CA Final May 2023 Suggested Answers Paper 8 Indirect Tax Laws (Old Scheme)

FOR CA FINAL EXAM PREPARATION

CA Final 2023
Suggested Answers ·
Paper 8 Indirect Tax
Laws (Old Scheme)
EXAM YEAR TYPE

CA Final 2023 Suggested Answers
SUBJECT DATE

Paper 8 Indirect Tax Laws (Old Scheme) May 2023

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 8: INDIRECT TAX LAWS

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(i) Question paper comprises of 6 questions. Answer Question No. 1 which is compulsory and

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any 4 questions out of the remaining 5 questions.

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(ii) Working notes should form part of the answer.
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e m notifications/circulars issued till 31.10.2022 and (ii) Customs law as amended la
(iii) All questions should be answered on the basis of the position of (i) GST law as amended
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by significant
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by the Finance Act, 2022 and significant notifications/circulars issued till 31.10.2022.

aQuestion
Vasudev is a mining contractor. He has crossed the threshold limit for registration in the
preceding financial year 2022-23 and is now duly registered under GST in the State of Gujarat.
He has undertaken following transactions during the month of April, 2023:
S. Particulars Value of supply
No. in ` (exclusive
of taxes)

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(a) Vasudev is an operating member in mining and exploration 15,00,000

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services at Aliabet Oilfield, Bhavnagar, Gujarat. He has provided

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certain services to the Joint Venture (JV) at same site in which

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he is also a member. He believes that the consideration received

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(b) He has purchased certainamachinery
from the JV is ‘Cost Recovery’ and not taxable.
8,00,000
to render services to the JV at Aliabet Oilfield.
(c) He has obtained professional services from a senior advocate of 1,50,000
Ahmedabad, Gujarat to represent him in a matter before the
Tribunal.
(d) He was allotted an office on rent by the State Government of 2,50,000
Gujarat close to the sea shore of Aliabet Oilfield.

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(e) He got a portion of the petroleum silt (non taxable under GST) as 8,00,000

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part of compensation while exploring the petroleum reserves at

c. o m 7,50,000
Aliabet Oilfield - which as per the contract with the government

He sells the petroleum silt (non-taxable under GST) to a SEZ se
is part of ‘Cost Petroleum’.

s em Developer in Bhavnagar, Gujarat. He has already filed LUT underla
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(f)

gla
a
GST.
(g) Consideration received in the nature of recovery of bond amount 75,000
in case of 3 employees leaving employment before a minimum
period of 1 year as per the terms of contract.

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PAPER – 8: INDIRECT TAX LAWS 71

(h) Consideration received towards transfer of tenancy rights in 7,00,000
Gujarat, which according to Vasudev is not liable to GST as it
has suffered stamp duty.
(i) Consideration received from mining lease holders for renting of 5,00,000
5 dumpers including driver given for transport of minerals within
the mining area for a period of 2 years.
(j) He has been assigned the mining right from Government and the
amount of IGST involved against royalty payment is
` 3,00,000.
Additional information:
(1) Vasudev has filed bond/LUT to claim benefits under zero rated supplies.
(2) Assume the CGST and SGST rates to be 2.5% each and IGST rate to be 5% on supply of
goods.
(3) Assume the CGST and SGST rates to be 9% each and IGST rate to be 18% on supply of
services.
(4) There is opening balance of ` 34,000 in the Electronic Cash ledger (SGST). And there was
brought forward ITC of ` 15,000 in Electronic Credit ledger (IGST), ` 50,000 in Electronic
Credit ledger (CGST), ` 9,000 in Electronic Credit ledger (SGST).
From the above details, compute the minimum net GST payable by Vasudev in cash (CGST,
SGST or IGST as the case may be) for the month of April, 2023. Working notes should form
part of your answer. (14 Marks)
Answer
Computation of tax payable in cash
S. Particulars Amount CGST SGST IGST
No. (`) (`) (`) (`)
A. GST liability on outward supply
(i) Consideration for services 15,00,000 1,35,000 1,35,000
provided as an operating member (15,00,000 (15,00,000
to the Joint Venture x 9%) x 9%)
[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.]

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72 FINAL EXAMINATION: MAY, 2023

(ii) Compensation received in the form 8,00,000 Nil Nil Nil
of petroleum silt, which, as per the

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contract with the Government, is

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part of cost petroleum

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[Cost petroleum is not a

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consideration for service to the
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Government and thus, is not

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l Sale of petroleum silt to a SEZ 7,50,000
taxable.]
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a developer
(iii) Nil Nil Nil

[Supply to SEZ developer is a zero-
rated supply made under a
bond/LUT and no tax is payable on
the same.]
(iv) Bond amount recovered from 75,000 Nil Nil Nil
employees leaving employment

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before stipulated period
[Not a supply since bond amount
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recovered is not a consideration for

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tolerating the act of such premature

(v) Transfer of tenancy rights g
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quitting of employment.]

