of duty demanded 5th February, 2020
Determine the interest payable and receivable, if any, by Moris Lal on the final re- assessment of the two
consignments, with suitable notes thereon.
Answer
As per section 18(3) of the Customs Act, 1962, an importer is liable to pay interest at the rate of 15% p.a.
(Notification No. 33/2016-Cus. (NT) dated 01.03.2016), on any amount payable consequent to the re-
assessment order from the first day of the month in which the duty is provisionally assessed till the date
of payment.
Therefore, in the given case, Moris Lal is liable to pay following interest in respect of 1st consignment:
= ₹ 1,80,000 x 15% x 67/365
If any amount refundable consequent to the re-assessment order is not refunded within 3 months from
date of re-assessment of duty, interest is payable to importer on unrefunded amount at the specified rate
till the date of refund of such amount in terms of section 18(4) of the Customs Act, 1962.
Since in the given case, refund has been made (28.04.2020) within 3 months from the date of re-
assessment of duty (02.02.2020), interest is not payable to Moris Lal on duty refunded in respect of 2nd
consignment.
Question 4
Mr. Sujoy, an Indian entrepreneur, went to London to explore new business opportunities on 01.04.2019.
His wife also joined him in London after three months. The following details are submitted by them with
the Customs authorities on their return to India on 15.04.2020:
(a) used personal effects worth ₹ 80,000,
(b) 2 music systems each worth ₹ 50,000,
(c) the jewellery brought by Mr. Sujoy worth ₹ 48,000 [20 grams] and the jewellery brought by his
wife worth ₹ 96,000 [40 grams].
With reference to Baggage Rules, 2016, determine whether Mr. and Mrs. Sujoy will be required to pay
any customs duty?
Answer
As per rule 3 of the Baggage Rules, 2016, an Indian resident arriving from any country other than Nepal,
Bhutan or Myanmar, shall be allowed clearance free of duty articles in his bona fide baggage, that is to
say, used personal effects and travel souvenirs; and articles [other than certain specified articles], upto
the value of ₹ 50,000ifthese are carried on the person or in the accompanied baggage of the passenger.
Thus, there is no customs duty on used personal effects and travel souvenirs and general duty free

Page 5.2
baggage allowance is ₹ 50,000 per passenger. Thus, duty liability of Mr. Sujoy and his wife is nil for the
used personal effects worth ₹ 80,000 and 2 music systems each worth ₹ 50,000.
As per rule 5 of the Baggage Rules, 2016, the jewellery allowance is as follows:
Jewellery brought by Duty free allowance

Gentleman Passenger Jewellery upto a weight of 20 grams with a value cap of ₹ 50,000
Lady Passenger Jewellery upto a weight of 40 grams with a value cap of ₹ 1,00,000
However, the jewellery allowance is applicable only to a passenger residing abroad for more than 1 year.
Consequently, there is no duty liability on the jewellery brought by Mr. Sujoy as he had stayed abroad for
period exceeding 1 year and weight of the jewellery brought by him is 20 grams with a value less than ₹
50,000.
However, his wife is not eligible for this additional jewellery allowance as she had stayed abroad for a
period of less than a year. Thus, she has to pay customs duty on the entire amount of jewellery brought
by her as she has already exhausted the general duty free baggage allowance of ₹50,000 allowed under
rule 3.
Question 5
After visiting USA for a month, Mrs. and Mr. X (Indian residents aged 40 and 45 years respectively)
brought to India a laptop computer valued at ₹ 80,000, used personal effects valued at ₹ 90,000 and a
personal computer for ₹ 52,000. What is the customs duty payable?
Answer
(1) As per Baggage Rules, 2016, an Indian resident arriving from any country other than Nepal, Bhutan
or Myanmar is allowed duty free clearance of-
(i) Used personal effects and travel souvenirs without any value limit.
(ii) Articles [other than certain specified articles] upto a value of ₹50,000 carried as
accompanied baggage [General duty-free baggage allowance].
Further, such general duty-free baggage allowance of a passenger cannot be pooled with the
general duty free baggage allowance of any other passenger.
(2) One laptop computer when imported into India by a passenger of the age of 18 years or above
(other than member of crew) as baggage is exempt from whole of the customs duty [Notification
No. 11/2004 Cus. dated 08.01.2004].
(3) Accordingly, there will be no customs duty on used personal effects (worth
₹ 90,000) of Mrs. and Mr. X and laptop computer brought by them will be exempt from duty.
Duty payable on personal computer after exhausting the duty free baggage allowance will be ₹
52,000 – ₹ 50,000 = ₹ 2,000.
Effective rate of duty for baggage = 38.5% [including social welfare surcharge @ 10%]
Therefore, total customs duty = ₹ 770
Question 6
What is the relevant date for determination of rate of duty under the Customs Act, 1962 in the case of
clearance of baggage?
Answer
Page 5.3
As per section 78 of the Customs Act, 1962, the relevant date for determination of rate of duty in case of
clearance of baggage is the date on which a declaration is made in respect of such baggage under section
77.
Question 7
State the difference between transit and transshipment of goods under the provisions of the Customs
Act.
Answer
Transit Transshipment
Section 53 of the Customs Act, 1962 provides for Section 54 of the Customs Act, 1962 provides for
transit of goods. transshipment of goods.
In case of transit of goods, goods are allowed to In case of transshipment of goods, the conveyance
remain on the same conveyance. changes i.e., the goods are unloaded from one
conveyance and loaded in another conveyance.
In case of transit of goods, there is continuity of In transshipment of goods, continuity in the
records. records is not maintained as the goods are
transferred to another conveyance.
Question 8
‘Queen Marry’, is a vessel containing the goods imported by XML Ltd. The events relating to its entry into
India and the discharge and onward movement and storage of the goods are as follows.
24.05.2020 Vessel entered the Indian territorial waters.
25.05.2020 Import manifest was delivered to the customs authorities
27.05.2020 XML Ltd filed bill of entry for the goods
29.05.2020 Entry inwards granted to the vessel
The rate of customs duty on the goods was increased from 8% to 10% on 28.05.2020.
At what rate should XML Ltd. pay the customs duty on the goods imported by it?
Answer
Rate of duty will be 10%, because the bill of entry is deemed to have been filed on the date of entry inward
though it was actually filed before the rate of duty increased.
Question 9
Write a brief note on self-assessment in customs under the Customs Act, 1962.
Answer
ASSESSMENT OF GOODS [SECTION 17]
(a) Duty to be self-assessed by the importer/exporter: An importer entering any imported goods
under section 46, or an exporter entering any export goods under section 50, shall, save as
otherwise provided in section 85 (i.e. stores allowed to be warehoused without assessment of
duty), self-assess the duty, if any, leviable on such goods.

Page 5.4
(b) Verification by proper officer: The proper officer may verify the entries made under section 46 or
section 50 and the self-assessment of goods and for this purpose, examine or test any imported
goods or export goods or such part thereof as may be necessary.
Further, the selection of cases for verification shall primarily be on the basis of risk evaluation
through appropriate selection criteria.
For the purposes of verification, the proper officer may require the importer, exporter or any other
person to produce any document or information, whereby the duty leviable on the imported goods
or export goods, as the case may be, can be ascertained and thereupon, the importer, exporter or
such other person shall produce such document or furnish such information.
Some major importers have been given the green channel clearance facility. It means clearance of
goods is done without routine examination of the goods. They have to make a declaration in the
declaration form at the time of filing of bill of entry. The appraisement is done as per normal
procedure except that there would be no physical examination of the goods. Only marks and
number are to be checked in such cases. However, in rare cases, if there are specific doubts
regarding description or quantity of the goods, physical examination may be ordered by the senior
officers/investigation wing like Special Intelligence and Investigation Branch (SIIB).
(c) Reassessment of duty by the proper officer if self-assessment not done correctly: Where it is found
on verification, examination or testing of the goods or otherwise that the self-assessment is not
done correctly, the proper officer may, without prejudice to any other action which may be taken
under this Act, re-assess the duty leviable on such goods.
(d) Speaking order for re-assessment to be passed unless the importer agrees with the reassessment:
Where any re-assessment done is contrary to the self-assessment done by the importer or exporter
and in cases other than those where the importer or exporter, as the case may be, confirms his
acceptance of the said re-assessment in writing, the proper officer shall pass a speaking order on
the re-assessment, within 15 days from the date of re- assessment of the bill of entry or the shipping
bill, as the case may be.
Question 10
State briefly the provisions of the Customs Act, 1962 relating to payment of interest in case of provisional
assessment.
Answer
The importer or exporter shall be liable to pay interest, on any amount payable to the Central
Government, consequent to the final assessment order or re- assessment order. The interest shall be
payable at the rate fixed by the Central Government under section 28AA. This interest shall be payable
from the first day of the month in which the duty is provisionally assessed till the date of payment thereof.
Question 11
What is meant by ‘boat notes’?
Answer
Boat notes are issued to cover transport of cargo to or from vessels that cannot come into the port.
Section 35 of the Customs Act stipulates that no imported goods shall be water borne for being loaded in
any vessel, and no export goods which are not accompanied by a shipping bill, shall be water borne for
being shipped unless the goods are accompanied by a boat note in the prescribed form. The Boat Notes

Page 5.5
Regulations 1976 prescribe the form and manner of issue of boat notes.
However, the board may, by notification give general permission and the proper officer may in any
particular case, give special permission, for any goods or any class of goods to be water borne without
being accompanied by a boat-note.
Question 12
Discuss the provisions regarding transit of goods and transhipment of goods without payment of duty
under the Customs Act.
Answer
Transit of Goods in the same Vessel or Air [Section 53]
Subject to the provisions of section 11 (power to prohibit import or export of goods), where any goods
imported in a conveyance and mentioned in the arrival manifest or import manifest or the import report,
as the case may be, as for transit in the same conveyance to any place outside India or to any customs
station, the proper officer may allow the goods and the conveyance to transit without payment of duty,
subject to such conditions, as may be prescribed.
Transhipment of Goods without payment of Duty [Section 54]
(1) Where any goods imported into a customs station are intended for transhipment, a bill of
transhipment shall be presented to the proper officer in the prescribed form. Where the goods are
being transferred under an international treaty or bilateral agreement between the Government
of India and Government of a foreign country, a declaration for transhipment instead of a bill of
transhipment shall be presented to the proper officer in the prescribed form.
(2) Subject to the provisions of sections 11 (power to prohibit import or export of goods), where any
goods imported into a customs station are mentioned in the arrival manifest or import manifest or
the import report, as the case may be, as for transhipment to anyplace outside India, such goods
may be allowed to be so transhipped without payment of duty.
(3) Where any goods imported into a customs station are mentioned in the arrival manifest or import
manifest or the import report, as the case may be, as for transhipment:
(a) to any major port as defined in the Indian Ports Act, 1908 (15 of 1908), or the customs airport
at Mumbai, Calcutta, Delhi, or Chennai or any other custom port or customs airport which
the board may, by notification in the Official Gazette, specify in this behalf, or
(b) to any other customs station and the proper officer is satisfied that the goods bonafide
intended for transhipment to such customs station,
the proper officer may allow the goods to be transhipped without payment of duty, subject to such
conditions as may be prescribed for the due arrival of such goods at the customs station to which
transshipment is allowed.
Question 13
Explain in brief the duty exemption to baggage under section 79(1) of the Customs Act, 1962.
Answer
Section 79(1) of the Customs Act refers to the duty relief available in respect of baggage. It stipulates that
the proper officer, may subject to any rules made under sub-section (2), pass free of duty
(a) any article in the baggage, of a passenger or a member of the crew, in respect of which the said

Page 5.6
officer is satisfied that it has been in his use for such minimum period as may be specified in the
rules;
(b) any article in the baggage of a passenger in respect of which the officer is satisfied that it is for the
use of the passenger or his family or is a bonafide gift or souvenir, provided that the value of each
such article and the total value of all such articles does not exceed such limits as may be specified
in the rule.
The law thus envisages two categories of baggage, namely those belonging to (a) passengers; and (b)
members of the crew.
Similarly, it envisages three classes of goods, namely (a) personal effects, which have been in the use of
the person for a minimum period; (b) household effects, which is used by the family including the person;
and (c) gifts and souvenirs.
Sub-section (2) of section 79 enables the Central Government to make rules for the purposes of carrying
out the provisions of section 79(1). It also stipulates that such rules may specify
(a) the minimum period for which any article has been used by a passenger or a member of the crew
for the purposes of [clause (a) of sub-section(1)] determining personal effects;
(b) The maximum value of any individual article and the maximum total value of all the articles which
may be passed free of duty [under clause (b) of sub-section (1)] i.e., household effects, gifts,
souvenirs etc.;
(c) the conditions to be fulfilled before or after clearance subject to which the baggage may be passed
free of duty. Sub-section(3) of section 79 provides that different rules may be made for different
classes of persons.
Question 14
What is the relevant date for determining the rate of duty and tariff valuation in respect of goods
imported/exported by post?
Answer
(1) The rate of duty and tariff value, if any, applicable to any goods imported by post or courier shall
be the rate and valuation in force on the date on which postal authorities or the authorized courier
present to the proper officer a list containing the particulars of such goods for the purposes of
assessing the duty thereon.
However, where the postal goods arrive on a vessel, and the list containing the particulars is
available and is filed by the Post Master, before the arrival of the vessel, the list shall be deemed to
have been filed on the date of arrival of the vessel.
The effect of this proviso is that the relevant date for imports by post is the date of submission of
the list by the Post-Master or the date of arrival of the vessel, whichever is later.
(2) The rate of duty and tariff value applicable to any goods exported by post or courier shall be the
rate and valuation in force on the date on which the exporter delivers such goods to the postal
authorities or the authorized courier for exportation.
Question 15
Explain the obligation cast on person-in-charge on arrival of vessels or aircrafts in India under section
29 of the Customs Act, 1962.

Page 5.7
Answer
Vessel/aircraft must call or land only at a notified customs port or airport, unless otherwise permitted,
and except in an emergency.
The person-in-charge of the vessel has the following obligation cast on him:
1. He will have to report the arrival of the vessel or the landing of the aircraft to the nearest customs
officer or officer in charge of police station and produce the log book if demanded.
2. He should not allow any unloading of goods without permission and should not allow any
passengers or crews to leave the immediate vicinity of the vessel or aircraft. However, the goods
can be removed, or the passengers and crews can be allowed to depart if the same is necessary for
reason of health, safety or preservation of life or property.
3. He should comply with all the directions given by such officers with respect to any such goods.
Question 16
Explain briefly the meaning of entry inwards and entry outwards with reference to the customs law.
Answer
Entry inwards is permission to begin unloading of the imported goods, and entry outwards is permission
to begin loading of export goods.
Entry outwards is the permission granted by the Customs authorities to a vessel to go on a foreign voyage
to the port of consignment.
Question 17
Which class of importers is required to pay customs duty electronically? Name the dedicated payment
gateway set up by the Board (CBIC) to use e-payment facility easily by an importer.
Answer
Authorised economic operators and those importers who are paying ₹ 10,000 or more per bill of entry.
They will pay through ICEGATE.
The Central Government has notified the following classes of importers who have to pay customs duty
electronically, namely:
(i) Importers registered under Authorized Economic Operator;
(ii) Importers paying customs duty of ₹10,000or more per bill of entry
The Board has set up a dedicated payment gateway called, ‘ICEGATE' through which the payments are to
be made.
The importer need not produce any proof of payment for the clearance of goods in case of e-payment.
Question 18
Mr. Anil and his wife (non-tourist Indian passengers) are returning from Dubai to India after staying
there for a period of two years. They wish to bring gold jewellery purchased from Dubai. Please
enumerate provisions of customs laws for jewellery allowance in their case.
Answer

Page 5.8
As per rule 5 of the Baggage Rules, 2016, a passenger who has been residing abroad for more than one
year and returns to India shall be allowed duty free clearance of jewellery in bona fide baggage as under:
• Jewellery upto a weight of 20 grams with a value cap of ₹ 50,000 for a gentlemen passenger
• Jewellery upto a weight of 40 grams with a value cap of ₹ 1,00,000 for a lady passenger
Thus, in the given case, Mr. Anil would be allowed duty free jewellery upto a weight of 20 grams with a
value cap of ₹ 50,000 and his wife would be allowed duty free jewellery upto a weight of 40 grams with
a value cap of ₹ 1,00,000.
Further, in addition to the jewellery allowance, Mr. Anil and his wife would also be allowed duty free
clearance of jewellery worth ₹ 1,00,000 (₹ 50,000 per person) as part of free baggage allowance.
Question 19
Can the customs audit cover a person who is not an exporter or importer?
Answer
Yes, persons dealing with the goods can also be audited. Auditee means a person who is subject to an
audit under section 99A of the Act and includes an importer or exporter or custodian approved under
section 45 or licensee of a warehouse and any other person concerned directly or indirectly in clearing,
forwarding, stocking, carrying, selling or purchasing of imported goods or export goods or dutiable
goods.
Question 20
A fishing trawler is operating 10 nautical miles from the baseline. Is it entitled to duty-free stores?
Answer
No, it is not entitled to duty-free stores.
Foreign going vessel or aircraft means any vessel or aircraft for the time being engaged in the carriage of
goods or passengers between any port or airport in India and any port or airport outside India, whether
touching any intermediate port or airport in India or not includes-
- any naval vessel of any foreign Government taking part in any naval exercise;
- any vessel engaged in fishing or any other operations outside the territorial waters of India;
- any vessel or aircraft proceeding to a place outside India for any purpose whatsoever.
The definition of India is an inclusive definition and includes not only the land mass of India but also the
territorial waters of India. The territorial waters extend to 12 nautical miles into the sea from the
appropriate base line.
Question 21
What are the circumstances under which assessment is done provisionally under section 18?
Answer
Provisional assessment can be resorted to in the following circumstances:
(a) where the importer or exporter is unable to make self-assessment under sub-section (1) of section

Page 5.9
17 and makes a request in writing to the proper officer for assessment; or

(b) where the proper officer deems it necessary to subject any imported goods or export goods to any
chemical or other test; or
(c) where the importer or exporter has produced all the necessary documents and furnished full
information, but the proper officer deems it necessary to make further enquiry; or
(d) where necessary documents have not been produced or information has not been furnished and
the proper officer deems it necessary to make further enquiry.
Question 22
State the provisions of transhipment of goods without payment of duty under section 54 of the Customs
Act, 1962.
Answer
Transhipment of Goods without payment of Duty [Section 54]
(1) Where any goods imported into a customs station are intended for transhipment, a bill of
transhipment shall be presented to the proper officer in the prescribed form. Where the goods are
being transferred under an international treaty or bilateral agreement between the Government
of India and Government of a foreign country, a declaration for transhipment instead of a bill of
transhipment shall be presented to the proper officer in the prescribed form.
(2) Subject to the provisions of sections 11 (power to prohibit import or export of goods), where any
goods imported into a customs station are mentioned in the arrival manifest or import manifest or
the import report, as the case may be, as for transhipment to anyplace outside India, such goods
may be allowed to be so transhipped without payment of duty.
(3) Where any goods imported into a customs station are mentioned in the arrival manifest or import
manifest or the import report, as the case may be, as for transhipment:
(a) to any major port as defined in the Indian Ports Act, 1908 (15 of 1908), or the customs airport
at Mumbai, Calcutta, Delhi, or Chennai or any other custom port or customs airport which
the board may, by notification in the Official Gazette, specify in this behalf, or
(b) to any other customs station and the proper officer is satisfied that the goods bonafide
intended for transhipment to such customs station,
the proper officer may allow the goods to be transhipped without payment of duty, subject to such
conditions as may be prescribed for the due arrival of such goods at the customs station to which
transshipment is allowed.
Question 23
Explain the procedure prescribed in Customs Act, 1962 in case of goods not cleared, warehoused or
transhipped within 30 days after unloading.
Answer
If there are any goods imported from a place outside India, which are not cleared either for home
consumption or for warehouse within 30 days or within such further time as the proper officer may allow
or if the title to any imported goods is relinquished (Section 23), the custodian of the goods is permitted,
with the approval of the customs department and after giving notice to the importer, to sell the goods by
auction.

