Suggested Answers_Syl2016_Deccember2019_Paper 18

FINAL EXAMINATION
GROUP - IV
(SYLLABUS 2016)

SUGGESTED ANSWERS TO QUESTIONS

DECEMBER - 2019
Paper-18 : INDIRECT TAX LAWS AND PRACTICE
Time Allowed : 3 Hours Full Marks : 100

The figures in the margin on the right side indicate full marks.
Wherever necessary, you may make suitable assumptions and state them clearly in your answer.
Working notes should form part of the answer.

Section – A
Answer Question No. 1 which is compulsory and any four from the rest of this section.

1. Choose the correct answer with justification/workings wherever applicable: 2×7=14

(i) The term ‘casual taxable person’ includes

(A) A person occasionally supplying goods or services or both in a State or an Union
Territory where he has no fixed place of business.
(B) A person occasionally supplying goods or services or both in a State or an Union Territory
where he has fixed place of business.
(C) Both (A) and (B)
(D) None of the above

(ii) Mahesh is employed in Zed Traders a proprietary concern of Kumar having taxable
turnover under GST. Services provided by Mahesh will be taxable if
(A) Mahesh provides them on contract basis to Zed Traders.
(B) Mahesh provides them on regular basis to Zed Traders.
(C) Mahesh provides them to the brother of Kumar, not in the course of employment.
(D) None of the above.

(iii) What would be the tax rate applicable in case of composite supply?
(A) Tax rate as applicable on principal supply.
(B) Tax rate as applicable on ancillary supply.
(C) Tax rate as applicable on respective supply.
(D) Tax rate of the principle supply or ancillary supply whichever is higher

(iv) What are the supplies on which reverse charge mechanism would apply?
(A) Notified categories of goods or services or both under Section 9(3).
(B) Inward supply of goods or services or both from an unregistered dealer under
9(4).
(C) Both of (A) and (B).
(D) None of the above.

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(v) Which one of the following is exempted from GST?

(A) Any business exhibition
(B) A business exhibition in India
(C) A business exhibition outside India
(D) None of the above

(vi) What is date of receipt of payment?

(A) Date of entry in the books
(B) Date of payment credited into bank account
(C) Earlier of (A) and (B)
(D) Date of filing of return

(vii)Time limit to pay the value of supply with taxes to avail the input tax credit is
(A) Three months
(B) Six months
(C) One hundred and eighty days
(D) Till the date of filing annual return or 30th September of following year whichever is
earlier.

Answer:

1.
(i) (A) A person occasionally supplying goods or services or both in a State or an
Union territory where he has no fixed place of business.
(ii) (C) Mahesh provides them to the brother of Kumar, not in the course of
employment. Supply includes services provided by the employees to the
employer, not in the course of employment.
(iii) (A) Tax rate as applicable to principal supply
(iv) (A) Notified categories of goods or services or both under Section 9(3) as section
9(4) has been deferred presently
(v) (C) A business exhibition outside India
(vi) (C) Earlier of (a) and (b)
(vii) (C) One hundred and eighty days from the date of issue of invoice by supplier

2. In the following cases based on information given and the query, give your comments on
the taxability under GST and the rate of GST applicable, if any: 2×7=14
(i) Space Bazar offers a free bucket with detergent purchased. It is composite supply or
mixed supply? Assume rate of GST for detergent @ 28% and bucket @ 18%.
(ii) Mr. A booked a Rajdhani train ticket, which includes meal. It is composite supply or
mixed supply?
(iii) Mr. Ravi being a dealer in laptops, sold a laptop bag along with the laptop to a
customer, for Rs. 55,000. CGST and SGST for laptop @ 18% and for laptop bag @ 28%.
What would be the rate of tax leviable? Also find the GST liability.
(iv) Renting of vacant land to a stud farm for Rs. 1,50,000. Is it a supply of service? Will GST
be leviable?