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[Transfer of tenancy rights to a new
7,00,000 63,000
(7,00,000
63,000
(7,00,000
tenant against consideration in the x 9%) x 9%)
form of tenancy premium is taxable
even though stamp duty has been
paid on the same.]
(vi) Renting of dumpers including 5,00,000 45,000 45,000
driver2 (5,00,000 (5,00,000

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[Taxable.] x 9%) x 9%)

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Total tax liability on outward supplies 2,43,000 2,43,000

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ag It is assumed that the immovable property in respect of which the tenancy rights are transferred, is a
1

commercial property and the same is located in Gujarat.
2 Renting of dumpers including driver to mining lease holders has been assumed to be an intra-State

transaction. Alternatively, it is also possible to assume the said transaction to be an inter-State transaction. In
that case, IGST of ` 90,000 will be charged.

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PAPER – 8: INDIRECT TAX LAWS 73

B. GST liability on inward supplies under reverse charge (RCM)
(i) Professional services provided by 1,50,000 13,500 13,500
senior advocate to Vasudev, i.e. a (1,50,000 1,50,000
business entity x 9%) x 9%)
(ii) Renting of office provided by the 2,50,000 22,500 22,500
State Government to Vasudev (a (2,50,000 (2,50,000
registered person) x 9%) x 9%)
(iii) Assignment of mining right by 3,00,000
Government to Vasudev (a
registered person)
Total tax liability on inward supplies 36,000 36,000 3,00,000
under reverse charge
C. Input tax credit
(i) Opening balance 50,000 9,000 15,000
(ii) Inter-State Since the 8,00,000 40,000
purchase of goods and (8,00,000
machinery services are x 5%)
used for
(iii) Professional 1,50,000 13,500 13,500
effecting
services from (1,50,000 (1,50,000
taxable
senior advocate3 x 9%) x 9%)
supplies
(iv) Renting of office including zero 2,50,000 22,500 22,500
rated supplies, (2,50,000 (2,50,000
full ITC thereon x 9%) x 9%)
will be allowed.
(v) Assignment of
mining right 3,00,000
Total ITC 86,000 45,000 3,55,000
Note: [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.]

3 It has been most logically assumed that professional services received from advocate are in the nature of the

legal services.

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74 FINAL EXAMINATION: MAY, 2023

D. Computation of tax payable in
cash

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Total tax liability on outward 2,43,000 2,43,000

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supplies

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Less: ITC of IGST 1,57,000 1,98,000

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Note: ITC of IGST to be used first

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l Less: ITC of CGST and SGST ag
before ITC of CGST and SGST

ag 86,000
(CGST)
45,000
(SGST)
Add: Reverse charge liability 36,000 36,000 3,00,000
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.]

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Total tax liability payable in cash 36,000 36,000 3,00,000

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Less: Balance of Electronic Cash Ledger (-)34000

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Net minimum tax liability payable in 36,000 2,000 3,00,000

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cash
Question 2
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(a) M/s Diva Fashions (Proprietor Ms. Diva), a registered supplier in Ludhiana (Punjab) under
GST law, has made the following supplies in the month of February 2023 :
(i) Supply of designer silk dresses packed in designer boxes to a boutique in Mumbai,
(Maharashtra) as per contract entered with the boutique amounting to ` 25,00,000.
(ii) Supply of 600 kits (at ` 1,000 each kit) amounting to ` 6,00,000 to Mrs. Arora in
Amritsar (Punjab). Each kit consisted of 1 silk dupatta, 1 sari brooch and 1 lipstick.

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(iii) M/s Diva Fashions organizes a fashion show in Chandigarh. Zion Exports Ltd, a

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registered entity in Jaipur (Rajasthan) has sponsored the show for which M/s Diva

(iv) 200 kits are given as free gifts to customers on the occasion of 5 sanniversary
Fashions received ` 7,50,000 from it.

s em g la Cost of each kit
th

la is ` 350. The open market value of such kit of goods andaof goods of like kind and
Diva Fashions. Each kit consists of 1 silk dupatta and 1 sari brooch.

ag quality is not available. Input tax credit has not been taken on the goods contained in
the kit.