Page 5.10
CBIC has clarified vide Circular No. 49/2018-Cus dated 03.12.2018 that after the successful bidder has
been informed about the result of the auction, a consolidated bill of entry, buyer-wise will be filed with
the Customs in the prescribed format by the concerned custodian for clearance of the goods as per section
46 of the customs Act, 1962 read with Un-Cleared Goods (Bill of Entry) Regulations, 1972 (Regulation 2
& 3).
(a) The proper officer of Customs shall assess the goods to duty in accordance with the extant law
within 15 days of filing of Bill of Entry and after assessment inform the amount of duty payable to
the concerned custodian.
(b) The auctioned goods shall be handed over to the successful bidder after assessment and out-of-
charge orders given by the proper officer, on payment of dues.
In the case of sensitive goods like animals, foodstuffs and hazardous goods etc. the custodian with the
approval of the proper officer can sell the goods even before the expiry of the 30 days limit. Similarly, in
the case of arms or ammunition, which cannot be sold in public auction, the disposal is regulated by the
rules made in this regard.
Question 24
Write short notes on:
(a) Export general manifest
(b) Boat note (or restriction on goods being water borne)
Answer
(a) EGM:
It consists of a general declaration of particulars of the vessel, its crew and passengers, its date and
port of departure; a list of ship’s stores; a list of crew’s personal effects; and a cargo declaration
which is a complete list of the goods shipped from the port, goods transshipped at the port, goods
lying in the vessel but not landed or transshipped (“same bottom cargo”), and dutiable goods,
including arms and ammunition, forming part of the equipment of the vessel.
(b) Boat note:
Boat notes are issued to cover transport of cargo to or from vessels that cannot come into the port.
Section 35 of the Customs Act stipulates that no imported goods shall be water borne for being
loaded in any vessel, and no export goods which are not accompanied by a shipping bill, shall be
water borne for being shipped unless the goods are accompanied by a boat note in the prescribed
form. The Boat Notes Regulations 1976 prescribe the form and manner of issue of boat notes.
However, the board may, by notification give general permission and the proper officer may in any
particular case, give special permission, for any goods or any class of goods to be water borne
without being accompanied by a boat-note.
Question 25
Discuss briefly:
(a) Temporary detention of baggage
(b) Relevant date for rate of duty and tariff valuation in respect of goods imported and exported by
post
Answer
Page 5.11
(a) Where the baggage of a passenger contains any article which is dutiable or the import of which is
prohibited and in respect of which a true declaration has been made under section 77, the proper
officer may, at the request of the passenger, detain such article for the purpose of being returned
to him on his leaving India and if for any reason, the passenger is not able to collect the article at
the time of his leaving India the article may be returned to him through any other passenger
authorised by him and leaving India or as cargo consigned in his name.
(b) The rate of duty and tariff value, if any, applicable to any goods imported by post or courier shall
be the rate and valuation in force on the date on which postal authorities or the authorized courier
present to the proper officer a list containing the particulars of such goods for the purposes of
assessing the duty thereon.
However, where the postal goods arrive on a vessel, and the list containing the particulars is
available and is filed by the Post Master, before the arrival of the vessel, the list shall be deemed to
have been filed on the date of arrival of the vessel.
The effect of this proviso is that the relevant date for imports by post is the date of submission of
the list by the Post-Master or the date of arrival of the vessel, whichever is later.
The rate of duty and tariff value applicable to any goods exported by post or courier shall be the
rate and valuation in force on the date on which the exporter delivers such goods to the postal
authorities or the authorized courier for exportation.
Question 26
What is the permissible time limit with respect to the following:
(i) for filing a bill of entry
(ii) for paying the assessed duty
(iii) for delivery of arrival manifest or import manifest/report and departure manifest or export
manifest/report
Answer
(i) 30 days prior to arrival, & not later than the day after the day of arrival.
(ii) day of filing bill of entry (self- assessment) or within a day of receiving re-assessed bill of entry.
(iii) For import manifest/report: within 12 hours of arrival of conveyance at customs station;
For departure or export manifest/report: before departure of conveyance.
Question 27
State in brief the provisions of the Customs Act, 1962 relating to filing of “Arrival manifest or import
manifest/ Report”.
Answer
Arrival manifest or import manifest or import report is a detailed information to customs about goods in
the vessels/aircrafts which have been brought in at any port/airport for unloading at that particular
port/international airport as also that which would be carried further for other ports/airports.
Declarations of such cargo has to be made in a prescribed form (which is termed ‘Import General
Manifest’ or IGM) and in prescribed manner. Imports via land route require filing of declaration (called
‘Import Report’).
Goods involved in an export may also be carried in the import conveyance (vessel or other), without such
Page 5.12
goods being delivered in India. The IM/IR must also contain details of goods meant for export and carried
by the conveyance. Similar provision for including details of ‘imported goods’ is required by section 41
in export manifest to be filed by person-in-charge of a conveyance carrying export goods before
departure of conveyance.
The person-in-charge of a vessel, or an aircraft, or a vehicle, carrying imported goods or any other person
as may be specified by the Central Government, by notification in the Official Gazette, in this behalf shall,
in the case of a vessel or an aircraft, deliver to the proper officer an arrival manifest or import manifest
by presenting electronically prior to the arrival of the vessel or the aircraft, as the case may be, and in the
case of a vehicle, an import report within twelve hours after its arrival in the customs station, in the
prescribed form.
Particulars Import Document Time limit for presentation Mode of

of IM/IR presentation
Where the imported goods are Arrival manifest or Any time prior to the arrival of Electronic filing
brought in a vessel import manifest thevessel
Where the imported goods are Arrival manifest or Any time prior to the arrival of Electronic filing
brought in an aircraft import manifest theaircraft
Where the imported goods are Import Report Within twelve hours after its Manual filing
brought in a vehicle arrival in the customs station
Question 28
Write a brief note on the declaration made by the owner of baggage.
Answer
Under this section, the owner of the baggage has to make a declaration of its contents to the proper officer
of customs, for the purpose of clearing it. This is known as Baggage Declaration Form.
Declaring packing list is sufficient declaration.
Question 29
State and summarise the provisions and procedure in the Customs Act, 1962 governing preparation and
filing of a bill of entry.
Answer
It is the duty of the importer of any goods to make an application electronically on the customs automated
system to the proper officer for clearance of the goods. The importer is required to make an electronic
integrated declaration to the Customs Computer Systems through network facility. The Bill of Entry
(Electronic Integrated Declaration and Paperless Processing) Regulations, 2018 provides the detailed
provisions in this regard.
According to section 46(3), the importer shall present the bill of entry before the end of the next day
following the day (excluding holidays) on which the aircraft/vessel/vehicle carrying the goods arrives at
a customs station at which such goods are to be cleared for home consumption or warehousing.
The proviso to section 46(3) provides that a bill of entry may be presented at any time not exceeding
thirty days prior to the expected arrival of the aircraft/vessel/vehicle by which the goods have been
shipped for importation into India.
However, where the bill of entry is not presented within the time so specified and the proper officer is

Page 5.13
satisfied that there was no sufficient cause for such delay, the importer shall pay prescribed charges for
late presentation of the bill of entry.
Question 30
Under what situations the amount of duty and interest refundable under section 18 of the Customs Act,
1962 shall be paid to the importer/exporter instead of being credited to the Consumer Welfare Fund?
Answer
The refund of duty and interest thereon is subject to the principle of unjust enrichment. It shall be paid
to the importer or the exporter, as the case may be, only if such amount is relatable to:
(a) the duty and interest, if any, paid on such duty paid by the importer, or the exporter, as the case
may be, if he had not passed on the incidence of such duty and interest, if any, paid on such duty to
any other person;
(b) the duty and interest, if any, paid on such duty on imports made by an individual for his personal
use;
(c) the duty and interest, if any, paid on such duty borne by the buyer, if he had not passed on the
incidence of such duty and interest, if any, paid on such duty to any other person;
(d) the export duty as specified in section 26;
(e) drawback of duty payable under sections 74 and 75.
In all other cases, the amount of such refund and interest shall be credited to the Consumer Welfare Fund.
Question 31
State the procedure for clearance of goods imported by post.
Answer
In the case of goods imported by post the agency for the carriage of goods is the Government of India be
it through sea, air or land. The control of the Customs Department is only on goods, whether imported or
exported
(i) on which there is a duty; and
(ii) which are subject to prohibition or restriction under the Customs Act or any other law for the time
being in force.
The customs have no concern over other goods or other mail.
Question 32
Briefly explain the following with reference to the provisions of the Customs Act, 1962:
(i) Bill of export
(ii) Import report
(iii) Imported goods
(iv) Entry
(v) Prohibited goods
(vi) Customs port

Page 5.14
(vii) Goods
(viii) Stores
(ix) Conveyance
(x) Dutiable goods
(xi) Customs area
(xii) Adjudicating Authority
(xiii) Foreign going vessel or aircraft
(xiv) Assessment
Answer
(i) Bill of export [Section 2(5)]: means a bill of export referred to in section 50to be filed when goods
are exported via land route.
(ii) Arrival manifest or Import manifest or Import report [Section 2(24)]: means the report
required to be delivered under section 30. It may be noted that import report is required only when
goods are imported via land route.
(iii) Imported Goods [Section 2(25)]: means any goods brought into India from a place outside India
but does not include goods, which have been cleared for home consumption.
(iv) Entry [Section 2(16)]: in relation to goods means an entry made in a bill of entry, shipping bill or
bill of export and includes the entry made under the regulations made under section 84.
(v) Prohibited goods [Section 2(33)]: means any goods the import or export of which is subject to
any prohibition under the Customs Act or any other law for the time being in force but does not
include any such goods in respect of which the conditions subject to which the goods are permitted
to be imported or exported have been complied with.
(vi) Customs port [Section 2(12)]: means any port appointed under clause (a) of section 7 to be a
customs port and includes a place appointed under clause (aa) of that section to be an inland
container depot.
(vii) Goods [Section 2(22)]: “Goods” includes
(a) vessels, aircrafts and vehicles
(b) stores
(c) baggage
(d) currency and negotiable instruments and
(e) any other kind of movable property.
(viii) Stores [Section 2(38)]: means goods for use in a vessel or aircraft and includes fuel and spare
parts and other articles of equipment, whether or not for immediate fitting. The definition does not
cover goods for use in a vehicle.
(ix) Conveyance [Section 2(9)]: includes a vessel, an aircraft and a vehicle.
(x) Dutiable goods [Section 2(14)]: means any goods:
(a) which are chargeable to duty and
(b) on which duty has not been paid.
In order to be dutiable, any article must first satisfy both the following conditions:
(i) The article should fall within the ambit of the word goods [defined under sec 2(22)].
(ii) The article should find a mention in the Customs Tariff.

Page 5.15
(xi) Customs area [Section 2(11)]: means the area of a customs station or a warehouse and includes
any area in which imported goods or export goods are ordinarily kept before clearance by customs
authorities.
(xii) Adjudicating authority [Section 2(1)]: means any authority competent to pass any order or
decision under this Act, but does not include the Board, Commissioner (Appeals) or Appellate
Tribunal. The adjudicating authority can adjudicate demand of customs duty, confiscation and
penalties under Customs Act.
(xiii) Foreign going vessel or aircraft [Section 2(21)]: means any vessel or aircraft for the time being
engaged in the carriage of goods or passengers between any port or airport in India and any port
or airport outside India, whether touching any intermediate port or airport in India or not
includes-
- any naval vessel of any foreign Government taking part in any naval exercise;
- any vessel engaged in fishing or any other operations outside the territorial waters of India;
- any vessel or aircraft proceeding to a place outside India for any purpose whatsoever.
(xiv) Assessment [Section 2(2)]: means determination of the dutiability of any goods and the amount
of duty, tax, cess or any other sum so payable, if any, under this Act or under the Customs Tariff
Act, 1975 (hereinafter referred to as the Customs Tariff Act) or under any other law for the time
being in force, with reference to —
(a) the tariff classification of such goods as determined in accordance with the provisions of the
Customs Tariff Act;
(b) the value of such goods as determined in accordance with the provisions of this Act and the
Customs Tariff Act;
(c) exemption or concession of duty, tax, cess or any other sum, consequent upon any
notification issued therefor under this Act or under the Customs Tariff Act or under any other
law for the time being in force;
(d) the quantity, weight, volume, measurement or other specifics where such duty, tax, cess or
any other sum is leviable on the basis of the quantity, weight, volume, measurement or other
specifics of such goods;
(e) the origin of such goods determined in accordance with the provisions of the Customs Tariff
Act or the rules made thereunder, if the amount of duty, tax, cess or any other sum is affected
by the origin of such goods;
(f) any other specific factor which affects the duty, tax, cess or any other sum payable on such
goods,
and includes provisional assessment, self-assessment, reassessment and any assessment in which
the duty assessed is nil.
Question 33
With reference to the facility, ‘Clear first-Pay later’ extended to importers under the customs law, answer
the following questions:
(i) What is the objective of the facility?
(ii) Who is eligible to avail this scheme?
(iii) What are the due dates for payment of duty under this facility?
(iv) What are the circumstances when the deferred payment facility will not be available?

Page 5.16
Answer
(i) ‘Clear first-Pay later’ i.e., deferred duty payment is a mechanism for delinking duty payment and
customs clearance. The aim is to have a seamless wharf to warehouse transit in order to facilitate
just-in-time manufacturing.
(ii) Central Government has permitted importers certified under Authorized Economic Operator
programme as AEO (Tier-Two) and AEO (Tier-Three) to make deferred payment of import duty
(eligible importers).
As a part of the ease of doing business focus of the Government of India, the CBEC has rolled out
the AEO (Authorized Economic Operator) programme.
It is a trade facilitation move wherein benefits are extended to the entities who have demonstrated
strong internal control systems and willingness to comply with the laws administered by the CBEC.
(iii) The due dates for payment of deferred duty are –
S. N. Goods corresponding to bill of entry Due date of payment of duty, inclusive of

returned for payment from the period (excluding holidays) as
mentioned in section 47(2)
1. 1st day to 15th day of any month 16th day of that month
2. 16th day till the last day of any month other 1st day of the following month
than March
3. 16th day till the 31st day of March 31st March
(iv) If there is default in payment of duty by due date more than once in three consecutive months, the
facility of deferred payment will not be allowed unless the duty with interest has been paid in full.
The benefit of deferred payment of duty will not be available in respect of the goods which have not been
assessed or not declared by the importer in the bill of entry.
Question 34
Gregory Peg of foreign origin has come on travel visa, to tour in India. He carries with him, as part of
baggage, the following:
Particulars Value in ₹
Travel Souvenir 85,000
Other articles carried on in person 1,50,000
120 sticks of cigarettes of ₹100 each 12,000
Fire arm with 100 cartridges (value includes the value of cartridges at @ ₹ 500 per 1,00,000
cartridge).
Determine customs duty payable, if the effective rate of customs duty is 38.50% inclusive of social
welfare surcharge, with short explanations where required.
Answer
As per rule 3 of Baggage Rules, 2016, tourist of foreign origin, excluding infant, is allowed duty free
clearance of
(i) travel souvenirs; and
(ii) Articles up to the value of ₹ 15,000 (excluding inter alia fire arms, cartridges of fire arms exceeding
50 and cigarettes exceeding 100 sticks), if carried on in person.