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(v) A contract awarded by Kolkata Municipal Corporation (KMC) for repair of a particular
road to M/s B Ltd., with terms and conditions that the entire work should be
completed within 30 days. However, there is a delay of 10 days to complete the work.
KMC charged liquidated damaged of Rs. 1,20,000 and the same recovered from M/s
B Ltd. Applicable rate of CGST 9% and SGST 9%. Previous year turnover of M/s B Ltd.
Rs. 2 crores.
Find the following:
(a) Who is liable to pay GST on what amount?
(b) Total tax liability if any.
(vi) M/s X Ltd. paid penalty under section 49 of the CGST act, 2017, Rs. 2,00,000 to the
Department in the month of October, 2018. Is it taxable under the GST law?
(vii)M/s M & Co. a sole proprietor, is in the business of selling furniture. Its owner took a set
of furniture of furnish his house permanently. Will the transaction be a supply in terms
of GST Act?
Note : ITC on such furniture not availed.

Answer:

2.
(i) This is a mixed supply. These items can be sold separately. Product which has the
higher rate, will apply on the whole mixed bundle. i.e., 28%.
(ii) It is a bundle of supplies. It is composite supply where the products cannot be
sold separately. The transportation of passenger is, therefore, the principal
supply. Rate of tax applicable to the principal supply will be charged to the
whole composite bundle. Therefore, rate of GST applicable to transportation of
passengers by rail will be charged by IRCTC on the booking of Rajdhani ticket.
(iii) If the laptop bag is supplied along with the laptop in the ordinary course of
business, the principal supply is that of the laptop and the bag is an ancillary.
Therefore, it is a composite supply and the rate of tax would be that at
applicable to the laptop. Hence, applicable rate of GST 18% on Rs. 55,000.CGST
is Rs. 4,950 and SGST is Rs. 4,950.
(iv) It is supply of service. GST is liable to be paid.
(v) In the ordinary course it is a supply of service.
However, non performance of contract by the supplier of service in case of
supplies to Government, local authority is covered under exemption.
The fine or penalty chargeable by Government or local authority imposed for
violation of statute, bye-laws, rules or regulations or contract are not leviable to
GST. Hence no liability to GST and no tax liability.
(vi) Such payment is not a supply of service. The fine or penalty chargeable by
Government or local authority imposed for violation of statute, bye-laws, rules or
regulations are not leviable to GST. The penalty of Rs. 2,00,000 is not taxable
under GST law.
(vii) No, the transfer of the furniture by the owner without consideration is not a
supply of goods, because credit is not allowed in case of personal consumption
of business assets under sec 17(5)(g) of CGST Act, and ITC on such furniture is not
availed.

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3. (a) Mr. Lakshminarayanan is a registered supplier in the State of Orissa under the regular
scheme. Following are the details of transaction entered into by him during the half
year ended on 31st March, 2019:
Particulars Amount (Rs.)
Intra-State supplies of product ‘Sun’ (GST rate 12%) 30,00,000
Intra-State supplies of product ‘Moon’ (GST payable by the recipient 10,00,000
under reverse charge)
Export of product ‘Sun’ with payment of GST 5,00,000
Legal services received from an advocate for Product ‘Sun’ 2,00,000
Common inputs used for supplies of above (GST rate 12%) 25,00,000
You are required to determine the net GST liability for the above tax period.

All amounts given above are excluding GST wherever applicable. GST rate on
services is 18%, all conditions for availing the ITC have been complied with. Turnover
during the earlier financial year was Rs. 35 lakhs. 7

(b) Mr. Muktinath, a service provider registered under GST law under the regular scheme,
at Bengaluru (Karnataka), provided taxable service to one of his clients LMN Co. Ltd.,
registered at Mumbai (Maharashtra). The provision of service was completed on
10.09.2018 and credit for payment received was made in the books of Mr. Muktinath
on 11/09/2018.
With effect from 16.09.2018, applicable GST rate was raised from 5% to 12%. The
payment for the service provided was credited in Mr. Muktinath’s bank account on
18.09.2018, and invoice for the same was raised on 23.09.2018.
Mr. Muktinath is of the view that he is liable to pay IGST @ 5% only. However, the
Department took the view that he is liable to pay IGST @ 12%.
Examine the correctness of the rival contentions.
Will your answer be different in the above case if the payment was credited to the
bank account on 14.09.2018 instead of 17.08.2018?