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PAPER – 8: INDIRECT TAX LAWS 75

(v) Professional services provided free of cost by Ms. Diva to her independent married
sister to set up her own boutique in Delhi. Cost of providing such services is
` 1,00,000, but the open market value of such services and of services of like kind
and quality is not available.
(vi) M/s Diva Fashions enters into a contract on 1st February, 2021 for 3 years with Miss
Shikha, a local model to act as a brand ambassador for their products for ` 1 lakh
(exclusive of GST - 18% IGST, 9% CGST and SGST each) per annum. Miss Shikha
terminated the contract on 2nd February 2023. As per the contract, M/s Diva Fashions
received 25% of the total contract fees paid to Miss Shikha as the contract is
terminated before 3 years, on 15th February, 2023. Miss Shikha had received the
contract fee for 2 years at the time of termination of the contract.
Other information is given below -
(a) All above amounts are exclusive of GST.
(b) Mrs. Arora paid interest of ` 8,850 (inclusive of GST) for delay in making payment to
M/s Diva Fashions.
(c) Assume rates of GST as under:
S. Particulars Rate of Rate of Rate of
No. IGST CGST SGST
1 Silk Dresses 18% 9% 9%
2 Designer Boxes 28% 14% 14%
3 Silk Dupatta 12% 6% 6%
4 Sari Brooch 18% 9% 9%
5 Lipstick 5% 2.5% 2.5%
6 Sponsorship received from Zion Exports 28% 14% 14%
Ltd.
7 Professional services 18% 9% 9%
From the above information, compute the total GST liability of M/s Diva Fashions for the
month of February 2023. Working notes should form part of your answer. (9 Marks)
(b) ABC Industries of Mumbai imported certain goods from United States of America.
Expenses incurred with respect to import are given below:
Cost of Goods $ 40,000
Transport charges from factory of exporter to the port for shipment $ 800
Freight charges from US to India $ 5,000
Lighterage charges paid by ABC Industries at the port in India ` 12,000

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76 FINAL EXAMINATION: MAY, 2023

Freight incurred from port of entry to Inland container depot ` 40,000
Ship demurrage charges paid at Indian port of importation ` 12,000
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ABC Industries incurred designing charges necessary for those goods ` 75,000
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which were paid to WOW Designers in New Delhi.

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Date of Bill of Entry is 16.02.2023 (Rate of BCD 20%, Notified Exchange Rate by CBIC is

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` 70 per US $)
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lDate of Entry Inward 16.03.2023 (Rate of BCD 10%, Notified Exchange Rate by CBIC isa
ag ` 75 per US$)
SWS rate is 10% and rate of IGST is ` 12%. Compute Assessable Value of imported
goods, Basic Customs Duty and IGST. Ignore GST Compensation Cess. (5 Marks)
Answer
(a) Computation of total GST liability of M/s Diva Fashions for the
month of February, 2023

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Particulars Amount CGST SGST IGST

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(`) (`) (`) (`)

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Supply of silk dresses in 25,00,000 4,50,000

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designer boxes [25,00,000

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[Since supply of silk dresses in
designer boxes is naturally g x 18%]

bundled, it is a composite
supply which is treated as the
supply of the principal supply
(viz. silk dresses). Accordingly,
rate of principal supply, i.e. silk
dresses will be charged.]
Supply of kits of silk dupatta, 6,00,000 54,000 54,000

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sari brooch and lipstick [6,00,000 [6,00,000

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[Since supplies are not x 9%] x 9%]

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naturally bundled and a single

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price is being charged, it is a

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mixed supply. It is treated as

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supply of that particular supply

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which attracts highest tax rate
(i.e., sari brooch).]
Since sponsorship services are 7,50,000 Nil
provided to a body corporate -

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PAPER – 8: INDIRECT TAX LAWS 77

Zion Exports Ltd., tax is
payable under reverse charge
by recipient.
Free gifts to customers Nil
[Not a supply as it is made
without consideration and is
also not covered in Schedule I
because customers are not
related persons.]
Professional services provided Nil
free of cost
[Not a supply as it is made
without consideration and is
also not covered in Schedule I
because sister being
independent is not a related
person.]
Fee received for termination of Nil
contract
[Being ‘liquidated damages’,
they are merely compensation
for loss due to breach of the
contract and not the
consideration for tolerating
non-performance of contract.4]
Interest received for delayed 7,500 675 [7,500 675 [7,500
payment (excluding GST) [8,850 x 9%] x 9%]
[Includible in value of original x 100/118]
supply. Further, since it is
received in February itself,
time of supply is when it is
received i.e. February5.]
GST liability 54,675 54,675 4,50,000

4
Vide Circular No. 178/10/2022 GST dated 03.08.2022
5 It has been most logically assumed that interest pertains to the supply of 600 kits made to Mrs. Arora. Hence,

same rate of 18% is applied on it.