Page 5.17
Computation of customs duty payable ₹

Travel souvenir Nil
Articles carried on in person 1,50,000
Cigarettes [100 sticks can be accommodated in General Free Allowance (GFA)] 10,000
Fire arms cartridge (50 cartridges can be accommodated in GFA) 25,000
Baggage than can be accommodated in GFA 1,85,000
Less: GFA 15,000
Baggage on which duty is payable 1,70,000
Duty payable @ 38.50% (including 10% Social welfare surcharge) 65,450
Note: Fire arms, cartridges of firearms exceeding 50 and cigarettes exceeding 100 sticks are not
chargeable to rate applicable to baggage [Notification No. 26/2016 Cus. dated 31.03.2016]. These items
are charged @ 100% applicable to baggage under Heading 9803 of the Customs Tariff.
Question 35
An importer filed a bill of entry after 60 days of filing Import General Manifest. The Deputy Commissioner
of Customs imposed a penalty of ₹ 10,000 for late filing of the bill of entry. Since, importer wanted to
clear the goods urgently, he paid the penalty. Can penalty be imposed for late filing of the bill of entry?
Can bill of entry be filed in advance? Examine the issue regarding period available for filing bill of entry
in the light of relevant statutory provisions?
Answer
Yes, charges are payable for late filing of bill of entry if an importer fails to present the bill of entry before
the end of the next day following the day (excluding holidays) on which the aircraft/vessel/vehicle
carrying the goods arrives at a customs station at which such goods are to be cleared for home
consumption or warehousing, and the proper officer is satisfied that there was no sufficient cause for
such delay [Section 46(3) of the Customs Act, 1962].
Yes, a bill of entry can be filed in advance. It can be presented within 30 days of the expected arrival of
the aircraft/vessel/vehicle by which the goods have been shipped for importation into India vide proviso
to section 46(3) of the Customs Act, 1962.
In the given case also, the time period as described above will be available - with reference to the date of
arrival of vessel/aircraft - for filing the bill of entry.
Question 36
Laxmi Company imported goods valued at ₹ 10,00,000 vide a Bill of Entry presented before the proper
officer on 15th December, 2019, on which date the rate of customs duty was 20%. The proper officer
decided that the goods should be subject to chemical or other test and therefore, the same were
provisionally assessed at a value of ₹ 10,00,000 and Laxmi company paid provisional duty of ₹ 2,00,000
on the same date. Laxmi Company wants to voluntarily pay duty of ₹ 1,50,000 on 20th January, 2020.
(1) Can Laxmi Company provisionally pay the duty and what are the conditions which are to be
complied before such payment is made?
(2) Determine the amount of interest payable, if any, under section 18 of the Customs Act, 1962
assuming that the payment of ₹ 1,50,000 as stated above is made on 20th January, 2020 and that
the final duty is assessed on 31st January, 2020 at ₹ 4,00,000 and the balance duty is paid on the
same day.

Page 5.18
Answer
1. Provisional assessment of duty is permitted in case where the proper officer deems it necessary to
subject any imported goods or export goods to any chemical or other test [Section 18 of the
Customs Act, 1962]. Thus, Laxmi Company can pay the duty on provisional basis.
Before, the provisional assessment of duty, the importer must furnish such security as the proper
officer deems fit for the payment of the deficiency, if any, between the duty finally assessed/re-
assessed and the duty provisionally assessed.
2. Section 18 of the Customs Act, 1962 further stipulates that the importer is liable to pay interest, on
any amount payable consequent to the final assessment order @ 15% p.a. from the first day of the
month in which the duty is provisionally assessed till the date of payment thereof.
Accordingly, amount of interest payable will be
= [₹ 1,50,000 x 15% x 51/365] + [₹ 50,000 x 15% x 62/365]
= ₹ 3,144 + ₹ 1,274
= ₹ 4,418
Question 37
After visiting USA for a month, Mrs. and Mr. Iyer (Indian residents aged 35 and 40 years respectively)
brought to India a laptop computer valued at ₹ 70,000, used personal effects valued ₹ 1,40,000 and a
personal computer for ₹ 58,000.
Calculate the custom duty payable by Mrs. & Mr. Iyer, if any.
Answer
(1) As per the Baggage Rules, 2016, an Indian resident arriving from a country other than Nepal,
Bhutan, or Myanmar, is allowed duty free clearance of-
(i) Used personal effects and travel souvenirs without any value limit.
(ii) Articles [other than certain specified articles] up to a value of ₹ 50,000 carried as
accompanied baggage [General duty free baggage allowance].
(iii) Further, such general duty free baggage allowance of a passenger cannot be pooled with the
general duty free baggage allowance of any other passenger.
(2) One laptop computer when imported into India by a passenger of the age of 18 years or above
(other than member of crew) is exempt from whole of the customs duty [Notification No. 11/2004
Cus. dated 08.01.2004].
(3) (i) Accordingly, there will be no customs duty on used personal effects (worth ₹ 1,40,000) of
Mrs. and Mr. Iyer and laptop computer brought by them will be exempt from duty.
(ii) Duty payable on personal computer after exhausting the duty free baggage allowance will be
₹ 58,000 – ₹ 50,000 = ₹ 8,000.
(iii) Effective rate of duty for baggage = 38.50% [including Social Welfare Surcharge]
(iv) Therefore, total customs duty = ₹ 3,080.
Question 38
Mrs. X, an Indian resident who was on a visit to China, returned after months. She was carrying with her
the following items:
Page 5.19
(i) Personal effects ₹ 75,000

(ii) Laptop computer ₹ 60,000
(iii) Jewellery - 25 grams (purchased in China) ₹ 75,000
(iv) Music system ₹ 50,000
Compute the customs duty payable by Mrs. X with reference to the Baggage Rules, 2016
Answer
Computation of customs duty payable by Mrs. X
Particulars ₹
Personal effects Nil
[Duty free clearance is allowed]
Laptop computer Nil
[One laptop computer is exempt when imported into India by a passenger ≥ 18 years of
age]
Jewellery 75,000
[Duty free jewellery allowance is not available to Mrs. X since she did not reside abroad
for more than 1 year]
Music system 50,000
Total value 1,25,000
Less: General duty free baggage allowance of ₹ 50,000 50,000
Value of baggage liable to customs duty 75,000
Rate of Duty 38.50%
Customs duty @ 38.50% (including social welfare surcharge) 28,875

Page 5.20

Question 39
Mr. Samuel, a US resident aged 35 years, has come to India on a tourist visa for a month-long vacation.
He carries with him, as part of baggage, the following:
Particulars Value in ₹
Travel souvenirs 85,000
Other articles carried on in person 1,50,000
80 sticks of cigarettes of ₹ 100 each 8,000
30 cartridges of fire arms valuing ₹ 500 each 15,000
One litre wine 15,000
With reference to the Baggage Rules, 2016, determine whether Mr. Samuel will be required to pay any
customs duty?
Answer
As per rule 3 of Baggage Rules, 2016, tourist of foreign origin, excluding infant, is allowed duty free
clearance of
(i) travel souvenirs; and
(ii) Articles up to value of ₹ 15,000 (excluding, inter alia, cigarettes exceeding 100 sticks, cartridges of
fire arms exceeding 50 and alcoholic liquor or wines in excess of two litres), if carried on in person.
Further, any article the value of which exceeds the duty free allowance admissible to such passenger or
member under the Baggage Rules, 2016, is chargeable to customs duty @ 35% [Notification No. 26/2016
Cus. dated 31.03.2016]. The effective rate of duty becomes 38.5% after including social welfare surcharge
@ 10% on customs duty.
Accordingly, the customs duty payable by Mr. Samuel will be calculated as under:
Computation of customs duty payable ₹

Travel souvenir Nil
Articles carried on in person 1,50,000
Cigarettes [Since the number of cigarettes does not exceed 100, the same will be covered 8,000
within the scope of rule 3 of Baggage Rules, 2016 and thus, be eligible for general free
allowance (GFA) or concessional rate of duty applicable to baggage vide Notification No.
26/2016 Cus. dated 31.03.2016, as the case may be.
Fire arms cartridge [Since the number of fire arms cartridge does not exceed 50, the same 15,000
will be covered within the scope of rule 3 of Baggage Rules, 2016 and thus, be eligible for
GFA or concessional rate of duty applicable to baggage vide Notification No. 26/2016 Cus.
dated 31.03.2016, as the case may be.]
One litre of wine [Since the quantity of wine does not exceed 2 litres, the same will be 15,000
covered within the scope of rule 3 of Baggage Rules, 2016 and thus, be eligible for GFA or
concessional rate of duty applicable to baggage vide Notification No. 26/2016 Cus. dated
31.03.2016, as the case may be.]
Baggage within the scope of rule 3 of Baggage Rules, 2016 1,88,000
Less: GFA 15,000
Baggage on which duty is payable 1,73,000
Customs duty payable @ 38.5% 66,605

Page 5.21
Question 40
State the salient features of "Deferred duty payment facility" with reference to Customs Act, 1962 and
rules thereunder.
Answer
The salient features of “Deferred duty payment facility” are as under:
 Under section 47 of the Customs Act, 1962, the Central Government has permitted importers
certified under Authorized Economic Operator programme as Authorized Economic Operator - AEO
(Tier-Two) and AEO (Tier-Three) to make deferred payment of import duty. AEO means Authorized
Economic Operator certified by the Directorate General of Performance Management under CBEC.
 An eligible importer intending to avail the benefit of deferred payment shall intimate to the Principal
Commissioner/Commissioner of Customs, having jurisdiction over the port of clearance, his
intention to avail the said benefit who on being satisfied with the eligibility of the importer will allow
him to pay the duty by due dates.
 Due dates for deferred payment of import duty-
S. N. Goods corresponding to Bill of Entry returned for Due date of payment of duty
payment from (excluding holidays)
1. 1st day to 15th day of any month 16th day of that month
2. 16th day till the last day of any month other than March 1st day of the following month
3. 16th day till the 31st day of March 31st March
 The eligible importer shall pay the duty electronically except where Assistant/Deputy
Commissioner of Customs allow payment by any other mode for reasons to be recorded in writing.
 If there is default in payment of duty in full by due date more than once in 3 consecutive months,
deferred duty payment facility will not be allowed unless the duty with interest has been paid in full.
 The benefit of deferred payment of duty will not be available in respect of the goods which have not
been assessed or not declared by the importer in the Bill of Entry.
Question 41
Mr. X has imported some items from abroad. Since he was unable to make a self-assessment, he has
sought for provisional assessment pending technical testing on 29.04.2021. The technical report was
received on 05.05.2021. Discuss about the time limit available to the officer for finalizing the provisional
assessment as per law and guide Mr. X as to when his provisional assessment will be finalized.
Answer
The proper officer can finalize the provisional assessment within 2 months of receipt of a chemical or
other test report, where the provisional assessment is ordered for that reason.
The Commissioner of Customs may allow a further time period of 3 months in case the proper officer is
not able to finalize the provisional assessment within the period of 2 months.
Thus, in the given case, provisional assessment will be finalized by 05.07.2021 [within 2 months of
receipt of test report (05.05.2021)]. However, if the proper officer is not able to finalize the provisional
assessment by 05.07.2021, the Commissioner may allow a further period of 3 months, i.e., till 05.10.2021
to the proper officer to finalize the provisional assessment.

Page 5.22
CHAPTER - 6
Duty Drawback
Question 1
Spatial Wireless Pvt. Ltd. imported five mainframe computer systems from Flexsonics Computers, USA
on 31.01.2020 paying customs duty of ₹ 30.45 lakhs. The computers worked for some time but in June
2020 some technical faults developed in the systems resulting in complete closure of work. On being
informed about the problem, Flexsonics Computers sent his technicians from USA, to repair the systems
in June 2020 itself. However, since no solution was found, the Management of Spatial Wireless Pvt. Ltd
re-shipped/returned the goods to Flexsonics Computers, USA on 31.12.2020.
You are the Financial Controller of the Spatial Wireless Pvt. Ltd. Board of Directors has approached you
for advising whether import duty paid can be taken back from the Central Government when goods are
sent back. Advise, in the light of the provisions of Customs Act, 1962.
Answer
Yes, the import duty already paid can be claimed back on five mainframe computer systems imported by
Spatial Wireless Pvt. Ltd. in accordance with the provision of section 74 of Customs Act.
Under this section, it is provided that when goods capable of being easily identified, which have been
imported into India and upon which duty has been paid on importation are entered for export and the
proper officer makes an order permitting clearance and loading of the goods for exportation, 98% of such
duty shall be paid back as drawback. However, the goods should be identified to the satisfaction of
Assistant Commissioner of Customs as the goods that were imported and the goods should have entered
for export within two years from the date of payment of duty on the importation thereof.
Further, it is provided in the section that 98% of drawback shall be allowed only in those cases where
the goods have not been used at all after the importation. Various percentages have been fixed by the
Government as the amount of drawback payable in respect of goods that are used after their importation.
In the instant case, all the conditions specified in provisions of section 74 are satisfied. The goods are
identifiable, import duty has been paid and they are scheduled to be exported within the prescribed time
limit. However, the goods have been used for some time. Here, the period between the date of clearance
for home consumption and the date when the goods are placed under the customs control for export is
more than 9 months, but not more than 12 months. Therefore, Spatial Wireless Pvt. Ltd will be eligible
for the drawback claim at the rate of 70% (rate notified by the Government in such case) of the import
duty paid.
Question 2
Answer the following with reference to the provisions of the Customs Act, 1962 and rules made
thereunder:
(1) Mr. A filed a claim for payment of duty drawback amounting to ₹ 50,000 on 30.07.2020. However,
the amount was received on 28.10.2020. You are required to calculate the amount of interest
payable to Mr. A on the amount of duty drawback claimed. Rate of interest allowed on delay in
payment of refund is 6% p.a.
(2) Mr. X was erroneously refunded a sum of ₹ 20,000 in excess of actual drawback on 20.06.2020. A
demand for recovery of the same was issued by the Department on 28.08.2020. Mr. X returned the
erroneous refund to the Department on 20.10.2020. You are required to calculate the amount of
interest chargeable from Mr. X.

Page 6.1
Duty Drawback
Provide brief reasons for your answer. Interest rate applicable @ 15% under Section 28AA of
Customs Act, 1962
Answer
1. Computation of interest payable to Mr. A on duty drawback claimed
Particulars (₹)
Duty drawback claimed 50,000
No. of days of delay [31.08.2020 to 28.10.2020] 59 days
Rate of interest 6%
Quantum of interest (rounded off) [₹ 50,000 x 59/365 x 6/100] 485
Note: Since the claim of duty drawback is not paid to claimant within 1 month from the date of
filing such claim, interest @ 6% per annum is payable from the date after the expiry of the said 1
month period till the date of payment of such drawback [Section 75A(1) of the Customs Act, 1962].
2. Computation of interest chargeable from Mr. X on excess duty drawback paid
Particulars (₹)
Duty drawback erroneously refunded ₹ 20,000
No. of days of delay [21.06.2020 to 20.10.2020] 122 days
Rate of interest 15%
Quantum of interest (rounded off) [₹ 20,000 x 122/365 x 15/100] 1,003
Note: Interest is payable by the claimant on erroneous refund of duty drawback @ 15% per annum
for the period beginning from the date of payment of such drawback to the claimant, till the date
of recovery of such drawback [Section 75A(2)of the Customs Act, 1962].
Question 3
Ascertain whether the exporter is entitled to duty drawback in the following case and if yes, what is the
quantum of such duty drawback?
FOB value of 2,000 kg of goods exported is ₹ 2,00,000. Rate of duty drawback on such export is ₹ 30 per
kg. Market price of goods is ₹ 50,000 (in wholesale market).
Answer
Section 76(1)(b) of the Customs Act, 1962 inter alia provides that no drawback shall be allowed in respect
of any goods, the market price of which is less than the amount of drawback due thereon. In this case, the
market price of the goods is ₹ 50,000, which is less than the amount of duty drawback, i.e. 2,000 kgs x ₹
30 = ₹ 60,000. Hence, no drawback shall be allowed.
Question 4
Infinity Corporation has imported goods and the following particulars are available for claiming duty
drawback under sections 74 & 75 of Customs Act, 1962:
(a) Custom duty has been paid on goods imported for use and have been out ₹ 14,00,000
of customs control for 14 months
(b) Raghuveer exports manufactured goods having FOBvalue of ₹ 86,000.
Rate of duty drawback on FOB value of exports 40%

Page 6.2
Duty Drawback
Market value of the export product ₹ 96,000
Determine duty drawback with explanations in the above cases.
Answer
(a) As per section 74(2) of Customs Act, 1962 read with Notification No. 19/65 Cus dated 06.02.1995
as amended, 65% of import duty is to be paid as duty drawback if goods are used after importation
and have been out of customs control for export for a period of more than 12 months but not more
than 15 months.
Therefore, amount of duty drawback = ₹ 14,00,000 x 65% = ₹ 9,10,000
(b) Amount of duty drawback = ₹ 86,000 x 40% = ₹ 34,400
However, the drawback amount should not exceed one third of the market price of the export
product as per rule 9 of Customs & Central Excise Duties Drawback Rules, 2017.
Thus, upper limit of drawback amount = ₹ 96,000/3 = ₹ 32,000
Thus, the amount of duty drawback in the present case will be restricted to ₹ 32,000
Question 5
Abdul Overseas Pvt. Ltd. was erroneously refunded a sum of ₹ 30,000 in excess of actual drawback on
16-06-2020. A demand for recovery of the same was issued by the Department on 24-08-2020. Abdul
Overseas Private Limited returned the erroneous refund to the Department on 16-10-2020. You are
required to calculate the amount of interest chargeable from Abdul Overseas Pvt. Ltd.
Provide brief reasons for your answer.
Answer
Computation of interest chargeable from Abdul Overseas Pvt. Ltd.
Particulars
Duty drawback erroneously refunded ₹ 30,000
No. of days of delay [17.06.2020 to 16.10.2020] (Refer Note) 122 days
Rate of interest (Refer Note) 15%
Quantum of interest (rounded off) [₹ 30,000 x 122/365 x15/100] 1,504
Note: Interest is payable by the claimant on erroneous refund of duty drawback @ 15% per annum for
the period beginning from the date of payment of such drawback to the claimant, till the date of recovery
of such drawback [Section 75A(2)of the Customs Act, 1962].
Question 6
M/s PQR has imported used wearing apparel from USA in April, 2020. After receipt, PQR is doubtful that
the apparel may not be saleable in India and want to re-export back to USA, without use, which the
supplier has accepted. Will PQR be eligible to take drawback of duty paid on imports? Also, list out the
conditions for duty drawback.
Answer
Duty drawback is allowed on re-export of imported wearing apparels only when the same has not been
used after import.