Note: You may assume that all days are working days 7

Answer:

3. (a)
Computation of GST liability
Particulars Amount
(Rs.)
GST on outward supply (Note 1) 3,60,000
GST payable on legal services under reverse charge (Note 3) 36,000
Common credit relating to exempt supply Nil
Total GST liability 3,96,000
Less: ITC (Note 2) (3,00,000 - 66,667) = 2,33,333 2,33,333
Balance GST liability 1,62,667

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Note 1: Computation of GST on outward supply

Particulars Value (Rs.) GST (Rs.)
Intra-State supplies of product “Sun” (GST rate 12%) 30,00,000 3,60,000
Intra-State supplies of product “Moon” (GST payable by 10,00,000 Nil
the recipient under reverse charge)
Export of product “Sun” with payment of GST (export is a 5,00,000 Nil
zero-rated supply)
Total 45,00,000 3,60,000

Note 2: Computation of ITC

Particulars Value (Rs.)
GST on inward supply (Rs. 25,00,000 × 12%) 3,00,000
GST payable on legal services under reverse charge, see note 3 below* Nil
Total ITC as per Electronic credit Ledger 3,00,000
Less: Common credit relating to exempt supply = Rs. 3,00,000 × Rs. 66,667
10,00,000 ÷ Rs. 45,00,000
[Exempt turnover : Rs. 10,00,000; total turnover Rs. 45,00,000]
ITC available 2,33,333

Note 3:
Tax on legal services provided by an advocate to an individual (Mr.
Lakshminarayanan is an individual) is exempted vide entry 45(b) of Notification No.
12/2017. However assuming that the turnover of the entity exceeds the turnover limit
for tax audit, GST under reverse charge would be applicable. In such case the tax
liability on Rs. 200000 will be Rs. 36,000. Same is added to tax liability. The next month
this amount can be claimed as ITC

Alternate answer: If credit for ITC is claimed for GST paid under RCM on advocate
fees of Rs. 36,000 the same will be allowable upto (Rs. 36,000 × 35 lakh / 45 lakhs. = Rs.
28,000. Hence GST net of further ITC of Rs. 28,000 will be Rs. 1,62,667 – Rs. 28,000 = Rs.
1,34,667

(b)
Change in GST rate
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 (11.09.2018),
or
(ii) Date on which the payment is credited to his bank account (18.09.2018).
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 11.09.2018 [i.e., earlier of 11.09.2018 or 18.09.2018].

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Section 14 further provides that where goods and /or services have been supplied
before the change in rate of tax (10.09.2018) and the payment has been received
before the change in rate of tax (11.09.2018), but the invoice for the same is issued
after the change in rate of tax (23.09.2018), the time of supply shall be the date of
receipt of payment.
Therefore, in the given case, the time of supply will be 11.09.2018 and the
applicable rate of tax will be rate prevalent at the time of supply, i.e., IGST @ 5%.
Therefore, the contention of Muktinath is correct. Department’s view is not tenable
in law.
Further, if the date on which the payment is credited to bank account of supplier is
14.09.2018, the date of receipt of payment will continue to be 11.09.2018 [i.e.,
earlier of 11.09.2018 or 14.09.2018] since the payment is credited in the bank
account before change in applicable rate of tax.
Consequently, with other things remaining the same, the time of supply and the
applicable rate of tax will remain the same.

4. Mudra Dancers Pvt. Ltd., owned by Mrs. Anjali, a famous Bharata Natyam dancer,
wishes to organize a ‘Anjali Dance Concert’ in Faridabad (Haryana). Mudra Dancers
Pvt. Ltd. is registered in Amritsar, Punjab. It enters into a contract with an event
management company, Saipriya (P) Ltd. (registered in Delhi) for organizing the said
dance concert at an agreed consideration of Rs. 12,00,000.
Saipriya (P) Ltd. books the lawns of Hotel Dream Palace, Faridabad (registered in
Haryana) for holding the dance concert, for a lump sum consideration of Rs. 5,00,000.
Mudra Dancers Pvt. Ltd. fixes the entry fee to the dance vent at Rs. 5,000. 500 tickets
for ‘Anjali Dance Concert’ are sold.
You are required to identify the different supplies which are involved and to
determine the CGST and SGST or IGST liability, as the case may be, in respect of all
the supplies involved in the outlined situation.
Will your answer be different, if the entry ticket is priced at Rs. 475 per person?
Rates may be taken as SGST 9%, CGST 9% and IGST 18%. 14

Answer:

4.
Particulars
In the given problem, three supplies are involved:
(i) Services provided by Mudra Dancers Pvt. Ltd. to audiences by way of admission to
dance event.
(ii) Services provided by Saipriya (p) Ltd. to Mudra Dancers Pvt. Ltd. by way of
organizing the dance event.
(iii) Service provided by Hotel Dream Palace to Saipriya (p) Ltd. by way of
accommodation in the Hotel lawns for organizing the dance 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) of the IGST Act, 2017, 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.