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78 FINAL EXAMINATION: MAY, 2023

(b) Computation of assessable value, basic customs duty and IGST payable
Particulars Amount ($)
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Cost of goods 40,000

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Designing. charges e
Transport charges up to port 800

m since undertaken in India.]
eincludible l a s
s
-

a value
lFOB ag
[Not

ag 40,800
Amount (`)
FOB value in Indian rupees @ ` 70/- per $ 28,56,000
[Rate of exchange notified by CBIC on the date of presentation of bill
of entry is considered]
Freight charges up to India [US $ 5,000 x ` 70] 3,50,000
Lighterage charges paid by the importer
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12,000

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[Cost of transport includes lighterage charges.]
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Ship demurrage charges 12,000

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[Cost of transport includes ship demurrage charges]
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Freight incurred from port of entry to Inland Container depot
[Not includible in assessable value]
Nil

Insurance charges @ 1.125% of FOB value 32,130
[Insurance charges are included @ 1.125% of FOB value since they
are not ascertainable.]
Assessable value 32,62,130
Add: Basic customs duty @ 10% 3,26,213

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[Rate prevalent on the date of presentation of bill of entry or on the

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date of entry inwards, whichever is later.]
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se36,20,964.30
32,621.30

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Total

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Add: IGST @ 12% of ` 36,20,964.30 4,34,515.72

a Or
4,34,516
(Rounded off)

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PAPER – 8: INDIRECT TAX LAWS 79

Question 3
(a) Explain in brief whether the below mentioned independent cases of supply of services
provided are exempt or taxable under GST as per the provisions of GST law including
notifications issued thereunder:
(i) Himalayan Wanderers Campsite, a registered entity under GST, has fixed up various
tents in Shimla, for lodging purposes being offered to tourists and trekkers. The
details of tents rented by Himalayan Wanderers Campsite on 8th December, 2022 is
as under:
No. of tents rented Amount of rent charged per tent per day Nature of occupancy
10 ` 600 Single
15 ` 1,000 Double

(ii) Fables Infotech LLP, a limited liability partnership firm having registered place of
business in Hyderabad under GST, entered into a contract with Neeta Services for
providing air-conditioned mini vans for 1 year for transportation of its female
employees working in night shifts to be picked up from designated spots every day at
9.00 p.m. except weekends and dropped to the office. The same female employees
were again picked up from office at 6.30 a.m. every morning except weekends and
dropped back at the same spots from where they were picked up.
(iii) HumTum Services Limited, registered under GST provided catering services to
Baljatan Anganwadi, an educational institute providing pre-school education
amounting to ` 2,50,000 in the month of February, 2023.
(iv) 50 women from different cities pursuing diploma in management courses, participated
in the 'Leadership Program' designed especially for women for a duration of 9 months
by IIM, Bangalore (a certificate as to their participation was awarded to each one of
them after the completion of the programme).
(v) Mr. Ashok rented his residential flat to his friend Dr. Kishore, who is not registered
under CGST Act, 2017 for use as his medical clinic at a monthly rent of ` 15,000.
(5 Marks)
(b) Mr. X, a trader dealing exclusively in supply of goods and paying tax under normal scheme
(also eligible for composition scheme), submit the following details for coming financial
year 2023-24. You are required to determine which scheme will be more beneficial to him
and whether Mr. X should opt for composition scheme. Estimated data for coming financial
year 2023-24 are as follows:

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80 FINAL EXAMINATION: MAY, 2023

Particular Amount (`)

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Inward supplies of goods from registered suppliers (amount exclusive 70,00,000

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of GST and goods chargeable to normal rate of GST @12%)

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Outward supplies of goods to unregistered customers (sale price of 90,00,000

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goods inclusive of GST) - Normal Rate of GST is @12%)

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Other information is as given below:

ag (ii) Books of account maintenance cost under normal scheme ` 2,00,000 yearly whereas
(i) Inherent nature expenses ` 4,50,000 per year under both the schemes.

under composition scheme it will be ` 75,000 yearly.
(iii) Return filing expenses under normal scheme ` 48,000 yearly whereas under
composition scheme it will be ` 12,000 yearly. (4 Marks)
(c) Importer Mr. M is engaged in importing and distributing of sports goods. He imports sports
product from Mr. Q of Malaysia and sells it under brand name "TrueSpeed". To publicize

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the product, Mr. M spent on AMP (Advertisement, Marketing and Promotion) of the product.

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The department contended that AMP expenses incurred by M were required to be added

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in the value of imported goods. Whether the contention of department is correct?

g l a (5 Marks)
Answer a
(a) (i) Taxable: Since, exemption with respect to services provided by a campsite for
lodging purposes has been withdrawn. Thus, there is no specific exemption with
respect to services provided by a campsite for lodging purposes, services provided
by Himalayan Wanderers Campsite are liable to GST.
(ii) Taxable: Service of transport of passengers provided by Neeta Services are liable to
GST since such services are being provided in a contract carriage which is air-

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conditioned.