Page 6.3
Duty Drawback
Since M/s. PQR has re-exported the imported apparels without using the same, it is eligible to take
drawback of duty paid on import of apparels provided the following conditions are satisfied:
(a) goods (apparels) are identified to the satisfaction of the proper officer as the goods which were
imported and
(b) the goods are entered for export within 2 years [period extendible on sufficient cause being shown]
from the date of payment of duty on import.
Question 7
Write a short note on “prohibition and regulation of drawback” with reference to the provisions of
section 76 of the Customs Act, 1962.
Answer
The provisions in respect of prohibition and regulation of drawback as contained in section 76 of the
Customs Act, 1962 are explained hereunder:
(1) No drawback is allowed in respect of any goods, the market price of which is less than the amount
of drawback due thereon. This provision has been made to prohibit export of cheap goods at
inflated price to get benefit of higher duty drawback. Further, drawback is also not allowed where
the amount of drawback in respect of any goods is less than ₹ 50.
(2) If the Central Government is of the opinion that goods of any specified description in respect of
which drawback is claimed are likely to be smuggled back into India, it may, not allow drawback in
respect of such goods or alternatively allow the drawback subject to certain restrictions and
conditions.
Question 8
Explain briefly the provisions relating to drawback allowable on re-export of duty paid imported goods
when:
(a) Duty paid imported goods are re-exported as such
(b) Duty paid imported goods are used before being re-exported
Answer
(a) Duty paid imported goods re-exported as such
When duty paid goods are re-exported as such, drawback is allowed under the provisions of section
74(1) of the Customs Act, 1962. Sub- section (1) of section 74 of the Customs Act, 1962 provides
that following conditions need to be satisfied before claiming drawback:
(a) the goods should have been imported into India;
(b) the import duty should have been paid thereon;
(c) the goods should be capable of being easily identified as the goods, which were originally
imported;
(d) the goods should have been entered for export either on a shipping bill through sea or air or
on a bill of export through land, or as baggage, or through post and the proper officer, after
proper examination of the goods and after ensuring that there is no prohibition or restriction
on their export, should have permitted clearance of such goods for export;
(e) the goods should have been identified to the satisfaction of the Assistant or Deputy

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Duty Drawback
Commissioner of Customs as the goods, which were imported, and

(f) the goods should have been entered for export within two years - which can be extended
further by Board on sufficient cause being shown - from the date of payment of duty on the
importation thereof.
Once these conditions are satisfied, then 98% of the import duty paid on such goods at the
time of importation shall be repaid as drawback.
(ii) Duty paid imported goods re-exported after being used
When duty paid imported goods are used before re-export, drawback is allowed under the
provisions of section 74(2) of the Customs Act, 1962. If the imported goods are used after
importation, the drawback is allowed at reduced rates as fixed by the Central Government having
regard to the duration of use, depreciation in value and other relevant circumstances prescribed
by a Notification. If the goods were in possession of the importer, they are treated as used by the
importer. Following percentages have been fixed vide Notification No. 19/65- Cus dated 6-2-1965
as amended as the rates at which drawback of import duty shall be allowed in respect of goods
which were used after their importation and which have been out of Customs control:
Length of period between the date of clearance for home % of import duty to be
consumption and the date when the goods are placed under paid as duty Drawback
customs control for export
Not more than three months 3 months 95%
More than three months but not more than six months 85%
More than six months but not more than nine months 75%
More than nine months but not more than twelve months 70%
More than twelve months but not more than fifteen months 65%
More than fifteen months but not more than eighteen months 60%
More than eighteen months Nil
Question 9
Can the rate of drawback be granted provisionally to the exporter where amount or rate of drawback has
not been determined? Briefly explain.
Answer
The exporter may be granted provisional duty drawback when he executes a bond binding himself to
repay the entire or excess amount of drawback. Where an exporter desires that he may be granted
drawback provisionally, he may make an application in writing to the Principal Commissioner of Customs
or Commissioner of Customs, as the case may be, that a provisional amount be granted to him towards
drawback on the export of such goods pending determination of the final amount of drawback. The
exporter may be allowed provisional duty drawback of an amount not exceeding the amount claimed by
him in respect of such export.
However, it is to be noted that rate of drawback is determined provisionally only when exporter intends
to get Brand Rate of duty drawback for his exports. The provision has no applicability when exporter
intends to get duty drawback on the basis of All Industry Drawback Rates.
Question 10
Write a short note on “interest on drawback” with reference to section 75A of the Customs Act, 1962.

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Duty Drawback
Answer
Section 75A of the Customs Act provides for payment of interest on delayed payment of drawback. Where
any drawback payable to a claimant under section 74 or 75 is not paid within a period of one month from
the date of filing a claim for payment of such drawback, interest @ 6% p.a. shall be paid along with the
amount of drawback. Such interest shall be paid from the date after the expiry of the said period of one
month till the date of payment of such drawback [Section 75A(1)].
Where any drawback has been paid to the claimant erroneously or it becomes otherwise recoverable
under the Customs Act or the rules made thereunder, the claimant shall, within a period of two months
from the date of demand, pay in addition to the said amount of drawback, interest at the rate fixed under
section 28AA [presently such interest has been fixed @ 15% p.a.] and the amount of interest shall be
calculated for the period beginning from the date of payment of such drawback to the claimant till the
date of recovery of such drawback. [Section 75A(2)].
Question 11
What is the minimum and maximum rate or amount of duty drawback prescribed under the Customs &
Central Excise Duties Drawback Rules, 2017? Explain with a brief note.
Answer
Minimum rate of duty drawback - Rule 8 of Customs and Central Excise Duties Drawback Rules, 2017
provides that no amount or rate of drawback shall be determined in respect of any goods or class of goods
under rule 6 or rule 7, as the case may be, if the export value of each of such goods or class of goods in
the bill of export or shipping bill is less than the value of the imported materials used in the manufacture
of such goods or class of goods, or is not more than such percentage of the value of the imported materials
used in the manufacture of such goods or class of goods as the Central Government may, by notification
in the Official Gazette, specify in this behalf.
Maximum rate of duty drawback - Rule 9 of Customs and Central Excise Duties Drawback Rules,
2017provides that the drawback amount or rate shall not exceed one third of the market price of the
export product. This provision has been made to avoid over invoicing of export goods.
Question 12
Your client loaded a machine on the vessel for export. He has paid import duty on the components used
in the manufacture. The vessel set sail from Mumbai, but runs into trouble and sinks in the Indian
territorial waters. The customs department refuses to grant duty drawback for the reason that the goods
have not reached their destination. Advise your client citing case law, if any.
Answer
Rule 2(c) of the Customs and Central Excise Duties Drawback Rules, 2017 inter alia provides that "export"
means "taking out of India to a place outside India". Section 2(27) of the Customs Act, 1962 provides that
In case of CC v. Sun Industries 1988 (35) ELT (241), the Supreme Court held that the expression “taking
out of India to a place outside India” would also mean a place in high seas, if that place is beyond
territorial waters of India. Therefore, the goods taken out to the high seas outside territorial waters of
India would come within the ambit of expression “taking out of India to a place outside India”. The
emphasis in the aforementioned judgment was on the movement of the goods outside the territorial
waters of India. It is then that an export may be said to have been taken place.
Page 6.6
Duty Drawback
In the instant case, the vessel sunk within territorial waters of India and therefore, there is no export.
Accordingly, no duty drawback shall be available in this case. Similar decision was given by the Supreme
Court in the case of UOI v. Rajindra Dyeing & Printing Mills Ltd. 2005 (180) ELT 433 (SC).
In other words, if the goods cross the territorial waters, drawback will be available even if they do not
reach the destination or are destroyed provided the payment for the goods is received in convertible
foreign exchange. Para 2.85.2 of HBP Vol. 1 2015-20 states that payment through insurance cover from
General Insurance and approved Insurance Companies would be treated as payment realised for exports
under various export promotion schemes.
Question 13
M/s. RIL Ltd. claimed duty drawback in respect of its export products. Over 97% of the inputs by weight
of the product were procured indigenously and were not excisable. All Industry Rates under the
Customs& Central Excise Duties Drawback Rules, 2017were fixed taking into account the incidence of
customs duty on imported inputs.
Explain briefly with reference to clause (ii) of second proviso to rule 3 of the said rules whether the claim
of M/s. RIL will merit consideration by the authorities.
Answer
Clause (ii) of second proviso to rule 3(c)of the Customs and Central Excise Duties Drawback Rules,
2017inter alia provides that no drawback shall be allowed if the exported goods have been produced or
manufactured using imported materials or excisable materials in respect of which duties have not been
paid.
In the given case, there was no duty incidence on 97% of the inputs of the export product except the duty
incidence on remaining 3% of the inputs, which was insignificant. All Industry Rates fixed for particular
export products are applicable to all exporters who export the same. However, in a case where there is
clear evidence, as in the present one, that the inputs of such export products have not suffered any duty,
no drawback can be claimed. Same view was expressed by the Tribunal in the case of Rubfila
International Ltd. v. CCus. Cochin 2005 (190) ELT 485 (Tri.-Bang.)[maintained in Rubfila International
Ltd. v. Commissioner - 2008 (224) E.L.T. A133 (S.C.)].
Question 14
With reference to drawback on re-export of duty paid imported goods under section 74 of the Customs
Act, 1962, answer in brief the following questions:
(i) What is the time limit for re-exportation of goods as such?
(ii) What is the rate of duty drawback if the goods are exported without use?
(iii) Is duty drawback allowed on re-export of wearing apparel without use?
Answer
(i) As per section 74 of the Customs Act, 1962, the duty paid imported goods are required to be
entered for export within two years from the date of payment of duty on the importation. This
period can be extended by CBIC if the importer shows sufficient reason for not exporting the goods
within two years.
(ii) If duty paid imported goods are exported without use, then 98% of such duty is re-paid as
drawback.

Page 6.7
Duty Drawback
(iii) Yes, duty drawback is allowed when wearing apparels are re-exported without being used.
However, Notification No. 19/65 Cus dated 06.02.1965 as amended provides that if wearing
apparels have been used after their importation into India, drawback of import duty paid thereon
shall not be allowed when they are exported out of India.
Question 15
With reference to the Customs & Central Excise Duties Drawback Rules, 2017, briefly state whether an
exporter who has already filed a duty draw back claim under All Industry Rates, can file an application
for fixation on special brand rate.
Answer
Rule 7 of the Customs and Central Excise Duties Drawback Rules, 2017 provides that application for
Special Brand Rate cannot be made where a claim for drawback under rule 3 or rule 4 has been made.
In other words, where the exporter has already filed a duty drawback claim under All Industry Rates
(AIR) Schedule, he cannot request for fixation of Special Brand Rate of drawback. Thus, the exporter
should determine prior to export of goods, whether to claim drawback under AIR or Special Brand Rate.
Question 16
M/s Deepak Business Ltd., had imported goods during 2017. Custom duty has been paid for ₹ 20,00,000
at the time of import. These goods were used and later re-exported after 23 months of import. Is M/s
Deepak Business Ltd., eligible for refund of customs duty paid at the time of import. If so, how much?
Answer
Reference to Section 74(2) of Customs Act, 1962 has to be made for examining the eligibility of drawback
if any on goods exported after usage. In the given instance, goods were exported after a period of 18
months, where in the percentage of to be paid as drawback allowed is “NIL”. Accordingly, M/s Deepak
Business Ltd., shall not be eligible to claim any amount of drawback on such re-export made.
Question 17
M/s Dynamic Exporters exported goods having FOB value of ₹ 10 lakhs. The All Industry duty drawback
on exports of these goods is 5%. Market price of the goods in India is ₹ 40,000. Calculate the duty draw
back receivable by M/s Dynamic Exporters.
Answer
Duty drawback eligible under Section 75 of Customs Act, 1962 is ₹ 50,000 [₹ 10,00,000 x 5% = ₹ 50,000].
Market price of such goods is ₹ 40,000/- As per Section 76(1)(b) of Customs Act, duty drawback shall not
be allowed in respect of any goods, if the market price of such goods is less than the amount of drawback
due thereon. Hence, M/s Dynamic Exporters is not entitled to get any duty drawback.

Page 6.8
Duty Drawback

Question 18
Times Graphics Ltd. has imported a machine from its holding company in Japan on 12.01.2021 after
paying customs duty of ₹ 15,00,000 for use in its factory and is re-exported on 10.10.2021. You are
required to advise Times Graphics Limited regarding duty drawback that will be available to the
company, when it sends back the machinery to its holding company after completion of the project.
Answer
Since in the given case, the imported goods have been used for more than 6 months but not more than 9
months before re-exportation, 75% of the import duty paid shall be allowed as duty drawback to Times
Graphics Ltd. Thus, amount of duty drawback available to Times Graphics Ltd. is:
= ₹ 15,00,000 x 75%
= ₹ 11,25,000

Page 6.9
CHAPTER - 7
Refund
Question 1
State briefly with reference to the provisions of section 27 of the Customs Act, 1962 whether the principle
of “unjust enrichment” will apply in case of refund of excess duty paid on car imported for personal use?
Answer
The bar of unjust enrichment applies in case of refund of customs duty under section 27(2) of the
Customs Act, 1962.
The principle of unjust enrichment will not apply to refund of duty on car imported for personal use, as
clause (b) of the proviso to sub-section (2) of section 27 of the Customs Act, 1962 stipulates that in case
of imports made by an individual for his personal use, the refund should not be credited to consumer
welfare fund, but shall be paid to the applicant.
Question 2
Explain the provisions of Customs Act, 1962 relating to computation of limitation for submission of
refund application.
Answer
According to section 27(1) of the Customs Act, 1962, a refund claim should be lodged before the expiry
of one year from the date of payment of such duty or interest. The period of limitation of one year should
be computed in the following manner:
(a) If the refund claim is lodged by the importer, the time limit should be calculated from the date of
payment of duty.
(b) If the refund claim is lodged by the buyer of imported goods, the time limit should be calculated
from the date of purchase of goods.
(c) In case of goods which are exempt from payment of duty by an adhoc exemption, the limitation
of one year should be computed from the date of issue of such exemption order.
(d) Where any duty is paid provisionally, the time limit should be computed from the date of
adjustment of duty after the final assessment thereof or in case of re-assessment, from the date of
such re-assessment.
(e) Where the refund arises as a result of any judgement/decree/order/direction of the Appellate
Authority/ Appellate Tribunal/Court, the time limit should be calculated from the date of such
judgement/decree/order/direction.
The time limit of one year is not applicable if duty is paid under protest. Finally, it is worth mentioning
that above provisions regarding time limit are mandatory and customs authorities cannot grant a refund
which is filed beyond the maximum permissible period.
Question 3
The assessee furnished bank guarantee to the department as required, and imported capital goods at
concessional rate of duty under an authorisation with export obligation, but failed to complete the export
obligation within the prescribed time. Consequently, the Department invoked the bank guarantee and

Page 7.1
Refund
realized the amount of duty foregone. Subsequently the assessee fulfilled the export obligation and the
same was also accepted by the Department. The assessee filed a refund claim for the amount realized by
the Department under the bank guarantee. The Department rejected the refund claim on the ground that
it was time barred in terms of section 27 of the Customs Act, 1962.
Was the stand taken by the Department correct in law? Examine with the support of case law on the issue.
Answer
In this case the bank guarantee was for the purpose of security for fulfilment of export obligation. It
cannot be construed as payment of ‘duty’. As section 27 applies only to refund of duty and not to refund
of other amounts, the time bar under the said section cannot be invoked to deny the refund.
The facts of given case are similar to the facts of CCus. (Exports) v. Jraj Exports (P) Ltd. 2007 (217) ELT
504 (Mad.). The High Court, in the instant case, held that furnishing of bank guarantee for export
obligation could not be regarded as payment of duty; therefore time-bar was not applicable for its return.
The High Court relied on the Supreme Court’s ruling in the case of Oswal Agro Mills Ltd. and Another v.
Asstt. Collector of Central Excise 1994 (70) ELT 48 (SC), wherein it was held that furnishing of bank
guarantee pursuant to an order of the Court would not be equivalent to payment of excise duty. The
furnishing of bank guarantee is only a security to safeguard the interest of the Revenue. Since section 27
governs the refund of ‘duty’, and the bank guarantee is not ‘duty’, the limitation prescribed therein for
refund of duty would not apply to refund of a bank guarantee.
Applying the principle laid down in the above said case, the High Court stated that the requirement to
establish that the duty incidence had not been passed on by the assessee to any other person would also
not get attracted since section 27 has no application to this case. Therefore, the stand of the Department
is not correct in law.
Question 4
M/s. HIL imports copper concentrate from different suppliers. At the time of import, the seller issues a
provisional invoice and the goods are provisionally assessed under section 18 of the Customs Act, 1962
based on the invoice. When the final invoice is raised, based on the price prevalent in the London Metal
Exchange on a predetermined date as agreed in the contract between the buyer and seller, the
assessments are finalized on the basis of the price in such invoices.
M/s HIL has filed a refund claim arising out of the finalization of the bill of entry by the authorities. The
Department, however, has rejected the refund claim on the grounds of unjust enrichment. Discuss
whether the action of the department is correct in law?
Answer
Section 18 (dealing with provisional assessment) incorporates the principle of unjust enrichment in case
of refund arising out of finalization of provisional assessment. Sub-section (5) of section 18 of Customs
Act, 1962 provides that if any amount is found to be refundable after finalisation of provisional
assessment, such refund will be subject to doctrine of unjust enrichment.
Further, section 28D places the onus on the person who has paid duty to prove that he has not passed on
the incidence of such duty. In the absence of any proof from such person, section 28D deems that the
burden of duty has been passed on to the buyer.
Therefore, in the given case, the Department’s action will be correct if M/s HIL does not produce any
evidence of bearing the burden of duty.