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Therefore, the place of supply of services supplied by Mudra Dancers Pvt. Ltd. to
audiences by way of admission to the dance concert is the location of the Hotel
Dream Palace, i.e. Faridabad, Haryana.
Since the location of the supplier (Amristar, Punjab) and the place of supply
(Faridabad, Haryana) are in different States, IGST will be leviable.
Therefore, IGST leviable will be computed as follows:
Consideration for supply (500 tickets @ Rs. 5,000 per ticket) = Rs. 25,00,000
IGST @ 18% on value of supply = Rs. 25,00,000 × 18% = Rs. 4,50,000
(ii) Section 12(7)(a)(i) of IGST Act, 2017 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 Saipriya (P) Ltd. to Mudra
Dancers Pvt. Ltd. (Amristar, Punjab) by way of organizing the dance concert is the
location of the recipient, i.e., Amristar (Punjab).
Since the location of the supplier (Delhi) and the place of supply (Amristar, Punjab) are
in different States, IGST will be leviable.
Consideration for supply = Rs. 12,00,000.
IGST @ 18% on value of supply = Rs. 12,00,000 × 18% = Rs. 2,16,000
(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 Dream Palace (Faridabad,
Haryana) to Saipriya (P) Ltd. by way of accommodation in any immovable property
for organizing is located at Faridabad, Haryana.
Since the location of the supplier (Faridabad, Haryana) and the place of supply
(Faridabad, 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 = Rs. 5,00,000
CGST @ 9% on value of supply = Rs. 5,00,000 × 9% = Rs. 45,000
SGST @ 9% on value of supply = Rs. 5,00,000 × 9% = Rs. 45,000
Where the price per entry ticket is Rs. 475.
If the price for the entry ticket for the dance event is fixed at Rs. 475, 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 Rs. 475, 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 Rs.
500 per person.
There will be no change in the answer in respect of other supplies mentioned in points
(ii) and (iii) above.
There will be no change in the answer in respect of other supplies as mentioned in
point (ii) and (iii) above.

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5. (a) Specify any three types of returns which are at present required to be filed under GST,
what the returns are for, their frequency and the due date. (not for composition
scheme) 7

(b) Asha Ltd. supplies raw material to a job worker Kareena Ltd. After completing the job-
work, the finished product of 5,000 packets are returned to Asha Ltd. putting the retail
sale price as Rs. 20 on each packet. The product in the packet is covered under MRP
provisions. Determine the transaction value in the hands of Kareena Ltd. under GST
law from the following details: 7
Particulars Value in Rs.
Cost of raw material supplied 30,000
Job worker’s charges including profit 10,000
Transportation charges for sending the raw material to the job worker 3,000
Transportation charges for returning the finished packets to Asha Ltd. 4,500
Asha Ltd. paid certain technology transfer fees to ‘Reena Ltd.’, so that 22,500
‘Kareena Ltd.’ can use the said technology in the given job-work
operation.
Note: Kareena Ltd. offered discount Rs. 2,000, provided full payment is made at the
time of rising invoice and the same is mentioned in the invoice. Asha Ltd. made full
payment at the time of issue of invoice.

Answer:

5. (a) Following table lists the three types of returns currently being filed under GST Law:
Return Particulars Frequency Due Date
Form
GSTR – Details of outward supplies of taxable goods Monthly 10th of the
1 and / or services effected (Section 37 of the next month
CGST Act, 2017).
GSTR – Simple return for Jul 2017 – mar 2018, and Monthly 20th of the
3B thereafter till date next month
GSTR – Annual Return (section 44 of the CGST Act, Annually 31st
9 2017) December of
(a) Who Files: Registered Person other than next financial
an ISD, TDS/TCS Taxpayer, Casual year
Taxable person and Non-resident
Taxpayer.
(b) In this return, the taxpayer needs to
furnish details of expenditure and details
of income for the entire Financial Year.
GSTR – Return for a Non-resident taxable person Monthly 20th of the
5 next month
GSTR – Return for an Input Service Distributor Monthly 13th of the
6 next month
GSTR – Return for authorities deducting tax at Monthly 10th of the
7 source next month