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(iii) Exempt: Since catering services provided to an educational institution providing pre-

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school education are exempt from GST, HumTum Services Limited is not liable to pay

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GST.

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(iv) Taxable: Since short duration program provided by IIMs are not any qualification

a recognized by law, GST is payable in the given case.
(v) Taxable: Since residential dwelling is rented for use other than residence, GST is
payable on the same.

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PAPER – 8: INDIRECT TAX LAWS 81

(b)
Particulars Composition scheme Regular scheme
(`) (`)
Tax payable under GST law 90,000 9,64,286
[` 90,00,000 × 1%] [` 80,35,714* × 12%]
Less: ITC on inward supplies A person opting for 8,40,000
composition scheme is
[` 70,00,000 × 12%]
not entitled to any ITC.
Net amount payable under GST 90,000 [Forms part of 1,24,286
law cost]

Inherent expenses 4,50,000 4,50,000
Add: Books of accounts 75,000 2,00,000
maintenance cost
Add: Return filing expenses 12,000 48,000
Add: Cost of inward supplies 78,40,000 70,00,000
Total cost involved 84,67,000 76,98,000

Sale Proceeds 90,00,000 80,35,714
Profit Margin (Sale proceeds Less 5,33,000 3,37,714
Total Cost)
Thus, it can be concluded that Mr. X should opt for composition scheme for FY 2023 -24 as
it is more beneficial for him. 67

*Note-Outward supplies excluding GST = ` 80,35,714.29 (` 90,00,000 × 100/112)

(c) The contention of the department that AMP expenses incurred by M were required to be
added to the value of imported goods was not correct.
As per a judicial pronouncement 8, it was decided that AMP expenses incurred by importer
for promotion of brand are not includible in assessable value of imported goods on the
following grounds:

6
It has been assumed that GST is not charged on the inherent expenses, books of account maintenance cost
and return filing expenses.
7
Alternate presentations/ answers are possible.
8 Commissioner of Customs v. M/s Indo Rubber and Plastic Works, upheld by SC.

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82 FINAL EXAMINATION: MAY, 2023

Agreement did not specify that a fixed amount/percentage of the invoice value of the
imported goods, was obliged to be spent by the assessee towards AMP, as a condition of

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sale/ import.

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It was a post import activity incurred by the assessee on its own account and not for
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discharge for any obligation of the seller under the terms of sale.

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to theeexporter,
The assessee importer was not obliged to give any account of expenditure incurred by it
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stipulation of reimbursement.
aQuestion
(a) EverYoung Manufacturers LLP, a registered supplier under GST is engaged in
manufacturing of ayurvedic cosmetic products within the State of Gujarat. It provides the
following information for the month of January, 2023
Particulars for the month of Rate of Rate of Value of supply
January,2023 CGST SGST (excluding GST)
Outward supply of skin care products 2.5% 2.5% 50,00,000

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o 6%
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Outward supply of skin care products 6% 6% 50,000
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Inward supply of Inputs for skin care 6% 35,00,000

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products

Inward supply of capital goodsg
Inward supply of Input services
l a 2.5% 2.5% 5,00,000

a 9% 9% 25,00,000
Other information:
(a) ITC in respect of all types of inward supply as given above was claimed in the relevant
GSTR 3B and the same was also reflected in GSTR 2B.
(b) All other conditions for claiming the refund are duly complied with.
(c) No refund was claimed for the month of January 2023.

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You are requested to compute the 'Maximum refund amount' eligible for inverted duty

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. 2017 in
structure. Working notes should form part of your answer. (5 Marks)

c. o (b) Decide s e m
with reason whether e-way bill is required to be issued under CGST Act,

em a to send from
A. SV Electricals Ltd., a registered supplier of electronic goods, islrequired
the following independent cases:

las Delhi, a consignment of parts of LED TV to be replaced a
g
ag under warranty at various
client locations in Gurugram (Haryana). The value of consignment declared in delivery
challan accompanying the goods is ` 65,000. SV Electricals Ltd. claims that since
movement of goods to Gurugram (Haryana) is caused due to reasons other than

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PAPER – 8: INDIRECT TAX LAWS 83