Page 7.2
Refund
Question 5
XYZ Ltd imported capital goods and used them in its factory to produce goods for sale. Upon discovery of
an error by which excess import duty had been paid on the said capital goods, it filed a claim for refund.
As regards unjust enrichment, it contended -
• that the capital goods were not sold and hence the principle of unjust enrichment will not apply to
the refund of import duty paid on capital goods; and
• that in any case the price of the finished goods manufactured in the factory remained the same
before and after the import and installation of the capital goods, which is sufficient proof to
establish that duty burden has not been passed on.
Examine the merits of these contentions, with the support of case law, if any.
Answer
The incidence of duty can be passed directly or indirectly. Where the capital goods are used for
manufacture, the duty paid on their import will go into the costing of the goods manufactured and sold,
and can thus be passed on to the buyers. The Large Bench of the Tribunal in the case of SRF Ltd. v. CCus.
Chennai 2006 (193) ELT 186 (Tri. - LB) has held that the doctrine of unjust enrichment would be
applicable in case of imported capital goods used captively for manufacture of excisable goods. As regards
the relevance of the fact that price remained the same before and after the capital goods were imported,
the Larger Bench also clarified that uniformity in price before and after assessment does not lead to
inevitable conclusion that duty burden has not been passed, as such uniformity may be due to various
reasons. In view of this, the contentions of XYZ Ltd are liable to be rejected.
Question 6
Section 26A of Customs Act, 1962 provides for refund of import duty paid if goods are found defective or
not as per specifications. Discuss the conditions governing such refund in brief.
Answer
Often, goods imported are found to be defective or not according to specifications. In such cases, earlier,
the refund of customs duty paid at the time of import could be obtained only if the imported goods were
physically returned to foreign supplier. Generally, cost of return of the rejected goods is heavy and it is
economical to dispose of the goods in India itself. Realising this practical difficulty, section 26A of
Customs Act makes provision for refund of import duty paid if goods are found defective or not as per
specifications. The refund is admissible if goods are re-exported or relinquished and abandoned to the
customs authorities or destroyed. Thus, refund is possible even if goods are destroyed or relinquished in
India without re-exporting the same.
The section stipulates the following conditions for the refund:
(i) the goods are found to be defective or otherwise not in conformity with the specification agreed
upon between the importer and the supplier of goods;
(ii) the goods have not been worked, repaired or used after importation except where such use was
indispensable to discover the defects or non-conformity with the specifications;
(iii) the goods are identified to the satisfaction of Assistant/Deputy Commissioner of Customs as the
goods which were imported;
(iv) the importer does not claim drawback under any other provision of this Act; and
(v) the goods are exported or the importer relinquishes his title to the goods and abandons them to
customs or such goods are destroyed/rendered commercially valueless in the presence of proper

Page 7.3
Refund
officer in prescribed manner within 30 days from the date on which the order of clearance of
imported goods for home consumption is made by the proper officer. This period of 30 days can
be extended up to 3 months.
(vi) An application for refund of duty shall be made before the expiry of 6 months from the relevant
date in prescribed form and manner.
(vii) Imported goods should not be such regarding which an offence appears to have been committed
under this Act or any other law.
(viii) Imported goods should not be perishable goods and goods which have exceeded their shelf life or
their recommended storage before use period.
Question 7
What is the minimum monetary limit prescribed in the Customs law below which no refund shall be
granted?
Answer
As per third proviso to section 27(1) of the Customs Act, 1962, the minimum monetary limit below which
refund cannot be granted is ₹ 100.
Question 8
Explain the doctrine of unjust enrichment with respect to refund of duty.
Answer
Customs duty is a levy under Indirect taxation, which implies that the incidence of the customs duty paid
is generally passed on to the buyer of the goods.
When an importer imports goods, he has to pay the customs duty on such goods. Similarly, an exporter
in case of export goods, if the same are subject to export duty, the exporter pays the export duty. This
duty is recovered from the buyer when the goods are sold by the importer or exporter, as the case may
be. In other words, the incidence or burden of duty is passed on to the buyer, from whom the importer
or exporter collects the customs duty paid. Subsequently, if the importer or exporter makes a claim for
refund of duty paid (due to excess payment) and receives the refund from the Government, he would be
called to have enriched himself as he collected the duty from his customer also and also as refund from
the Government. Such enrichment is referred to as ‘unjust enrichment’.
Accordingly, the doctrine of ‘unjust enrichment’ implies that no person should enrich himself at the cost
of others.
Therefore, wherever there is excess payment of duty, the refund is to be given only to the person who
has borne the burden of such duty along with interest, if any. When the person who applies for refund is
not the person who has borne the burden of duty, the refund is paid into a fund called 'Consumer Welfare
Fund'.
Section 28D provides that every person who has paid duty under the Customs Act, unless the contrary is
proved by him, shall be deemed to have passed the full incidence of such duty to the buyer; hence the
applicant for refund has to refute the presumption of passing on the incidence of duty.
Question 9

Page 7.4
Refund
Acme Sales’ imports were being provisionally assessed pending a verification that the department was
carrying out. Upon completion of the verification, the assessments were finalized, and Acme Sales was
asked to pay ₹ 12 lakhs, which it paid. After six months, upon detailed scrutiny of the verification report
and taking legal opinion on it, Acme Sales filed a claim for refund of
₹ 8 lakhs on the ground that the differential amount should be ₹ 4 lakhs only and that there were factual
errors in the verification report. Was this the correct mode of redressal for Acme Sales? What will be
likely outcome of the claim? Discuss on the basis of case law on the subject.
Answer
Acme Sales received an order finalizing provisional assessment on the basis of a verification report, and
requiring payment of ₹ 12 lakhs. They did not contest this order, but made the payment, and allowed the
appeal period of sixty days to lapse. After appeal became time-barred they filed a claim for refund in
which they challenged the order. This was a backdoor method of seeking relief against the order; it also
asked an officer of the same rank to review the order passed; and it sought to bypass the time limitation
for appeal by presenting the appeal as a claim for refund. The Supreme Court has held, in the case of Priya
Blue Industries Limited, 2004 (172) ELT 145 (SC), that such a refund claim is not permissible for all these
reasons. A person who is aggrieved with an assessment order cannot seek refund without filing an appeal
against the assessment order.
Question 10
Mr. N has, over three consignments of 200, 400 and 400 units, imported a total of 1000 units of an article
"ZEP", which has been valued at ₹ 1,150 per unit. The customs duty on this article has been assessed ₹
250 per unit. He adds his profit margin ₹ 350 per unit and sells the article for ₹ 1,750 per unit.
After one month of selling the entire consignment of article "ZEP", Mr. N found that there had been an
error in payment of amount of duty, in which duty for the consignment of 200 units was paid as if it was
400 units, resulting in excess payment of duty. Mr. N files an application for refund for ₹ 50,000 (200 X
250). Is the bar of unjust enrichment attracted?
Answer
Mr. N’s invoices show that he collected duty of ₹ 250 per unit on 1,000 items. However, he paid duty on
200 items more. This payment, in the normal course, was made before the order permitting the clearance
of the goods. It would be evident from the bill of entry that the amount paid was more than the amount
of duty assessed. Thus Mr. N’s case falls within the exception to unjust enrichment listed at clause (g) of
the first proviso to section 27(2). He will be able to refute the charge of unjust enrichment. Furthermore,
clause (a) of the same sub-section provides that the doctrine of unjust enrichment will not apply to the
refund of duty and interest, if any, paid on such duty if such amount is relatable to the duty and interest
paid by the importer/exporter, if he had not passed on the incidence of such duty and interest to any
other person. Mr. N’s invoices will show how much duty he collected from his customers, hence he may
be covered by this clause also to escape the bar of unjust enrichment.
Question 11
Explain the relevant dates as provided in section 26A(2) of the Customs Act, 1962 for purpose of refund
of duty under specified circumstances, namely:
(i) goods exported out of India
(ii) relinquishment of title to goods

Page 7.5
Refund
(iii) goods destroyed or rendered valueless.
Answer
The relevant dates provided under Explanation to section 26A(2) of the Customs Act, 1962 for purpose
of refund of duty under specified circumstances are as follows:
Case Relevant date

(i) Goods exported out of Date on which the proper officer makes an order
India permitting clearance and loading of goods for
exportation
(ii) Relinquishment of title to the goods Date of such relinquishment
(iii) Goods being destroyed or rendered Date of such destruction or rendering of goods
valueless commercially valueless
Question 12
Explain whether refund of import duty is allowed in case of perishable goods?
Answer
Refund is not allowed in case of perishable goods and goods which have exceeded their shelf life or their
recommended storage-before-use period in terms of section 26A(3) of the Customs Act, 1962.
However, the Board may, by notification in the Official Gazette, specify any other condition subject to
which the refund may be allowed under section 26A(4) of the Customs Act, 1962
Question 13
Briefly explain whether interest is paid to the applicant in case of delayed refund by Customs Authorities?
If yes, also explain the period for computation of interest?
Answer
Yes, interest is to be paid to the applicant in case any duty ordered to be refunded to an applicant is not
refunded within 3 months from the date of receipt of application for refund. The government is permitted
to fix such interest between 5% and 30%.
Currently, the rate of interest is 6% vide Notification No. 75/2003-Cus (NT) dated 12.09.2003.
The interest is to be paid for the period beginning from the date immediately after the expiry of 3 months
from the date of receipt of such application, till the date of refund of such duty. For the purpose of
payment of interest, the application is deemed to have been received on the date on which a complete
application, as acknowledged by the proper officer of Customs, has been made.

Page 7.6
Refund

Question 14
Would the period of limitation for claiming refund applicable to refund of amount paid on account of duty
paid twice under mistake? Briefly discuss with reference to legal provisions and case law.
Answer
The High Court, in Parimal Ray v. CCus. 2015 (318) ELT 379 (Cal.), has ruled that the law of limitation
under Customs Act is applicable to duty or interest paid under that Act.
However, any sum paid to the exchequer by mistake is not the duty or excess duty but is simply money
paid to the account of Government.
Hence, limitation of one year applicable to refunds of customs duty will not apply to refunds of amount
paid to the Government by mistake. In view of the same, the limitation period of one year will not apply
to the duty paid twice by mistake.

Page 7.7
CHAPTER - 8
Foreign Trade Policy
Question 1
Examine whether benefit of Service Exports from India Scheme (SEIS) can be availed with respect to
notified services provided by service providers located in India in the current financial year in the
following independent cases:
(i) Net Foreign exchange earned by Mr. Aniket, a service provider, in the year of rendering service is
USD 3,000.
(ii) X and Y Brothers, a firm of service providers, has earned net foreign exchange to the tune of USD
16,500 in the year of rendering service.
(iii) Mr. Ishaan, a service provider, has earned net foreign exchange of USD 12,000 in the year of
rendering service. Out of this, USD 3,000has been paid to Mr. Ishaan through the credit card of the
foreign client.
Note: All the above service providers have an active IEC at the time of rendering services.
Answer
In order to be eligible for duty credit scrip entitlement under SEIS:
(a) Service provider must be located in India.
(b) It must provide only notified services in specified manner.
(c) It must have an active IEC at the time of rendering such services for which rewards are claimed.
(d) An individual service provider/Sole-proprietorship should have minimum net foreign exchange
earnings of USD 10,000 and a service provider other than individual/Sole-proprietorship should
have minimum NFE of USD 15,000, in the year of rendering service.
Free foreign exchange earned through International Credit Cards and other instruments as permitted by
RBI for rendering of service are also be taken into account for computation of NFE.
In the light of the above provisions, the cases are examined as under:
(i) Mr. Aniket is not eligible for SEIS Scheme as his net foreign exchange earnings are less than USD
10,000 (minimum limit for individuals).
(ii) X and Y Brothers are eligible for the Scheme as their net foreign exchange earnings exceed the limit
of USD 15,000 (minimum limit for firms).
(iii) Foreign exchange earned through credit cards is counted for the purpose of computing the limit of
minimum net foreign exchange required for being eligible to SEIS Scheme. Thus, Mr. Ishaan is
eligible for SEIS Scheme.
Question 2
Two exporters namely, Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. have achieved the status of Status
Holders (One Star Export House) in the current financial year. Both the exporters have been regularly
exporting goods (other than Gems and Jewellery) every year. What would have been the minimum export
performance of the two exporters to achieve such status?
Both the exporters want to establish export warehouses in accordance with the applicable guidelines.
What should be their export turnover to enable them to establish export warehouses?
Answer
Page 8.1
Status Holders are business leaders who have excelled in international trade and have successfully
contributed to country’s foreign trade. All exporters of goods, services and technology having an import-
export code (IEC) number shall be eligible for recognition as a status holder. Status recognition depends
upon export performance.
In order to be categorized as One Star Export House, an exporter needs to achieve the export performance
of 3 million US $ million [FOB/ FOR (as converted)] during current and previous three financial years.
Thus, export performance of Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. would have been at least 3 million
US $ million [FOB/ FOR (as converted)] during current and previous three financial years. For granting
status, export performance is necessary in at least 2 out of 4 years.
Further, Two Star Export Houses and above are permitted to establish export warehouses. Therefore,
Red Sky Pvt. Ltd. and Black Night Pvt. Ltd. can establish export warehouses in India only if they achieve
the status of Two Star Export House and above. In order to achieve said status, export performance of
the exporters during current and previous three financial years should be as indicated below:
Status Category Export Performance

[FOB/FOR (As converted value on us$ million)]
Two Star Export House 25
Three Star Export House 100
Four Star Export House 500
Five Star Export House 2,000
Question 3
Answer the following questions with reference to the provisions of Foreign Trade Policy:
(i) FIintex Manufacturers manufactures goods by using imported inputs and supplies the same under
Aid Programme of the United Nations. The payment for such supply is received in free foreign
exchange. Can FIintex Manufacturers seek Advance Authorization for the supplies made by it?
(ii) XYZ Ltd. has imported inputs without payment of duty under Advance Authorization. The CIF value
of such inputs is ₹ 10,00,000. The inputs are processed and the final product is exported. The
exports made by XYZ Ltd. are subject to general rate of value addition prescribed under Advance
Authorization Scheme. No other input is being used by XYZ Ltd. in the processing. What should be
the minimum FOB value of the exports made by the XYZ Ltd. as per the provisions of Advance
Authorization?
(iii) ‘A’ has used some duty paid inputs in its export products. However, for the rest of the inputs, he
wants to apply for the Advance Authorization. Can he do so? Explain.
Answer
(i) Supply to goods to UN or international organisations for their official use or supplied to projects
financed by them are ‘deemed exports’. Advance Authorization can be issued for supplies made to
such ‘deemed exports’. Therefore, Flintex Manufacturers can seek an Advance Authorization for
the supplies made by it.
(ii) Advance Authorization necessitates exports with a minimum of 15% value addition (VA).
VA = [(A – B)/B x 100]
A = FOB value of export realized, B = CIF value of inputs covered by authorization.
Therefore, the minimum FOB value of the exports made by XYZ Ltd. should be ₹ 11,50,000 to attain
15% VA.