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GSTR – Details of supplies effected through e- Monthly 10th of the

8 commerce operator and the amount of tax next month
collected
GSTR – Final Return Once, when Within three
10 GST months of the
Registration is date of
cancelled or cancellation or
surrendered date of
cancellation
order,
whichever is
later.
GSTR- Details of inward supplies to be furnished by Monthly 28the of the
11 a person having UIN and claiming a refund month following
the month for
which
statement is
filed

(b) Statement showing transaction value of Kareena Ltd.

Particulars Value in Rs.
Cost of raw material supplied Exempted
Supply
Job worker’s charges including profit 10,000
Transportation charges for sending the raw material to the job Exempted
worker Supply
Transportation charges for returning the finished packets to Asha 4,500
Ltd. [Sec. 15(2)(b) of the CGST Act, 2017]
Technology fee [Sec. 15(2)(b) of the CGST Act, 2017] 22,500
Sub-total 37,000
Less: Discount [Sec. 15(3) of CGST Act, 2017] (2,000)
Transaction value (i.e., sole consideration) 35,000
Note: It is very clear that principal to job worker and job worker to principal cannot
be treated as supply as per section 143 of the CGST Act, 2017.

6. (a) Best Ltd. is operating in two states Andhra Pradesh and Tamil Nadu. The tax liability for
the month of July, 2018 is as follows:
Sl. No. Tax Liability Andhra Pradesh (Rs.) Tamil Nadu (Rs.)
1. Output CGST Payable 25,000 10,000
2. Output SGST Payable 10,000 5,000
3. Output IGST Payable 3,000 2,500
4. Input CGST 8,000 13,000
5. Input SGST 15,000 1,500
6. Input IGST 12,000 16,000

Calculate the tax payable for the month of July, 2018. 8

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(b) (i) M/s Ace Ltd. is a registered person under GST law and purchased 10 cars for Rs.
45 lakhs plus 28% GST. M/s Ace Ltd. sold 8 cars for Rs. 55 lakh plus 28% GST.
Find the GST liability in the following two independent cases:
(A) M/s Ace Ltd. is a dealer of motor vehicles
(B) M/s Ace Ltd. is not a dealer of motor vehicles 3

(ii) M/s Expert Driving School Pvt. Ltd. supplied taxable services in the month of
October, 2017 for Rs. 15 lakh (plus GST 18%) to provide training on driving.
Company purchased two vehicles for this purpose namely passenger vehicle for
Rs. 20 lakh plus GST 28% and goods vehicle for Rs. 33 lakh plus GST 28%. Find the
net GST liability/ITC, of M/s Expert Driving School Pvt. Ltd. 3

Answer:

6. (a) Net tax payable for the month of July 2018 is as follows –

Particulars Andhra Pradesh Tamil Nadu

CGST SGST IGST CGST SGST IGST
Output tax 25,000 10,000 3,000 10,000 5,000 2,500
Input credit available for setoff 8,000 15,000 12,000 13,000 1,500 16,000
Input credit adjusted 8,000 10,000 3,000 10,000 1,500 2,500
Tax payable after setting off ITC 17,000 --- --- --- 3,500 ---
Input Tax available for further --- 5,000 9,000 3,000 --- 13,500
set-off
Inter adjustment of ITC 9,000 --- (9,000) --- 3,500 (3,500)
(Note – 1)
Net Tax payable in cash 8,000 --- --- --- --- ---
Input credit carry forwarded to --- 5,000 --- 3,000 --- 10,000
next month

Notes:
1. IGST Input tax credit can be adjusted against Output tax of liability of IGST, CGST,
SGST, UTGST (set off can be done in same Order)
2. SGST Input tax credit cannot be adjusted against output CGST & Vice-Versa
3. CGST & SGST Input tax credit of one State cannot be adjusted against Output
CGST & SGST of other State (same principle is applicable to IGST credit also)

(b) (i) Statement showing net GST liability of M/s Ace Ltd.
Particulars M/s Ace Ltd. is a M/s Ace Ltd. is not Remarks
dealer in motor a dealer in motor
vehicles Rs. in lakh vehicles Rs. in lakh
GST on Supply of 15.40 15.40 Rs. 55 lakh × 28%
goods
Less: ITC (12.60) Not allowed Rs. 45 lakhs × 28%
Net GST Liability 2.80 15.40