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 SV Electricals Ltd.
B. Tree Ltd. registered in Kerala, sends goods to its job worker Woods & Co. in Tamil
Nadu, which is also registered under GST. Value of the consignment was ` 37,500
(including GST). (4 Marks)
(c) The custom authorities of India noticed that there is an increase in the quantity of Solar PV
Products imported into the country. So, on the recommendation of Director General
(Specific Safeguard), the Central Government via Notification in Official Gazette imposed
safeguard duty @25% on the import of Solar PV Products.
ABC Exports an importer in Bhuvneshwar imported Solar PV Products from Vietnam at
landed price (exclusive of duties) of ` 30 lakh. Assume that IGST u/s 3(7) is 12%, BCD is
10% and SWS @10%. Determine the total duties payable under Customs Act. Ignore
agriculture infrastructure and development cess.
Will it change your answer if ABC Exports is a SEZ unit? Explain discussing applicable
provisions. (5 Marks)
Answer
(a)
Particulars
In the case of refund on account of inverted duty structure, refund of ITC is granted as
per the following formula:
Maximum (Turnover of Net - Tax Net ITC
Refund inverted ITC payable
Amount rated supply on such
of goods and inverted
services) rated
= × supply of ×
Adjusted ITC availed on
goods
Total inputs and input
and
Turnover services
services

(i) Turnover of inverted rated supply of goods and services = 50,00,000
(product having rate less than 6% to be considered)
(ii) Adjusted Total Turnover 50,00,000 + 50,000 = 50,50,000
(iii) Net ITC: means ITC available only on Inputs 3500000 @ 12% = 4,20,000
ITC of Input service and Capital Goods not to be considered.

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84 FINAL EXAMINATION: MAY, 2023

(iv) Tax payable on such inverted rated supply of goods and services 2,50,000
[(50,00,000 × 5%)

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(v) ITC availed on inputs [(35,00,000×12%) = 4,20,000

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(vi) ITC availed on input services [(5,00,000×5%)] = 25,000

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‘Maximum 50,00,000 × 4,20,000 - 2,50,000 4,20,000

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a ag
refund amount’ = 50,50,000 ×

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4,45,000

ag
eligible in the
given case
= ` 1,79,887 (rounded off) (Total under CGST and SGST)
Or
` 89,943.50+89,943.50 each (under CGST and SGST)

(b) A. The claim made by SV Electricals Ltd. is not correct. SV Electricals Ltd. needs to
issue e-way bill.
E-way bill is mandatorily required to be issued whenever there is a movement of

o m
goods for reasons other than supply, provided the consignment value exceeds
` 50,000.
B. In case of inter-State transfer of m
. c
s eirrespective of the value of the consignment.
goods by principal to job-worker, e-way bill is

a
glto be issued in case of transfer of goods by Tree Ltd.
mandatorily required to be issued

a
Thus, e-way bill is required
registered in Kerala to Woods & Co. in Tamil Nadu . 9

(c) Computation of total duties payable under Customs Act
Particular Amount (`)
Landed price of Solar PV Products 30,00,000
Add: Basic custom duty @ 10% (` 30,00,000 × 10%) 3,00,000

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Add: Safeguard duty @ 25% on ` 30,00,000 7,50,000

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Add: Social welfare surcharge @ 10% on ` 3,00,000
.c o 30,000

c. o m
se 4,89,600
Total 40,80,000

em la
IGST (` 40,80,000 × 12%)

las [Value for calculation of IGST also includes safeguard duty amount.]
a g
ag Total customs duty payable
(` 3,00,000 + ` 7,50,000 + ` 30,000 + ` 4,89,600)
15,69,600

9 It has been most logically assumed that the movement of goods has commenced from Kerala.

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PAPER – 8: INDIRECT TAX LAWS 85

Safeguard measures are not applicable to articles imported by a SEZ unit unless
specifically made applicable or article imported is cleared as such/ used in the manufacture
of goods cleared into DTA.
Thus, if ABC Exports is a SEZ unit, safeguard duty will not be applicable to it and total
amount of duties payable will be ` 7,29,600. 10(3,00,000 BCD + 30,000 SWS + 3,99,600
IGST)
Question 5
(a) KK Pvt. Ltd. self-assessed its tax liability as ` 1,15,000 for the month of May 2022, but
failed to make the payment.
Subsequently the Department initiated penal proceedings against KK Pvt. Ltd. for recovery
of penalty under Section 73 for failure to pay GST and issued show cause notice on
12th September 2022, which was received by KK Pvt. Ltd. on 17 th September 2022.
KK Pvt. Ltd. deposited the tax along with interest on 27th September 2022 and informed
the department on the same day.
Department is contending that he is liable to pay a penalty of ` 57,500 (i.e. 50% of
` 1,15,000).
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. (5 Marks)
(b) Mr. Raj intends to start a new manufacturing business in Jaipur. However, he is not able
to determine the classification of the goods proposed to be manufactured and supplied by
him since the classification of said goods has been contentious. Mr. Raj read an article
about advance ruling in the newspaper and decided to apply for advance ruling so as to
avoid litigation later.
Mr. Rahul, who is friend of Mr. Raj is also engaged in the supply of goods similar to which
Mr. Raj proposes to manufacture in Jaipur and Mr. Rahul advised him to apply the same
classification as of his, since he has already taken advance ruling order regarding
classification of the said goods.
Mr. Raj's tax consultant also agreed with the advice given by Mr. Rahul. Mr. Raj also
thought it to be a good decision since he was unregistered and thought that he needed to
be registered to apply for advance ruling in his name.
You are required to advise Mr. Raj with respect to following:
(a) Whether Mr. Raj and his tax consultant are right and can classify the goods proposed
to be supplied by Mr. Raj on the basis of his friend Mr. Rahul's advance ruling order?