Page 8.2
(iii) Yes, ‘A’ can do so. In case of part duty free and part duty paid imports, both Advance Authorization
and drawback will be available. Drawback can be obtained for any duty paid material, whether
imported or indigenous, used in goods exported, as per drawback rate fixed by DoR, Ministry of
Finance (Directorate of Drawback). Advance Authorization can be used for importing duty free
material. Details about duty paid material must be mentioned in the application for Advance
Authorization. In such case, All Industry Brand Rates may not be applicable. The manufacturer has
to get specific brand rate fixed from Commissioner for these exported goods.
Question 4
Discuss the key similarities and differences between Advance Authorization and DFIA (Duty Free Import
Authorization) schemes.
Answer
In both DFIA and Advance Authorization schemes, import of inputs, oil and catalyst which are required
for export products are permitted without payment of customs duty.
Key differences between DFIA and Advance Authorisation schemes are as follows -
(i) ‘Advance Authorisation’ is not transferable. DFIA is transferable after export obligation is fulfilled.
(ii) Advance Authorisation scheme requires 15% value addition, while in case of DFIA, minimum 20%
value addition is required.
(iii) Advance Authorisation scheme is available to gem and jewellery sector but not DFIA.
(iv) DFIA cannot be issued where SION (Standard Input Output Norms) prescribes actual user
condition [as the material is transferable after fulfilment of export obligation]. Advance
Authorisation can be issued even if SION for that product is not fixed. DFIA can be issued only if
SION has been fixed for that product to be exported.
(v) IGST has been exempted on imports under Advance Authorisation scheme upto 31.03.2021, but
there is no such exemption available if imports are under DFIA scheme.
Question 5
XP Pvt. Ltd., a manufacturer, wants to import capital goods in CKD condition from a foreign country and
assemble the same in India. The import of the capital goods will be under notified Project Imports. The
capital goods will be used for pre-production processes. The final products of XP Pvt. Ltd. would be
supplied in SEZ unit. XP Pvt. Ltd. wishes to sell the capital goods imported by it as soon as the production
process starts.
XP Pvt. Ltd. seeks your advice whether it can avail the benefit of EPCG Scheme for importing the intended
capital goods.
Note – Base your opinion on the facts given above assuming that all other conditions required for being
eligible to the EPCG Scheme are fulfilled in the above case.
Answer
Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods at zero
customs duty or procure them indigenously without paying duty in prescribed manner.
In return, exporter is under an obligation to fulfill the export obligation. Export obligation means
obligation to export product(s) covered by Authorisation/permission in terms of quantity or value or
both, as may be prescribed/specified by Regional or competent authority. Exports to SEZ unit will be

Page 8.3
considered for discharge of export obligation of EPCG Authorization, irrespective of currency, however,
payment must be received from the Foreign Currency Account.
The authorisation holder can either procure the capital goods (whether used for pre-production,
production or post-production) from global market or domestic market. The capital goods can also be
imported in CKD/ SKD to be assembled in India.
An EPCG Authorization can also be issued for import of capital goods under Scheme for Project Imports
notified by CBIC. Export obligation for such EPCG Authorizations would be 6 times of duty saved to be
fulfilled in 6 years.
However, import of capital goods is subject to ‘Actual User’ condition till export obligation is completed.
Only after completion of export obligation, capital goods can be sold or transferred.
Therefore, based on the above discussion, XP Pvt. Ltd. can import the capital goods under EPCG Scheme.
However, it has to make sure that it does not sell the capital goods till the export obligation is completed.
Question 6
Monotype traders wants to enter into export contracts with various customers. It intends to understand
the currency denomination while entering into contract with them and seeks your advice as to how it
should ensure compliance.
Answer
Monotype Traders can denominate all export contracts and invoices either in freely convertible currency
or Indian rupees but export proceeds sh1.ould be realised in freely convertible currency.
However, export proceeds against specific exports may also be realized in rupees, provided it is through
a freely convertible Vostro account of a non- resident bank situated in any country other than a member
country of Asian Clearing Union (ACU) or Nepal or Bhutan.
Additionally, rupee payment through Vostro account must be against payment in free foreign currency
by buyer in his non-resident bank account.
Contracts for which payments are received through ACU shall be denominated in ACU Dollar. Export
contracts and invoices can be denominated in Indian rupees against EXIM Bank/ Government of India
line of credit.
Question 7
Jigsaw Puzzle has imported inputs, having CIF value of ₹ 25,00,000 without payment of duty under
Advance Authorisation. Inputs are supplied free of cost valued at ₹ 5,00,000 to meet eventualities of
quality issues arising during manufacture. On manufacturing, the products are supplied to SEZ units and
realisation is in Indian currency through regular current account.
Jigsaw Puzzle wants to know whether it is entitled to Advance Authorisation scheme and what should be
the minimum value addition. And you are required to compute FOR value of supplies to SEZ.
Jigsaw Puzzle has manufactured and supplied goods against EPCG authorisation to their customer. Jigsaw
Corporation who are setting up a new unit for exports. The payment for such supply is received in Indian
currency. Can Advance Authorization be denied as payment has not been received in free foreign
exchange?
Answer
Advance authorisation (AA) can be issued for supplies made to SEZ units (as supplies made to SEZ units

Page 8.4
are considered as equivalent to physical exports). The minimum value addition required to be achieved
under AA is 15%. The FOR value of supplies made to SEZ units is computed as under:
Value addition = (FOR value of supply received – CIF value of inputs/CIF value of inputs) x 100
Notional value of free of cost inputs supplied by foreign buyer needs to be added to the CIF value of
imported inputs to compute FOR value of the supplies made to SEZ units.
FOR value of supplies made to SEZ units (after adding minimum 15% value addition) = 30,00,000 x 115%
= ₹ 34,50,000
Jigsaw Puzzles will, however, be not eligible for AA as the payment from SEZ unit is not realised from its
Foreign Currency Account.
Supply of goods to against EPCG Authorisation is a deemed export eligible for grant of AA. However in
this case, AA can also be issued when the payment for such deemed exports is realised in free foreign
exchange.
Question 8
From the following particulars, you are required to determine reward under Merchandise Exports from
India Scheme (MEIS) under Foreign Trade Policy 2015-2020:
(1) Exports of handloom products through notified courier using e- commerce platform with FOB
value of ₹ 5,15,000 per consignment.
(2) Exports of goods which are subject to minimum export price with FOB value of ₹ 50,000.
(3) Exports of goods where FOB value declared in shipping bill is ₹ 8,00,000. FOB value realised with
exchange gain is ₹ 8,20,000.
(4) Exports of books through foreign post office using e-commerce platform with FOB value of ₹
4,95,000 per consignment
(5) Biotechnology Park products exported through DTA units of ₹ 3,00,000
(6) Supplies made from DTA units to SEZ units of ₹ 2,00,000
(7) Rate of reward under MEIS is 7%.
Answer
Computation of rewards under MEIS
Particulars Amount eligible

for reward (₹)
Export of handloom products through courier using e- commerce platform with 5,00,000
FOB value ₹ 5,15,000
[Export of handloom products of FOB value upto ₹ 5,00,000 per consignment is
entitled for reward under MEIS.]
Export of goods which are subject to minimum export price [Ineligible for MEIS] Nil
Export of goods where FOB value declared in shipping bill is ₹ 8,00,000 and FOB 8,00,000
value realized is ₹ 8,20,000
[FOB value declared in the shipping bill or the FOB value realized, whichever is
lower is considered for MEIS rewards]
Export of books through foreign post office using e- commerce platform with 4,95,000
FOB value of ₹ 4,95,000
[Export of books of FOB value upto ₹ 5,00,000 per consignment is entitled for

Page 8.5
reward under MEIS.]

Biotechnology Park products exported through DTA units [Ineligible for MEIS] Nil
Supplies made from DTA units to SEZ units [Ineligible for MEIS] Nil
Total amount eligible for MEIS reward 17,95,000
MEIS reward @ 7% 1,25,650
Question 9
Briefly explain as to how FTP is linked with customs laws.
Answer
The Foreign Trade Policy is closely knit with the Customs laws of India. However, the policy provisions
per-se do not override tax laws. The exemptions extended by FTP are given effect to by issue of
notifications under respective tax laws (e.g., IGST Act, CGST Act, SGST/UTGST Act,
Customs Tariff Act, 1975, Central Excise Act, 1944, Customs Act, 1962 etc.). Thus, actual benefit of the
exemption depends on the language of exemption notifications issued by the CBIC.
In most of the cases the exemption notifications refer to policy provisions for detailed conditions.
Ministry of Finance/ Tax Authorities cannot question the decision of authorities under the Ministry of
Commerce (so far as the issue of authorization etc. is concerned).
Decision of Director General of Foreign Trade (DGFT) is final and binding in respect of (a) Interpretation
of any provision of foreign trade policy or provision of Handbook of Procedures, Appendices, Aayat
Niryat Forms (b) Classification of any item in ITC(HS).
Question 10
Enumerate the various matters in respect of which policies and regulations are framed under FTP.
Answer
Following issues are covered under FTP 2015-2020 -
• General provisions regarding import and export of goods – Chapter 2 of FTP 2015-2020.
• Export from India Scheme [MEIS and SEIS] to encourage exports of specified goods to specified
countries and also export of services – Chapter 3 of FTP 2015-2020.
• Duty Exemption and Remission Schemes [Advance Authorisation, DFIA and Duty Drawback
Scheme and duty remissions schemes under GST law] to enable exporters to import inputs without
payment of customs duty – Chapter 4 of FTP 2015-2020.
• Export Promotion Capital Goods (EPCG) scheme [to obtain capital goods without payment of
customs duty] – Chapter 5 of FTP 2015- 2020.
• EOU/EHTP/STP and BTP schemes – Chapter 6 of FTP 2015-2020.
• Deemed Exports – Chapter 7 of FTP 2015-2020.
• Quality Complaints and Trade Disputes – Chapter 8 of FTP 2015-2020.
Policy in respect of Special Economic Zones [SEZ] is contained in SEZ Act, 2005 and Rules.
Question 11
With reference to the provisions of FTP 2015-2020, discuss giving reasons whether the following
Page 8.6
statements are true or false:

(i) If any doubt arises in respect of interpretation of any provision of FTP, the said doubt should be
forwarded to CBIC, whose decision thereon would be final and binding.
(ii) Authorization once claimed by an importer cannot be refused by DGFT.
(iii) IEC is a unique 12 digit PAN based alphanumeric code allotted to a person for undertaking any
export/ import activities.
(iv) Waste generated during manufacture in an SEZ Unit can be freely disposed in DTA on payment of
applicable customs duty, without any authorization.
Answer
(i) False. If any question or doubt arises in respect of interpretation of any provision of the FTP, said
question or doubt ought to be referred to DGFT whose decision thereon would be final and binding.
(ii) False. No person may claim an Authorization as a right and DGFT shall have power to refuse to
grant or renew the same in accordance with provisions of FT(D&R) Act, rules made thereunder
and FTP.
(iii) False. IEC is a unique 10-digit code allotted to a person for undertaking export/ import activities.
(iv) True. Any waste or scrap or remnant including any form of metallic waste & scrap generated
during manufacturing or processing activities of an SEZ Unit/ Developer/ Co-developer are
allowed to be disposed in DTA freely, without any authorization, subject to payment of applicable
customs duty.
Question 12
Mr. A has brought a laptop from USA with him. Such laptop has been used by Mr. B - the seller for few
months there. Mr. A contends that he can freely import such laptop as baggage without any
restriction/authorization. Examine the correctness of Mr. A’s claim in the light of the provisions of FTP
2015-2020.
Answer
Import of one laptop computer (notebook computer) as baggage is exempt from whole of the customs
duty. Further, Foreign Trade Policy 2015-2020 provides that import of second hand laptop requires
authorization.
In view of above, Mr. A’s claim is not correct as second hand laptops can be imported only against an
authorization.
Question 13
State in brief policy for import of samples.
Answer
No authorisation is required for import of bona fide technical and trade samples. These are importable
freely. Samples upto ₹ 3,00,000 can be imported by all exporters without duty.
Authorisation for import of samples is required only in case of vegetable seeds, bees and new drugs.
Samples of tea upto ₹ 2,000 (CIF) per consignment will be allowed without authorization.

Page 8.7
Question 14
State salient aspects of Advance authorisation for annual requirements to exporters.
Answer
Annual Advance authorisation would be issued to exporters having past export performance for at least
two financial years, to enable them to import the inputs required by them on annual basis.
Advance authorization for Annual Basis can be only on basis of prescribed manner and not on basis of ad
hoc norms.
Annual Advance Authorisation in terms of CIF value of imports will be granted upto 300% of FOB value
of physical exports in preceding financial year and/or FOR value of deemed exports in preceding year or
₹ 1 crore, whichever is higher.
Question 15
Answer the following questions with reference to the provisions of Duty Credit Scrips under Export from
India Schemes under FTP 2015-2020.
(i) Rishita provides services eligible for SEIS Scheme. She wants to sell SEIS scrips earned by her. Can
she do so?
(ii) Can a manufacturer, importing the inputs utilize the duty credit scrip for payment of entire customs
duty, social welfare surcharge and IGST?
(iii) An exporter was issued duty credit scrip dated 15.07.2020. What is the period within which he
must utilize the scrip?
(iv) An exporter exported leather footwears through courier using e- commerce of value of ₹ 24,000.
Can he apply for duty credit scrips under Merchandise Exports from India Scheme (MEIS)?
Answer
(i) Yes. The duty credit scrips and goods imported or domestically procured against them are freely
transferable.
(ii) No. Utilization of duty credit scrip is not permitted for payment of GST on imports or even domestic
procurements.
(iii) The duty credit scrip will be valid for 24 months from date of issue.
(iv) Yes. Exports of leather footwears through courier using e-commerce of FOB value of ₹ 5,00,000 per
consignment are eligible for MEIS.
Question 16
Mention the reward scheme provided under FTP which aims to promote the manufacture and export of
notified goods/products. Discuss the basis of computation of reward under said scheme. How can the
duty scrips issued under the Scheme be utilized?
Answer
The scheme is known as Merchandise Exports from India Scheme (MEIS).
The objective of MEIS scheme is to promote the manufacture and export of notified goods/ products.
Under MEIS, exports of notified goods/products to notified markets shall be eligible for reward at the
specified rate(s). Unless otherwise specified, the basis of calculation of reward would be:

Page 8.8
(i) on realised FOB value of exports in free foreign exchange,

or
(ii) on FOB value of exports as given in the Shipping Bills in free foreign exchange,
whichever is less.
These scrips can be used for payment of customs duties on import of inputs/goods including notified
capital goods.
Question 17
Explain salient features of post export EPCG scheme.
Answer
In EPCG scheme, first capital goods are imported without payment of customs duty and then export
obligation is fulfilled.
In case of post export EPCG scheme, the capital goods are imported on full payment of applicable duties
in cash. Later, basic customs duty paid on Capital Goods shall be remitted in the form of freely
transferable duty credit scrips. Capital goods imported under EPCG Authorisation for physical exports
are also exempt from IGST and Compensation Cess upto 31.03.2021.
In case integrated tax and compensation cess are paid in cash on imports under EPCG, incidence of the
said integrated tax and compensation cess would not be taken for computation of net duty saved
provided input tax credit is not availed.
These Duty Credit Scrips can be used for payment of applicable custom duties for imports. All other
provisions of EPCG Scheme apply to post export EPCG scheme also.
Specific Export Obligation under this Scheme shall be 85% of the applicable specific EO [6 times of duties,
taxes and cess saved on capital goods imported under EPCG scheme to be fulfilled in 6 years reckoned
from authorization issue date]. Average EO remains unchanged.
Duty remission shall be in proportion to the Export Obligation fulfilled.
The advantage of the scheme is that the exporter does not have any specific export obligation when he
imports capital goods on payment of full customs duty. Later, he gets remission on the basis of exports
made by him.
Question 18
With reference to the provisions relating to EOU, EHTP, STP, BTP & SEZ Schemes as contained in FTP,
answer the following questions:
(i) A unit intending to trade in handicrafts wants to set up an EOU. Is it allowed?
(ii) An EOU has started production after 4 years 10 months from the date of grant of Letter of
Permission (LoP)/ Letter of Intent (LoI). Is it correct?
(iii) A EOU wants to import a second hand capital goods which is prohibited under ITC (HS). Can it do
so?
Answer
(i) No. Units undertaking to export their entire production of goods and services (except permissible
sales in DTA), may be set up under the Export Oriented Unit (EOU) Scheme, Electronics Hardware
Technology Park (EHTP) Scheme, Software Technology Park (STP) Scheme or Bio- Technology

Page 8.9
Park (BTP) Scheme for manufacture of goods, including repair, re- making, reconditioning, re-
engineering and rendering of services. Trading units are not covered under these schemes.
(ii) No. EOU/ BTP/ EHTP/ STPs should start production within 2 years from the date of grant of Letter
of Permission (LoP)/ Letter of Intent (LoI). In other words, LoP/ LoI have an initial validity of 2
years, by which time unit should have commenced production. Its validity may be extended
further up to 2 years by competent authority. However, proposals for extension beyond four years
shall be considered in exceptional circumstances, on a case to case basis by BoA.
(iii) No. Though an EOU is permitted to import duty free second hand capital goods, without any age
limit, it cannot import capital goods that are prohibited items of import in the ITC(HS).
Question 19
List some supplies which are ‘deemed exports’ for purpose of benefits under Foreign Trade Policy 2015-
2020.
Answer
As per FTP 2015-2020, following are treated as deemed exports:
• Supplies against Advance Authorisation/DFIA
• Supplies to EOU/STP/EHTP/BTP
• Supplies against EPCG authorization
• Supply of marine freight containers by 100% EOU
• Supplies to projects against International Competitive Bidding
• Supplies to projects where imports permitted at zero customs duty
• Supply to mega power projects
• Supplies to UN or International Organizations for their official use.
• Supplies to nuclear projects
Question 20
What are the key features of Advance Authorization Scheme? Enlist the items which can be and which
cannot be imported against Advance Authorization.
Answer
Under advance authorization scheme, INPUTS which are physically used/incorporated in the export
product can be imported without payment of customs duty. IGST and GST Compensation Cess have been
exempted upto 31.03.2021 on imports under Advance Authorisation for physical exports (including
exports to SEZ units) or deemed exports like supply of goods against Advance Authorisation, capital
goods against EPCG, supply of goods to EOU/STP/EHTP etc.
The goods imported are exempt from basic customs duty, additional customs duty, education cess, anti-
dumping duty, countervailing duty, safeguard duty, transition product specific safeguard duty, wherever
applicable, unless otherwise specified. However, specified deemed exports are not exempted from
payment of applicable anti-dumping duty and safeguard duty. The conditions for duty free imports
against physical exports are provided in notification issued under the Customs law.
Validity period for import of Advance Authorisation shall be 12 months from the date of issue of
Authorisation. Validity of Advance Authorisation for deemed export supplies shall be co-terminus with