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(ii)
GST on output supply Rs. 2,70,000 (Rs. 15,00,000 @ 18%)
Less: ITC
On passenger vehicle Rs. (5,60,000) (Rs. 20,00,000 @ 28%)
On goods vehicle Rs. (9,24,000) (Rs. 33,00,000 @ 28%)
Net Excess ITC c/d Rs. 12,14,000

7. (a) Mr. Shankar is running a fancy stores and is also having a consulting firm, registered
under the same PAN. During the earlier year, the turnover was Rs. 150 lakhs in the
grocery stores and receipts in the consulting firm was Rs. 9 lakh. In the light of these
facts, answer the following (having regard to the legal provision prevailing in April, 2019):
(i) Examine whether Mr. Shankar eligible to opt for Composition Scheme under CGST
Act.
(ii) Can he opt for the Composition Scheme in respect of the grocery store alone,
though he has the consulting firm also, in addition to the store? 2+3=5

(b) Mr. Nakul, a manufacturer of pesticides registered under the GST law, provides to you
the following information pertaining to the GST paid by him in the month of January,
2019:
Particulars Amount (Rs.)
GST on machinery purchased and sent directly to a job worker 1,20,000
GST on car purchased, exclusively used for business purchases 1,92,000
GST on raw materials purchased (Goods are received in lots/ 5,50,000
installments and 25% of the materials were received in February, 2019)
GST on Medical insurance premium paid for the employees working in 96,000
the factory. Providing this is optional and Mr. Nakul has taken out this
measure to improve the relations with the labourers.

Compute the quantum of input tax credit available to Mr. Nakul for the given month,
adducing detailed note for treatment of each item. 9

Answer:

7. (a)
Eligibility to opt for Composition Scheme
(i) No. Shankar is not eligible for Composition Scheme.
The reason is that the turnover in the earlier year was in excess of Rs. 150 lakhs.
Note: W.e.f. 01.02.2019, other services, with restaurant & catering services, also
eligible vide CGST (Amendment) Act, 2018 for composition scheme, subject to 10%
of turnover in a State or Union Territory in preceding financial year or 5,00,000
whichever is higher.
(ii) No, it is not possible for Mr. Shankar no opt for Composition Scheme, for the
grocery store alone.
All the registrations under the same PAN have to opt for composition scheme in
terms of proviso to section 10(2) of the CGST Act, 2017.

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(b) Computation of input tax credit

Particulars Amount (Rs.)
GST on machinery purchased and sent directly to a job worker 1,20,000

ITC on capital goods directly sent to job worker’s premises under

challan is allowed in terms of section 19(5) of CGST Act, 2017, read
with rule 45(1) of CGST Rules, 2017
GST on car purchased, exclusively used for business purchases Nil

Car figures in the list of blocked assets for ITC and hence no ITC can
be availed.
GST on raw materials purchased (25% of the materials are yet to be Nil
received)

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) of the CGST Act, 2017. ITC can be availed next
month only.
GST on Medical insurance premium paid for the employees working Nil
in the factory

ITC of health insurance is blocked in the given case, since said

services are not notified by Government as obligatory for employer
to provide to its employees under any law – in terms of section
17(5)(b)(iii) of the CGST Act, 2017.
Total ITC available 1,20,000

Section – B
(Customs Duty and FTP)

Answer Question No. 8 which is compulsory and any two from the rest of this section.

8. Choose the most appropriate option for the following [Option to be given in capital letters
A, B, C or D] and give brief reason/justification for your choice or conclusion [1 mark for the
correct choice and 1 mark for reason] : 2×3=6

(i) Determine the correct combination:

Sl. No. Event Sl. No. Effect on customs duty
1 Foods damaged 1 Remission of duty
2 Goods pilfered 2 Abatement of duty
3 Goods destroyed 3 Not liable to pay duty

(A) 1 and 2, 2 and 3, 3 and 1

(B) 1 and 3, 2 and 3, 3 and 2
(C) 1 and 2, 2 and 1, 3 and 3
(D) 1 and 1, 2 and 3, 3 and 2