10 It has been most logically assumed that article imported by ABC Exports is not cleared as such/ used in the

manufacture of goods cleared into DTA.

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86 FINAL EXAMINATION: MAY, 2023

(b) Whether Raj needs to get registered to apply for advance ruling? (4 Marks)
(c) Mr. Noddy, aged 40 years and a citizen of Australia, is on a solo trip to India for 1 month

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to meet his Indian friend residing in Mumbai. He carries with him following articles as part

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of baggage:

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mpersonal effects s
Particulars Value in `

s e
Used 80, 000
g l a
l a a
ag 65150cartridges
Other articles carried on in person 1,00,000
of fire arms @ ` 1,000 per cartridge 65,000
gms of tobacco @ ` 10 per gram 1,500
Mobile phone 50,000
50 cigars of ` 100 each 5,000
Used personal effects of his infant child for donation 10,000
With reference to the Baggage rules 2016, indicate the taxability and taxable value in

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respect of each item in the table under baggage rules or otherwise. Also calculate the

co
customs duty payable on baggage rounded off to the nearest rupee in accordance with

.
em
law. Ignore agriculture infrastructure and development cess. (5 Marks)

a s
Answer

g l
a
(a) The stand taken by the Department that he is liable to pay a penalty of ` 57,500 is not
correct.
In the given case, since KK Pvt. Ltd. has not paid self-assessed tax for the month of
May, 2022 within a period of 30 days from the due date of payment of such tax penalty
payable will be higher of the following 11:
(a) 10% of tax,
Or
(b) ` 10,000

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Hence in given case

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` 11,500 (` 1,15,000 x 10%)

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Or
la se
las ` 10,000
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ag
11 Since the question requires answer with reference to the provisions of the CGST Act, it has been

assumed that the tax liability provided in the question is also with respect to CGST only and accordingly
amount of penalty payable has been computed.

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PAPER – 8: INDIRECT TAX LAWS 87

i.e. ` 11,500 each under CGST and SGST
(b) (a) No, Mr. Raj and his tax consultant are not correct.
An advance ruling is binding only on the applicant who had sought it and on the
concerned officer. An advance ruling is not applicable to similarly placed other taxable
persons in the State.
Thus, Mr. Raj cannot classify the goods to be supplied by him on the basis of his
friend Mr. Rahul’s advance ruling order.
(b) No, Mr. Raj need not register to apply for advance ruling since advance ruling can be
sought by a registered person or person desirous of obtaining registration. It is not
mandatory for a person seeking advance ruling to be registered.
(c)
Taxable value
under Baggage
Rules
Used personal effects [Allowed duty free] NIL
Other articles carried on in person Taxable 1,00,000
50 cartridges of fire arms 50,000
(50 x ` 1,000)
125 gms of tobacco 1,250
(125 gm x ` 10)
Mobile phone 50,000
25 cigars of ` 100 each 2,500
(25 cigars x ` 100)
Used personal effects of his infant child [Taxable.] 10,000
Total 2,13,750
Less: General Free Allowance 15,000
Baggage on which duty is payable @ 38.50% (including 10% 1,98,750
Social welfare surcharge)
Duty payable on baggage 12 76,519
(rounded off)

12 Cartridges of fire arms exceeding 50, tobacco exceeding 125 gms and cigars exceeding 25 are not

chargeable to rate of 38.50% as applicable to baggage vide Notification No. 26/2016 Cus. dated 31.03.2016.
These items are charged @ 100% applicable to baggage under Heading 9803 of the Customs Tariff.

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88 FINAL EXAMINATION: MAY, 2023

Question 6
(a) M/s Blue Berry Traders, a registered person under GST, issued a tax invoice on 1st August,

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2022 to M/s Blue Lagoon Traders without any underlying supply of goods or services

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amounting to Input Tax Credit (ITC) involved of ` 30 lakh.