Page 8.10
contracted duration of project execution or 12 months from the date of issue of Authorisation, whichever
is later.
Period of fulfillment of export obligation under Advance Authorization is 18 months from the date of
issue of Authorization or as notified by DGFT.
Exports proceeds shall be realized in freely convertible currency except otherwise specified. Export to
SEZ Units shall be taken into account for discharge of export obligation provided payment is realised
from Foreign Currency Account of the SEZ unit. Export to SEZ Developers/Co- developers can also be
taken into account for discharge of export obligation even if payment is realised in Indian Rupees.
Items which can be imported duty free against advance authorization:
• Inputs, which are physically incorporated in export product (making normal allowance for
wastage)
• Fuel, oil, catalysts which are consumed/utilised to obtain export product
• Mandatory spares which are required to be exported/supplied with resultant product permitted
upto 10% of CIF value of Authorization.
• Specified spices only when used for activities like crushing/ grinding/ sterilization/ manufacture
of oils or oleoresins and not for simply cleaning, grading, re-packing etc.
However, items reserved for imports by STEs cannot be imported against advance authorization.
Question 21
Discuss the benefits granted under FTP to Status Holders.
Answer
Status holders are granted certain benefits like:
(a) Authorisation and custom clearances for both imports and exports on self- declaration basis.
(b) Fixation of Input Output Norms (SION) on priority i.e. within 60 days by Norms Committee.
(c) Exemption from compulsory negotiation of documents through banks. The remittance/ receipts,
however, would continue to be received through banking channels.
(d) Exemption from furnishing of Bank Guarantee in Schemes under FTP.
(e) Two Star Export Houses and above are permitted to establish export warehouses.
(f) Manufacturers who are also status holders (Three Star/Four Star/Five Star) will be enabled to self-
certify their manufactured goods (as per their IEM/IL/LOI) as originating from India with a view
to qualify for preferential treatment under different preferential trading agreements (PTA), Free
Trade Agreements (FTAs), Comprehensive Economic Cooperation Agreements (CECA) and
Comprehensive Economic Partnership Agreements (CEPA).
(g) Status holders shall be entitled to export freely exportable items (excluding Gems and Jewellery,
Articles of Gold and precious metals) on free of cost basis for export promotion subject to a certain
annual limit specified for each sector separately.
Question 22
Explain the significant features of EPCG Scheme. Which type of capital goods cannot be imported under
such Scheme?
Answer

Page 8.11
Export Promotion Capital Goods Scheme (EPCG) permits exporters to import capital goods for pre-
production, production and post- production at zero customs duty or procure them indigenously without
paying duty in the prescribed manner. In return, exporter is under an obligation to fulfill the export
obligation.
Capital goods imported under EPCG Authorisation for physical exports are also exempt from IGST and
Compensation Cess upto 31.03.2021.
Import under EPCG scheme shall be subject to an export obligation equivalent to 6 times of duties, taxes
and cess saved on capital goods to be fulfilled in 6 years reckoned from the date of issue of authorization.
Authorisation shall be valid for 18 months from the date of issue of Authorisation.
Import of capital goods shall be subject to ‘Actual User’ condition till export obligation is completed. After
export obligation is completed, capital goods can be sold or transferred.
In case integrated tax and compensation cess are paid in cash on imports under EPCG, incidence of the
said integrated tax and compensation cess would not be taken for computation of net duty saved
provided, input tax credit is not availed.
Export proceeds shall be realized in freely convertible currency except for deemed exports supplies.
Export to SEZ Units shall be taken into account for discharge of export obligation provided payment is
realised from Foreign Currency Account of the SEZ unit. Export to SEZ Developers/Co-developers can
also be taken into account for discharge of export obligation even if payment is realised in Indian Rupees.
Eligible capital goods under EPCG Scheme are:
 Capital Goods including capital goods in CKD/SKD condition
 Computer systems and software which are a part of the Capital Goods being imported
 Spares, moulds, dies, jigs, fixtures, tools & refractories
 Catalysts for initial charge plus one subsequent charge
 Capital goods for Project Imports notified by CBIC.
Question 23
Write short notes on the following with reference to the provisions relating to EOU/EHTP/STP/BTP as
contained in the FTP:
(i) Entitlement for supplies from DTA
(ii) Inter-unit transfer
(iii) Sale of unutilized material
(iv) Exit from EOU Scheme
Answer
(i) Entitlements for supplies from DTA
 Supplies from DTA to EOU/ EHTP/ STP/ BTP units will be regarded as “deemed exports” and
DTA supplier shall be eligible for relevant entitlements for deemed exports, besides
discharge of export obligation, if any, on the supplier. The refund of GST paid on such supply
would be available to the supplier subject to specified conditions and documentations under
GST law.
 In addition, EOU / EHTP / STP / BTP units shall be entitled to following:
 Imported goods are exempt from basic customs duty. Further, IGST and GST
compensation cess is exempt upto 31.03.2021.

Page 8.12
 Input Tax Credit of GST paid on inputs and capital goods.

(ii) Inter-unit transfer
 Transfer of manufactured goods from one EOU / EHTP / STP / BTP unit to another EOU /
EHTP / STP / BTP unit is allowed on payment of applicable GST and compensation cess with
prior intimation to concerned Development Commissioners of the transferor and transferee
units as well as concerned Customs authorities, following the prescribed procedure.
 Capital goods may be transferred or given on loan to other EOU/ EHTP/ STP/ BTP/ SEZ units,
with prior intimation to concerned DC and Customs authorities on payment of applicable
GST and compensation cess. Such transferred goods may also be returned by the second unit
to the original unit in case of rejection or for any reason on payment of applicable GST and
compensation cess.
(iii) Sale of unutilized material
 In case an EOU/ EHTP/ STP/ BTP unit is unable to utilize goods (including capital goods and
spares that have become obsolete/surplus) and services, imported or procured from DTA, it
may be
 transferred to another EOU/ EHTP/ STP/ BTP/ SEZ unit; or
 disposed off in DTA with intimation to Customs authorities on payment of applicable
duties and/ or taxes and compensation cess. Further, exemption of basic customs
duties availed, if any, on the goods, at the time of import will also be payable and
submission of import Authorisation; or
 exported.
Such transfer from EOU/ EHTP/ STP/ BTP unit to another such unit would be treated as
import for receiving unit.
 In case of capital goods, benefit of depreciation, as applicable, will be available in case of
disposal in DTA only when the unit has achieved positive NFE taking into consideration the
depreciation allowed.
 No duty shall be payable other than the applicable taxes under GST laws in case capital goods,
raw material, consumables, spares, goods manufactured, processed or packaged, and scrap/
waste/ remnants/ rejects are destroyed within unit after intimation to Customs authorities
or destroyed outside unit with permission of Customs authorities.
 Disposal of used packing material will be allowed on payment of duty on transaction value.
(iv) Exit from EOU Scheme
With approval of DC, an EOU may opt out of scheme. Such exit shall be subject to payment of
applicable IGST/ CGST/ SGST/ UTGST and compensation cess, if any, and industrial policy in force.
If unit has not achieved obligations, it shall also be liable to penalty at the time of exit.
Question 24
What is ‘deemed exports’? Which type of supplies are regarded as deemed exports?
Answer
It refers to those transactions in which goods supplied do not leave country, and payment for such
supplies is received either in Indian rupees or in free foreign exchange. Supply of goods as specified in
FTP shall be regarded as “Deemed Exports” provided goods are manufactured in India.

Page 8.13
Categories of Supplies considered as ‘Deemed Export’ are:

(i) Supply by manufacturer
 Supply of goods against Advance Authorisation/Advance Authorisation for Annual
Requirement/ DFIA
 Supply of goods to units located in EOU/ STP/BTP/EHTP
 Supply of capital goods against EPCG authorisation
(ii) Supply by main/sub-contractors(s)
 Supply of goods to projects or turnkey contracts financed by multilateral or bilateral
agencies/Funds notified by Department of Economic Affairs (DEA), under International
Competitive Bidding.
 Supply of goods to any project where import is permitted at zero customs duty as per
customs Notification No. 50/2017-Customs dated 30.6.2017, provided supply is made
against International Competitive Bidding.
 Supply of goods to mega power projects against International Competitive Bidding (even if
customs duty on imports made by such project is not zero). The ICB procedures should be
followed. Supplier is eligible for benefits as specified. International Competitive Bidding
(ICB) is not mandatory for mega power projects if requisite quantum of power has been tied
up through tariff based competitive bidding or if project has been awarded through tariff
based competitive bidding.
 Supply to goods to UN or international organisations for their official use or supplied to
projects financed by them.
 Supply of goods to nuclear projects through competitive bidding (need not be international
competitive bidding).
Question 25
What do you understand by the term ‘Foreign Trade Policy’ (FTP)? Which is the governing legislation for
FTP? Which Government authorities administer FTP in India?
Answer
Foreign Trade Policy is a set of guidelines or instructions issued by the Central Government in matters
related to import and export of goods in India viz., foreign trade. The FTP, in general, aims at developing
export potential, improving export performance, encouraging foreign trade and creating favorable
balance of payments position.
In India, Ministry of Commerce and Industry governs the affairs relating to the promotion and regulation
of foreign trade. The main legislation concerning foreign trade is the Foreign Trade (Development and
Regulation) Act, 1992 FT (D&R) Act.
In exercise of the powers conferred by the FT (D&R) Act, the Union Ministry of Commerce and Industry,
Government of India announces the integrated Foreign Trade Policy (FTP) in every five years with
certain underlined objectives. This policy is generally updated every year in April, in addition to changes
that are made throughout the year.
The FTP is formulated, controlled and supervised by the office of the Director General of Foreign Trade
(DGFT), an attached office of the Ministry of Commerce & Industry, Government of India. DGFT has
several offices in various parts of the country which work on the basis of the policy formed by the
headquarters at Delhi.

Page 8.14
Though the FTP is formulated by DGFT, it is administered in close coordination with other agencies.
Other important authorities dealing with FTP are:
(i) Central Board of Indirect Taxes and Customs (CBIC)
(ii) Reserve Bank of India (RBI)
(iii) State VAT Departments

Page 8.15

Question 26
(i) A star export house wishes to import goods which are exempt from duty under Foreign Trade
Policy (FTP), subject to fulfilment of export obligation. However, Customs Notification giving effect
to the FTP is yet to be issued. Can the export house import the goods claiming exemption from duty
under FTP in the absence of Customs Notification?
(ii) Give examples of categories of exports/sectors which are ineligible for duty credit scrip
entitlement under MEIS.
Answer
(i) No. The exemptions extended by Foreign Trade Policy can be taken only when the exemption
notification is issued under the relevant tax laws. The provisions of FTP cannot override tax laws.
(ii) Some of the categories of exports/sectors which are ineligible for duty credit scrip entitlement
under MEIS are listed below:
(a) Supplies made from DTA units to SEZ units
(b) Exports through trans-shipment, i.e. exports that are originating in third country but trans-
shipped through India
(c) Deemed Exports
(d) SEZ/EOU/EHTP/BPT/FTWZ products exported through DTA units
(e) Export products which are subject to Minimum export price or export duty
(f) Exports made by units in FTWZ.
Question 27
Whether all types of exports categories/sectors are eligible for duty credit scrip entitlement under
Merchant Export from India Scheme (MEIS)? If your answer is no, give few examples of the export
categories/sectors which are ineligible for duty credit scrip entitlement under MEIS.
Saksham exports a consignment of handicraft items through courier using e-commerce of free on board
(FOB) value of ₹ 4,48,000. Determine whether the export consignment of Saksham is eligible for the MEIS
benefit.
Answer
No, all types of exports categories/sectors are not eligible for duty credit scrip entitlement under
Merchant Export from India Scheme (MEIS).
A few of the ineligible exports categories/sectors under MEIS are listed below:
(i) Supplies made from domestic tariff area (DTA) units to special economic zone (SEZ) units
(ii) Exports through transshipment, i.e., exports that are originating in third country but transshipped
through India
(iii) Deemed exports
(iv) SEZ /export oriented undertaking (EOU) /electronic hardware technology park (EHTP) /bio
technology park (BTP) /free trade warehousing zone (FTWZ) products exported through domestic
tariff area units
(v) Export products which are subject to minimum export price or export duty
(vi) Exports made by units in FTWZ.
Page 8.16
Export of handicraft items through courier, using e-commerce, of free on board (FOB) value up to ₹
5,00,000 per consignment is entitled for rewards under MEIS.
Therefore, the entire consignment of handicraft items exported by Saksham (FOB value ₹ 4,48,000) is
eligible for MEIS benefit.
Question 28
What are the salient features of Duty-Free Import Authorization Scheme (DFIA)? Which duties are
exempted under this scheme?
Answer
DFIA is issued to allow duty free import of inputs, oil and catalyst which are required for production of
export product. The goods imported are exempt ONLY from basic customs duty.
DFIA shall be issued on post export basis for products for which SION have been notified. Separate DFIA
shall be issued for each SION and each port.
No DFIA shall be issued for an export product where SION prescribes ‘Actual User’ condition for any
input.
Holder of DFIA has an option to procure the materials/ inputs from indigenous manufacturer/STE in lieu
of direct import against Advance Release Order (ARO)/ Invalidation letter/ Back to Back Inland Letter of
Credit. However, DFIA holder may obtain supplies from EOU/EHTP/BTP/STP/SEZ units, without
obtaining ARO or Invalidation letter.
Drawback as per rate determined and fixed by Customs authority shall be available for duty paid inputs,
whether imported or indigenous, used in the export product.
DFIA or the inputs imported against it can be transferred after the fulfillment of the export obligation. A
minimum 20% value addition is required for issuance of DFIA except for items in gems and jewellery
sector.
Question 29
Payal Company, a unit located in Agri Export Zone has made exports of machineries worth US $ 30 lakh
per annum (on an average) during the last three years and in the current year. It wants to export certain
goods for export promotion on free of cost basis, which are worth ₹ 25 lakh. 1 US $ = ₹ 50. Examine
whether Payal Company can export, export promotion goods on free of cost basis as proposed.
Answer
Status holders are entitled to export freely exportable items on free of cost basis for export promotion
subject to an annual limit of ₹ 1 crore or 2% of average annual export realization during preceding 3
licensing years, whichever is lower.
All exporters of goods having an import-export code (IEC) number shall be eligible for recognition as a
status holder. Payal Company, upon achieving export performance of US $ 12 million [₹ 30 lakh x 4]
during current and previous 3 financial years, is eligible for status recognition as One Star Export House.
Being a unit in Agri Export Zone, exports of Payal Company is eligible for grant of double weightage for
calculation of export performance for grant of status of One Star Export House. However, the same is not
relevant for Payal Company as it is already eligible for grant of One Star Export House on the basis of its
export performance without taking the benefit of double weightage.
Therefore, being a Status Holder, Payal Company is entitled to export freely exportable items on free of

Page 8.17
cost basis for export promotion as under:

(i) ₹ 1 crore or
(ii) 2% of ₹ 1500 lakh [US $ 30 lakh2 x ₹ 50] which is ₹ 30 lakh
whichever is lower.
Thus, Payal Company can export goods worth ₹ 25 lakh for export promotion on free of cost basis.
Question 30
Which exporters are eligible for Export Promotion Capital Goods Scheme as per Foreign Trade Policy
2015-20? Also describe which capital goods are eligible for import under this scheme?
Answer
Following exporters are eligible for Export Promotion Capital Goods Scheme (EPCG) as per Foreign Trade
Policy 2015-20:
(i) Manufacturer exporters with or without supporting manufacturer(s),
(ii) Merchant exporters tied to supporting manufacturer(s), and
(iii) Service providers including service providers designated as Common Service Provider (CSP) subject
to prescribed conditions.
Further, following capital goods are eligible for imports under this scheme:
(1) Capital goods including capital goods in CKD/SKD condition
(2) Computer systems and software which are a part of capital goods being imported
(3) Spares, moulds, dies, jigs, fixtures, tools & refractories
(4) Catalysts for initial charge plus one subsequent charge
(5) Capital goods for Project Imports notified by CBEC.
Question 31
State export categories/sectors which are ineligible for duty credit scrip entitlement under Merchandise
Exports from India Scheme (MEIS) of Foreign Trade Policy.
Answer
The following export categories /sectors are ineligible for duty credit scrip entitlement under MEIS:
(i) Supplies made from DTA units to SEZ units
(ii) Export of prescribed imported goods
(iii) Exports through trans-shipment, i.e., exports that are originating in third country but trans-
shipped through India;
(iv) Deemed Exports;
(v) SEZ/ EOU /EHTP/ BTP /FTWZ products exported through DTA units;
(vi) Export products which are subject to minimum export price or export duty.
(vii) Exports made by units in FTWZ.
Question 32

Page 8.18
Nirav Shah used some duty paid inputs for manufacture of the export products. However, for the rest of
the inputs, he wants to apply for advance authorization. Can he do so? Advise him with reference to the
Foreign Trade Policy 2015-2020.
Answer
Yes, he can do so. In case of part duty free and part duty paid imports, both advance authorization and
drawback are available.
Drawback can be obtained for any duty paid material, whether imported or indigenous, used in goods
exported, as per prescribed drawback rates. Advance authorization can be used for importing duty free
material.
Drawback allowed must be mentioned in the application for advance authorization. In such case, All
Industry Brand Rates are not applicable. The manufacturer has to get specific brand rate fixed from the
Commissioner for these exported goods.
Question 33
List out the conditions for eligibility for duty credit scrip entitlement under Service Exports from India
Scheme (SEIS) and determine whether the following cases are eligible for benefit under SEIS.
(i) Mr. Raj has received USD 12,500 as consideration for services provided, during the year. He has
also paid USD 3,000 towards services received from abroad. He has also received USD 4,000
towards employment rendered abroad during the year.
(ii) Services Ltd. has received the USD 16,000 as foreign exchange during the year towards share
capital.
(iii) Mrs. Anita has received USD 15,000 as consideration for services provided, during the year.
Assume that except for in case (iii) above, others have an active IEC.
Answer
The conditions for eligibility for duty credit scrip entitlement under SEIS are as under: -
(1) Service provider must be located in India.
(2) It must provide notified services from India either to any other country or to service consumers of
any other country in India.
(3) It must have an active IEC at the time of rendering such services for which rewards are claimed.
(4) While an individual service provider/sole-proprietorship should have minimum net foreign
exchange earnings (NFE) of USD 10,000, other service providers should have minimum NFE of USD
15,000, in the year of rendering service.
In view of the aforesaid provisions, the eligibility of the given cases for the benefit under SEIS has been
determined as under:
(i) NFE = Gross earnings of foreign exchange minus Total expenses/ payment/ remittances of foreign
exchange by the IEC holder, relating to service sector in the financial year
= USD 12,500 - USD 3,000 = USD 9,500
Receipt of USD 4,000 towards employment rendered abroad during the year is not related to
service sector and thus should not be considered for calculating NFE.
Therefore, Mr. Raj is not eligible for SEIS scheme as his NFE is less than USD 10,000 (minimum
limit for individuals).
(ii) Foreign exchange remittances which are earned for rendering of notified services are only
Page 8.19
considered for calculating NFE. Thus, foreign exchange earned towards share capital cannot be
taken into account for calculation of SEIS entitlement.
Thus, Services Ltd. is not eligible for SEIS scheme.
(iii) Since Mrs. Anita does not have an active IEC, she is not eligible for SEIS scheme irrespective of her
NFE.
Note: The above answer is based on the assumption that service provider (in all the three independent
cases) is located in India and provides notified services from India either to any other country or to
service consumers of any other country in India.