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(ii) Two sets of sales were effected by Boomerang Ltd. First set 1000 units at Rs. 190 and
second set 900 units at Rs. 200. In terms of rule 7 (Deductive Value) of the Customs
Valuation (Determination of Value of Imported Goods) Rules, 2007, the unit price in
greatest aggregate quantity determined will be
(A) Rs. 200
(B) Rs. 190
(C) Rs. 195
(D) More data is required

(iii) As per the Customs Tariff Act, 1975, the following is not considered to be a way that
constitute circumvention of antidumping duty imposed on an article which may warrant
action by the Central Government:
(A) Altering the description or name or composition of the article subject to imposition
of such anti-dumping duty
(B) Changing the country of its origin or export
(C) Import of such article in an unassembled or disassembled form
(D) Procuring the goods through an Indian subsidiary which is a SEZ unit.

Answer:

8.
(i) A When imported goods are damaged, there will be abatement of customs duty.
In respect of pilfered goods, customs duty is not payable and when goods are
destroyed, there will be remission of duty.
(ii) B The greatest number of units sold at a particular price is 1,000 units. Therefore,
the unit price in the greatest aggregate quantity is Rs. 190.
(iii) D The first three are specifically covered by section 9A(1A) of the Customs Tariff
Act, 1975. Import by a SEZ unit will not attract any anti-dumping duty.

9. (a) A commodity is imported into India from a country covered by a notification issued
by the Central Government under section 9A of the Customs Tariff Act, 1975.
Following particulars are made available:
CIF value of the consignment: US$ 25,000
Quantity imported: 500 kgs
Exchange rate applicable: Rs. 60 = US $ 1
Basic customs duty: 12%
Social Welfare Surcharge @ 10%

As per the notification, the anti-dumping duty will be equal to the difference between
the cost of commodity calculated @ US $ 70 per kg. and the landed value of the
commodity as imported.

Appraise the liability on account of normal duties, cess and the anti-dumping duty.

Assume that only ‘Basic customs duty” (BCD) and education and secondary and
higher education cess are payable. IGST @ 12% is also applicable.
Calculate the Customs Duty Payable. 8

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(b) M/s Globe 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, viz transaction value of identical goods. State briefly, whether the
Department’s action sustainable in law, with reference to decided cases, if any. 4

Answer:

9. (a)
Particulars US $
CIF Value 25,000

Value in Rs.
Assessable value (i.e., 25,000 × Rs. 60) 15,00,000
Add: Customs duty 13.2% on Assessable value (12% + 10% on 12%) 1,98,000
Landed value (or value of imported goods) 16,98,000
Anti-dumping duty (21,00,000 – 16,98,000) 4,02,000
Market value of imported goods (500 kgs × Rs. 60 × US $ 70) = 21,00,000
Open Market Value 21,00,000
Add: IGST @ 12% on Rs. 21,00,000 2,52,000
Total 23,52,000

Total customs duty payable is Rs. 8,52,000 (i.e. 1,98,000 + 4,02,000 + 2,52,000)

Note: In case where imported goods are liable to Anti-Dumping Duty or Safeguard
Duty, calculation of Anti – Dumping Duty or Safeguard duty would be as per the
respective notification issued for levy of such duty. It is also clarified that value for
calculation of IGST as well as Compensation Cess shall also include Anti-Dumping
Duty amount and Safeguard duty amount.

(b) As per Rule 2(2) of the Customs Valuation (Determination of Value of Imported
Goods) Rules, 2007 persons shall be deemed to be related if any person directly or
indirectly owns, controls or holds 5% or more of the outstanding voting stock or shares
or both of them.
In the instant case, the exporter co. held 30% equity share capital of the importer co.
So, it can be said that the two parties are related.

The fact that the assessee had made bulk imports could be a reason for reduction of
import price. But here, as the importer co. has already purchased the same goods
from the exporter co. @ US$ 20 p.u., this price is to be considered as the Assessable
value of the said import.

Therefore, the Department’s action is tenable in law.