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M/s Blue Lagoon Traders avails ITC on the basis of the said tax invoice. The department

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issued a show cause notice to M/s Blue Lagoon Traders on 1st April, 2023 specifying the
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amount of tax along with interest payable thereon u/s 50 and applicable penalty. M /s Blue

ag
Lagoon Traders paid the amount of tax along with interest payable thereon u/s 50 specified
in the show cause notice on 15 th April, 2023 and also along with applicable penalty.
Explain the relevant provision in brief and determine the amount of penalty to be paid by
M/s Blue Berry Traders and M/s Blue Lagoon Traders under CGST Act, 2017 in respect of
above referred transaction.
OR
Mr. Jumbo 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

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Appellate Tribunal came also in favour of the Department. Mr. Jumbo now wants to file an
appeal against the decision of the Appellate Tribunal as he feels the stand taken by him is

emwith regard to filing of an appeal b efore the
correct.

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You are required to advise him suitably

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a to proper officers for scrutiny of returns under GST. The
appellate forum higher than the Appellate (4 Marks)
(b) What are the powers available
proper officer while conducting scrutiny of returns under Section 61 of the CGST Act, 2017,
detected discrepancy in the return filed by M/s R Kumar Pvt. Ltd. (registered under GST).
Explain the recourse that may be taken by the proper officer in case proper explanation is
not furnished by M/s R Kumar Pvt. Ltd. (5 Marks)
(c) Under which provisions of Constitution of India, government is empowered to levy taxes,
custom duty and export duties. You are required to write a note on related provisions and

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restrictions under the Constitution of India. (5 Marks)

m c o
M/s Blue Berry Traders issued an invoice without any supply of goods or. services in
Answer

c. o (a) Since mhigher of the
violation of the provisions of GST law, it shall be liable to pay a penaltyeof
s
s em g l a
la a
following-

ag (a) ` 10,000 or
(b) Amount of ITC passed on,
So in given case, penalty is higher of:
(a) ` 10,000, or

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PAPER – 8: INDIRECT TAX LAWS 89

(b) ` 30 lakh
i.e. ` 30 lakh
each under CGST and SGST 13
Where any person chargeable with tax due to wrongful availment and utilization of ITC by
reason of fraud etc. pays the said tax along with interest payable under section 50 and a
penalty equivalent to 25% of such tax within 30 days of issue of the notice, all proceedings
in respect of the said notice shall be deemed to be concluded 14 15.
Thus, M/s Blue Lagoon Traders has to pay penalty of ` 7,50,000 (` 30 lakh x 25%) each
under CGST and SGST 16.
Alternative (a) Since the issue involved in Mr. Jumbo’s appeal relates to the place of
supply, the appeal in his case would have been decided by the
(i) National Bench of the Tribunal.
(ii) Regional Bench of the Tribunal.
An appeal against the decision of the National/Regional Bench lies directly to the Supreme
Court.
Thus, in the given case Mr. Jumbo will have to file an appeal with the Supreme Court
against the decision of the Appellate Tribunal.
(b) The proper officer may scrutinize the return and related particulars furnished by the
registered person to verify the correctness of the return and inform him of the discrepancies
noticed.
In case no satisfactory explanation is furnished by registered person, the proper officer
may take recourse to any of the following provisions, namely:
(a) proceed to conduct audit under section 65 of the CGST Act
(b) proceed to conduct special audit to be conducted by a Chartered Accountant or a
Cost Accountant under section 66 of the CGST Act

13
Since the question requires the students to determine the penalty to be paid under the CGST Act, it has
been assumed that the amount of ITC provided in the question is also with respect to CGST only and
accordingly amount of penalty payable has been computed.
14
It has been most logically assumed that M/s Blue Lagoon Traders has availed ITC by reason of fraud or any
willful- misstatement or suppression of facts.
15
Section 74 of the CGST Act, 2017
16
M/s Blue Lagoon Traders may be liable to pay a penalty of higher of ` 10,000 or amount of ITC passed on
under section 122(1)(vii) of the CGST Act, 2017 read with Circular No. 171/03/2022 GST dated 06.07.2022.
So in the given case, penalty is higher of: ` 10,000, or ` 30 lakh i.e. ` 30 lakh each under CGST and SGST
Act.

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90 FINAL EXAMINATION: MAY, 2023

(c) undertake procedures of inspection, search and seizure under section 67 of the
CGST Act.

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(d) initiate proceeding for determination of tax and other dues under section 73/74 of the

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CGST Act

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s
(c) Constitution17 provides that no tax shall be levied or collected except by authority of law.

s em
Entry 83 of Union List or List I of Seventh Schedule to the Constitution has given the power
g l a
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lConstitution
to the
provides for restrictions as to imposition of tax on certain supply of goods ora
Union to frame laws to levy duties of customs including export duties.

a services or both. The said Article provides as follows-
18

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 and/or export of the goods or services or both into and/or
out of territory of India

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it solely lies with the Union, i.e. the Parliament of India.

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gla a
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17
Article 265 of the Constitution
18
Article 286 of the Constitution

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