Page 8.20
INDIRECT TAX
Amendments for Dec 21 Exams
GST
Chapter 8 (ITC) – Question 34
Sunshine Pvt. Ltd. manufactures taxable goods. The company is registered under GST in the State of West
Bengal. The company has provided following information in relation to inward supplies received by it in
the month of October:
S. No. Invoices received for inward supplies IGST (₹)

1. Raw material - X 2,00,000
2. Rent of the factory building 1,50,000
3. Raw material - Y 1,30,000
4. Car purchased for the use of the director 1,20,000
5. Consumables 80,000
6. Machinery for being used in the manufacturing process 1,50,000
7. Raw material - Z 1,10,000
8. Technical consultancy for improvement in the manufacturing process 60,000
9. Raw material – W (imported from China) 50,000
Total 10,50,000

(i) Balance in Form GSTR-2A on 28th October (Invoices at S. Nos. 1, 2 and 3 4,80,000
uploaded by the respective suppliers in their Form GSTR-1s)
(ii) Balance in Form GSTR-2A on 11th November 6,00,000
(Invoices at S. Nos. 1, 2, 3 and 4 uploaded by the respective suppliers in
their Form GSTR-1s)
(iii) Balance in Form GSTR-2A on 20th November 6,80,000
(Invoices at S. Nos. 1, 2, 3, 4 and 5 uploaded by the respective suppliers in
their Form GSTR-1s)
Compute the ITC that can be claimed by Sunshine Pvt. Ltd. in its Form GSTR-3B for the month of October
to be filed by 20th November.
Note: The due date of filing of Form GSTR-1 and Form GSTR-3B for the month of October are 11th
November and 20th November respectively. Subject to the information given above, all the other
conditions for availing ITC have been complied with.
Answer
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-
Invoices Amount of input tax Amount of ITC that

involved in the invoices (₹) can be availed (₹)
Balance in GSTR-2A on 11th November [Note 1] 6,00,000 4,80,000
(Invoices at S. Nos. 1, 2, 3 and 4 uploaded by the [Note 2]
respective suppliers in their GSTR-1s)
Invoices at S. Nos. 5, 6 7 and 8 not uploaded in 4,00,000 24,000

Page A.1
IDT Amendments for Dec 21 Exams
GSTR-1 [Note 3]
Invoice at S. No. 9 50,000 50,000
[Note 4]
Total 10,50,000 5,54,000
Notes:
(1) ITC in respect of the invoices whose details have not been uploaded by the suppliers shall not
exceed 5% of the 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 section 37(1) of the CGST
Act, 2017 as on the due date of filing of the returns in Form GSTR-1 of the suppliers for the said tax
period. The taxpayer can ascertain the same from his auto populated Form GSTR 2A as available
on the due date of filing of Form GSTR-1 under section 37(1) [Rule 36(4) of the CGST Rules, 2017
read with Circular No. 123/42/2019 GST dated 11.11.2019].
(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:
(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.
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, the ITC has been
restricted to 5% of eligible ITC in respect of invoices uploaded in Form GSTR-1s, i.e. 5% of ₹
4,80,000 in terms of rule 36(4) of the CGST Rules, 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].
Chapter 8 (ITC) – Question 41

Mr. Rishi, a registered supplier under GST in the State of Maharashtra, provides the following information
for the month of January 2020:
OUTWARD SUPPLY:
(i) Supplied computers (which were purchased from an unregistered supplier) Nil
without any consideration to his brother-in-law in Ranchi (market value of
supply was ₹ 62,000)
(ii) Supplied a consignment of 10 laptops to M/s NK & Co. in the State of 6,00,000
Maharashtra at the instruction of third person being M/s ZX Computers of
Tamilnadu.
(iii) Provided stock counting service to M/s XY Impex registered with GST in the 80,000
State of Gujarat, whereas the place where the stock counting was carried out was
at the godown located in Mumbai

Page A.2
(iv) Provided renting service of his service apartment in Mumbai at a daily rent of ₹ 30,000
1500 for residential purposes
(v) Recovery agent services provided to Apex Finance Ltd., an NBFC located in Delhi 2,00,000
(vi) Advance received during the month for future intra-State supply 9,00,000
INWARD SUPPLY:
(i) Imported computer accessories from Korea and the goods landed in Mumbai 5,00,000
Port and reached at his registered premises on 31.01.2020
(ii) Availed GTA services from M/s Speed Trans of Kolkata with regard to transport 1,00,000
of traded goods where rate of CGST/SGST @ 2.5% each IGST @ 5% was
applicable
(iii) Apart from the above, received 15 invoices involving IGST of ₹ 1,00,000 during -
the current month
Mr. Rishi provided the following additional information:

(a) Turnover for the previous financial year was ₹ 21 lakh.
(b) He had availed services in an inter-State transaction with a taxable value of ₹ 4,00,000 and a tax
rate of 18%. This transaction was liable to tax under reverse charge. Payment for the same to the
supplier was not made till the current month (overdue for 181 days as at 01.01.2020). However,
tax due under the said transaction was paid to Government and credit availed in the month of
transaction itself.
(c) Out of the 15 invoices as per above, 12 invoices involving IGST of ₹ 95,000 were uploaded by the
suppliers in their GSTR-1 Return. All the invoices are eligible for claiming as ITC.
(d) He had sent goods valued ₹ 1,00,000 to his job worker, in the State of Kerala, who further processed
the said goods and made direct supply on 31.01.2020 from Kerala to a buyer in the State of
Maharashtra.
(e) Out of advance received for future supply, ₹ 5,00,000 related to supply of goods and the rest related
to service.
(f) Rate of CGST, SGST and IGST are 9%, 9% and 18% respectively for both inward and outward supply
of goods and services. Same rate is also applicable for inward supplies received, except where
otherwise provided.
(g) All the amounts given are exclusive of taxes wherever applicable.
From the information given above, you are required to compute the net GST liability payable in cash
(CGST and SGST or IGST, as the case may be) for the month of January, 2020. Assessee wants to make the
cash payment of GST under SGST head as far as possible.
Answer
Computation of net GST payable in cash for the month of January 2020
(i) Computers supplied without Nil - - -
consideration
[Not a supply as it is made without
consideration and is also not
covered in Schedule I because
computers have been supplied to
an unrelated person and ITC has
Page A.3
also not been availed on the

same.]
(ii) Consignment of laptops supplied 6,00,000 1,08,000
at the instruction of third person [6,00,000 x
[Since supply is a bill to ship to 18%]
supply where the goods are
delivered on the direction of a
third person-ZX Computers,
goods are deemed to be received
by ZX Computers and thus, the
place of supply is Tamil Nadu.
Hence, it is an inter-State supply.]
(iii) Stock counting service to M/s XY 80,000 7,200 7,200 NIL
Impex of Gujarat [80,000 x [80,000 x
[Intra-State supply as the place of 9%] 9%]
supply is the location of recipient,
viz. Mumbai. Godown at Mumbai
being a fixed establishment is the
location of recipient.]
(iv) Service apartment rented in 30,000 2,700 2,700
Mumbai [30,000 x [30,000 x
[Taxable, since the value of supply 9%] 9%]
of the accommodation unit
exceeds ₹ 1,000 per day. Intra-
State supply since place of supply
is Maharashtra as property is
located in Mumbai.]
(v) Recovery agent services provided 2,00,000 - - -
to an NBFC
[Tax is payable by the NBFC under
reverse charge.]
(vi) Advance received for intra-State 4,00,000 36,000 36,000
supply [4,00,000 x [4,00,000 x
[Tax on advance received for 9%] 9%]
supply of goods of ₹ 5,00,000 will
be payable at the time of issuance
of invoice.]
(vii) Finished goods sold from the 1,00,000 9,000 9,000
premises of the job worker* [1,00,000 x [1,00,000 x
[Supply of goods by principal 9%] 9%]
from the job worker’s premises is
regarded as supply by principal
only irrespective of the location of
job worker. Therefore, since the
place of supply is the location
where movement of goods
terminates for delivery to
recipient, i.e., Maharashtra, it is an

Page A.4
intra- State supply.]

*It has been assumed that either
Mr. Rishi has declared the job
worker’s place of business /
premises as his additional place of
business or the job worker is
registered. Further, it has been
assumed that the goods have been
sold from the job worker’s
premises at a price of ₹ 1,00,000
itself.
Total tax liability on outward supplies 54,900 54,900 1,08,000
(i) GTA services availed from M/s 1,00,000 5,000
Speed Trans [1,00,000 x
[Tax is payable under reverse 5%]
charge on the GTA services
received by a registered person
and on which tax is payable @ 5%.
Further, it is an inter-State supply
since supplier is located in
Kolkata and place of supply is
Maharashtra (location of
registered recipient)]
C. Input tax credit
Import of computer accessories* 5,00,000 90,000
[Input tax, inter alia, includes IGST [5,00,000 x
charged on import of goods] 18%]
*It has been assumed that the
value of imported computer
accessories is inclusive of basic
customs duty and social welfare
surcharge and consequently, the
IGST has been computed on the
same.
GTA services availed 1,00,000 5,000
IGST on invoices received during 95,000 +
the month 4,750 =
[Full ITC can be claimed on the 99,750
invoices uploaded by supplier in
Form GSTR-1. Further, where
invoice has not been uploaded by
the supplier in its GSTR-1, 5% of
the eligible ITC available in
respect of the uploaded invoices
or actual ITC in respect of invoices
not uploaded, whichever is lower,
can be claimed by the recipient,

Page A.5
[i.e., lower of 5% of ₹ 95,000, or ₹

5,000]
Less: Input tax reversed [Outward (20,419)
supply, tax on which is payable
under reverse charge is
considered as exempt supply for
the purpose of reversal of ITC.
= ₹ 1,95,000 x ₹ 2,00,000/₹
19,10,000 (₹ 1,95,000 x turnover
of exempt supply/ total turnover)
[The condition for making the
payment for the supply within
180 days so that the ITC availed
does not get added to the output
tax liability does not apply to
reverse charge supplies. Thus, ITC
on ₹ 4,00,000 will not be affected.]
Total ITC available for set off - - 1,79,331
D. Computation of net GST payable
in cash
Total tax liability on outward 54,900 54,900 1,08,000
supplies
Less: ITC of IGST (54,900) (16,431) (1,08,000)
Forward charge liability on -
outward supplies payable in cash
after set off of ITC
Reverse charge liability on inward
supplies payable in cash without
set off of ITC
[Tax payable under reverse
charge, being not an output tax,
cannot be set off against ITC and
thus, will have to be paid in cash.] 5,000
Total net GST liability payable in cash - 38,469 5,000
(It has been assumed that IGST has been
paid on imported goods before January
2020. Therefore, the same has not been
considered as being paid in cash in the
month of January 2020.)
Chapter 9 (Registration) – Question 3

SNP Pvt. Ltd., Coimbatore exclusively manufactures and sells product ‘Z’ which is exempt from GST vide
notifications issued under relevant GST legislations. The company sells product ‘Z’ only within Tamil
Nadu and it not registered under GST. Further, all the inward supply of the company are taxable under
the sales to grow by 20% in the current year. Owing to the growing demand for the product, the company

Page A.6
decided to increase its production capacity and purchased additional machinery for manufacturing ‘Z’ on
1st July. The purchase price of the capital goods was ₹ 20 lakh exclusive of GST @ 18%.
However, effective from 1st November, exemption available on ‘Z’ was withdrawn by the Central
(a) The Board of Directors of SNP Pvt. Ltd. wants to know whether they have to register under GST?
(b) In case in the above question, SNP Pvt. Ltd. is already registered with respect to certain taxable
supplies being made by it along with manufacture of exempt product ‘Z’, other facts remaining the
same, can it take input tax credit on additional machinery purchased exclusively for manufacturing
‘Z’? If yes, then how much credit can be availed?
Advice SNP Pvt. Ltd. on the above issues with reference to the provisions of GST law.
Answer
(a) Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019 inter alia provides that
every supplier who is exclusively engaged in intra-State supply of goods is liable to be registered
under GST in the State/ Union territory from where he makes the taxable supply of goods only
when aggregate turnover in a financial year exceeds ₹ 40,00,000.
Uttarakhand.
However, a person exclusively engaged in the business of supplying goods and/or services that are
23(1)(a).
lakh which is more than the applicable threshold limit of ₹ 40 lakh. Therefore, as per section 22,
the company will be liable to registration. However, since SNP Pvt. Ltd. supplied exempted goods
till 31st October, it was not required to be registered till that day; though voluntary registration
was allowed under section 25(3).
Therefore, turnover of ‘Z’ will be considered for determining the threshold limit even though the
same was exempt from GST. Therefore, the company needs to register within 30 days from
1st November (the date on which it becomes liable to registration) in terms of section 25(1).
Further, the company cannot avail exemption of ₹ 40 lakh from 1st November as the GST law does
not provide any threshold exemption from payment of tax but threshold exemption from obtaining
registration (which in this case had been crossed).
(b) Rule 43(1)(a) of the CGST Rules, 2017 disallows input tax credit on capital goods used or intended
to be used exclusively for effecting exempt supplies.
However, as per section 18(1)(d), where an exempt supply of goods and/or services by a registered
person becomes a taxable supply, such person gets entitled to take credit of input tax in respect of
inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable
to such exempt supply and on capital goods exclusively used for such exempt supply on the day
immediately preceding the date from which such supply becomes taxable.
Rule 40(1)(a) of the CGST Rules, 2017 lays down that the credit on capital goods can be claimed
after reducing the tax paid on such capital goods by 5% per quarter of a year or part thereof from

Page A.7
the date of the invoice.

Therefore, in the given case, SNP Pvt. Ltd. could not claim credit on machinery till the time the
supply of product ‘Z’ for which said machinery was being used was exempt. However, it can claim
credit from 31st October - the day immediately preceding the date from which the supply of
product ‘Z’ became taxable (1st November).
The credit will be available for the remaining useful life of the machinery and will be computed as
follows:
Date of purchase of machinery 1st July
Date on which credit becomes eligible 31st October
Number of quarters for which credit is to be reduced 2 (including part of quarter)
GST paid on machinery [₹ 20,00,000 x 18%] ₹ 3,60,000
Credit to be reduced ₹ 3,60,000 x 5% x 2] ₹ 36,000
Amount of credit that can be taken [₹ 3,60,000 – ₹ 36,000] ₹ 3,24,000

Page A.8
CUSTOMS & FTP

Chapter 8 (FTP) – Question 8
MEIS is replaced with a new scheme (Remission of Duties & Taxes on Export Products) w.e.f. 01.01.2021
Chapter 8 (FTP) – Question 4, 17, 20, 22, 23

GST compensation cess is now exempt upto 30.09.2021 instead of 31.03.2021.

Page A.9

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This Question Bank is property of AIR1CA

Career Institute. It is covered under the

(Relevant for DEC 2021

Best Wishes… Radhe Radhe!!

PART I: Goods & Services Tax (75 Marks)

PART II: Customs & FTP (25 Marks)

BY CA ATUL AGARWAL (AIR-1)

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(b) Petroleum crude, diesel, petrol, ATF and natural gas

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Section B – Additional Questions

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• Octroi and Entry Tax

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Particulars Value received (₹) Rate of GST GST payable (₹)

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BY CA ATUL AGARWAL (AIR-1)

BY CA ATUL AGARWAL (AIR-1)

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S. No Particulars Rate of GST

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Section B – Additional Questions

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Garden for transportation of the same.

S. Amount CGST SGST IGST

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Goods/services supplied CGST SGST IGST

You are required to make suitable assumptions, wherever necessary.

BY CA ATUL AGARWAL (AIR-1)

Particulars CGST (₹) SGST (₹) IGST (₹)

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A. Truck sent to own location in Tamil Nadu

Items used for repairs

You are required to make suitable assumptions, wherever necessary.

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or in some other form) is involved in the execution of such contract.

Particulars Rate of Tax

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Particulars Rate of Tax

S. No. Particulars CGST (₹) SGST (₹) IGST (₹)

Computation of total ITC available

BY CA ATUL AGARWAL (AIR-1)

Particulars CGST (₹) SGST (₹) IGST (₹)

Goods/services supplied CGST SGST IGST

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Particulars CGST (₹) SGST (₹) IGST (₹)

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