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10. (a) An importer imported some goods. Entry inwards granted to the vessel on 7 th
February, and the goods were cleared from Chennai port for warehousing on 8 th
February, after assessment. The Bill of Entry was presented on 1 st February for
warehousing. Assessable value was US$ 10,000. Assume that no additional duty is
payable. The goods were warehoused at Chennai and were cleared from Chennai
warehouse on 4th march. What is the duty payable while removing the goods from
Chennai warehouse on 4 th March? Exchange rates and rate of Customs Duties are as
follows: 6

Particulars Date Exchange rate Basic Customs

declared by the CBE&C Duty
Date of submission of bill of 1st Rs. 55/USD 10%
entry for warehousing February
Date of entry inwards 7th Rs. 59/USD 15%
granted to the vessel February
Date of clearance of goods 4th Rs. 60/USD 12%
from warehouse by March
submission of bill of entry

(b) Compare between ‘Rules’ and ‘Regulations’ under the Customs Act, 1962. Bring out the
differences and similarities, if any. 6

Answer:

10. (a) Relevant rate of duty - date of submission of sub-bill of entry

Relevant exchange rate - date of submission of into bond bill of entry

Total customs duty will be

Basic Customs Duty = Rs. 66,000
+ SWS @ 10% on BCD = Rs. 6,000 (Rs. 66,000 × 10%)
Total customs duty = Rs. 72,600
[w.e.f. 02.02.2018, all goods are exempt from EC and SHEC]

The term ‘CBEC’ has been changed as ‘CBIC’

(b) Difference between the Rules and Regulations

Rules Regulations
(1) Issued by the Government of India (1) Issued by the CBIC
(2) Rules have to be approved by the (2) Regulations do not need to be
Parliament approved by the Parliament
(3) Has statutory force (3) Has statutory force
(4) Power to make rules under Section (4) Power to make regulations as per
156 of Customs Act Section 157 of Customs Act

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11. (a) X Ltd. exported following goods to USA. Discuss whether any duty drawback is
admissible under section 75 of the Customs Act, 1962. 8

Product FOB Value of Exported goods Market price of goods Duty drawback rate
A 2,50,000 1,80,000 30% of FOB
B 1,00,000 50,000 0.75% of FOB
C 8,00,000 8,50,000 3.50% of FOB
D 2,000 2,100 1.50% of FOB

Note: Imported value of product C is Rs. 9,50,000.

(b) Mr. Gopal, an Indian entrepreneur, went to London to explore new business
opportunities on 01.04.2018. His wife also joined him in London on 01.12.2018. The
following details are submitted by them with the Customs authorities on their return to
India on 30.04.2019.
(i) Used personal effects worth Rs. 95,000
(ii) A music system worth Rs. 34,000
(iii) The jewellery brought by Mr. Gopal for Rs. 44,000 and the jewellery brought by his
wife worth Rs. 25,000.
Determine their eligibility with regard to duty free allowance. 4

Answer:

11. (a) Duty draw back amount for all the products are as follows:

Product A:
Drawback amount = 2,50,000 × 30% = Rs. 75,000 or Rs. 1,80,000 × 1/3 = Rs. 60,000
Allowable duty draw back does not exceed 1/3 of the market value.
Hence, the amount of duty drawback allowed is Rs. 60,000

Product B:
Drawback amount allowed is Rs. 750 (i.e., Rs. 1,00,000 × 0.75%).
Since, the amount is more than Rs. 500 even though the rate is less than 1% it is
allowed.

Product C:
No duty drawback is allowed.
Since the value of export is less than the value of import (i.e., negative sale)

Product D:
No duty drawback is allowed.
Since the duty drawback amount is Rs. 30 (which is less than Rs. 50)

Though rate of duty drawback is more than 1%, no duty drawback is allowed.

(b) As per the Baggage Rules, 2016, in case of passengers other than tourists there is no
customs duty on used personal effects and general free allowance is Rs. 50,000 per
passenger. Thus, their duty liability is nil for the personal effects and a music system.

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However, the additional duty free allowance, that is jewellery allowance is

applicable to non-tourist passenger of Indian origin who had stayed abroad for
period exceeding one year. The additional jewellery allowance is as follows:

Gentleman Passenger - Rs. 50,000.

Lady Passenger – Rs. 1,00,000.

Thus, there is no duty liability on the jewellery brought by Mr. Gopal as he had stayed
abroad for period exceeding one year. However, his wife is not eligible for this
additional jewellery allowance as she had stayed abroad for a period less than a
year. Thus, she has to pay customs duty on the amount of jewellery brought by her of
Rs. 25,000.

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