Taxation - GST Ch 03: Charge Composition - Test 2: answer key

Question 1 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. Vikramaditya Tech Labs LLP, registered in Delhi, manufactures industrial automation equipment and files monthly GSTR-3B returns. During September 2026, it receives four transportation services relating to movement of machinery and components. On 4 September, Sarathi Carriers, an unregistered Goods Transport Agency (GTA), transports components worth ₹18,00,000 and charges freight of ₹8,00,000. Sarathi issues a consignment note for the transportation and has not exercised any option to pay tax under forward charge. On 12 September, Northstar Logistics Pvt. Ltd., a registered GTA, transports another consignment for freight of ₹6,00,000. Northstar had exercised its option to pay tax under forward charge by filing Annexure V on 20 March 2025. It has not filed Annexure VI to revert to reverse charge for FY 2026-27 by 31 March 2026. Its invoice dated 12 September charges GST at 12% and contains the prescribed forward-charge declaration. Northstar claims eligible input tax credit on its business expenses. On 17 September, FleetLine Transport carries machinery by road for freight of ₹2,50,000. It issues only an ordinary freight receipt and does not issue a consignment note. On 22 September, Bharat Roadways, a GTA, transports equipment for ₹1,80,000 for the Public Works Department of the Delhi Government. The Department has obtained GST registration solely for deduction of tax under section 51 and does not make taxable outward supplies. It is specifically stated that all four services are intra-State supplies and all freight amounts represent taxable-service values before GST. The finance controller proposes to apply RCM to every freight invoice addressed to a registered recipient. Assume the applicable combined GST rate is 5% where RCM applies and 12% under the forward-charge option selected by Northstar. The company must distinguish the GTA definition, recipient category, forward-charge election and government-registration exception.

Which of the four transportation arrangements in September 2026 results in GST liability under RCM in the hands of Vikramaditya Tech Labs LLP, considering the GTA definition, specified-recipient condition and available exceptions?

1. Sarathi's ₹8,00,000 freight, since it issues a consignment note and the recipient is a registered LLP. (correct answer)
2. Northstar's ₹6,00,000 freight, since every registered GTA supplying a registered LLP attracts RCM.
3. FleetLine's ₹2,50,000 freight, since an ordinary freight receipt constitutes a consignment note.
4. Bharat Roadways' ₹1,80,000 freight, since TDS-only registration makes the Department a regular recipient.

Answer: A — Sarathi's ₹8,00,000 freight, since it issues a consignment note and the recipient is a registered LLP.

Explanation. Notification No. 13/2017-Central Tax (Rate), Sl. No. 1, covers GTA transportation to specified recipients, including registered persons. Sarathi issues a consignment note, and Vikramaditya is registered; hence RCM applies. Its CGST is ₹8,00,000 × 2.5% = ₹20,000 and SGST is ₹20,000. Northstar satisfies the forward-charge exception, FleetLine is not a GTA, and Bharat Roadways' TDS-only government recipient falls under the specified exception.

Where it goes wrong. Applying RCM to every freight invoice addressed to a registered recipient without examining the consignment-note requirement, forward-charge election and TDS-only government exception.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 1; Notification No. 11/2017-Central Tax (Rate), Explanation relating to GTA; Notification No. 12/2017-Central Tax (Rate), Entry 21B

Question 2 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Northstar filed Annexure V in March 2025 and did not file Annexure VI for FY 2026-27. Its September invoice charges 12% GST and contains the prescribed declaration. Which treatment applies to the ₹6,00,000 freight service, assuming the GTA continues its previously exercised forward-charge option?

1. Vikramaditya pays ₹30,000 GST under RCM because Northstar must renew its election annually.
2. Northstar pays ₹72,000 under forward charge, and Vikramaditya does not pay RCM on this supply. (correct answer)
3. Both parties pay ₹36,000 each because the forward-charge election is partly effective.
4. Vikramaditya pays ₹72,000 under RCM because the invoice contains a forward-charge declaration.

Answer: B — Northstar pays ₹72,000 under forward charge, and Vikramaditya does not pay RCM on this supply.

Explanation. Notification No. 6/2023-Central Tax (Rate) provides that an option exercised by a GTA for forward charge continues for subsequent financial years unless Annexure VI is filed to revert to RCM. No such reversion occurred. Northstar's 12% invoice is therefore under forward charge. Tax = ₹6,00,000 × 12% = ₹72,000, comprising CGST ₹36,000 and SGST ₹36,000, payable by Northstar rather than Vikramaditya.

Where it goes wrong. Believing that the GTA must submit a fresh Annexure V every financial year even when its earlier forward-charge election continues.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 11/2017-Central Tax (Rate), Sl. No. 9(iii); Notification No. 6/2023-Central Tax (Rate), dated 26.07.2023; Notification No. 13/2017-Central Tax (Rate), Sl. No. 1

Question 3 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

FleetLine transports goods by road for ₹2,50,000 but issues an ordinary freight receipt instead of a consignment note. The recipient argues that the registered-recipient condition automatically makes the service taxable under RCM. Which conclusion correctly follows from the statutory GTA definition and the road-transport exemption?

1. FleetLine is a GTA because it receives freight consideration for carrying commercial goods.
2. Vikramaditya must pay GST at 5% because all road transport is covered by RCM.
3. The service is exempt road transportation because FleetLine does not issue a consignment note. (correct answer)
4. FleetLine pays GST at 12% because the recipient holds a GST registration.

Answer: C — The service is exempt road transportation because FleetLine does not issue a consignment note.

Explanation. A GTA is a person who provides services relating to road transportation of goods and issues a consignment note. FleetLine does not issue such a document, so it does not satisfy the GTA definition. Entry 18 of Notification No. 12/2017-Central Tax (Rate) exempts road transport other than GTA and courier services. Consequently, taxable value ₹2,50,000 × 0% = nil GST, and section 9(3) RCM does not arise.

Where it goes wrong. Treating an ordinary freight receipt as a consignment note and assuming that the recipient's registration alone creates GTA status.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 11/2017-Central Tax (Rate), Explanation relating to GTA; Notification No. 12/2017-Central Tax (Rate), Sl. No. 18

Question 4 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Determine the total CGST and SGST payable by Vikramaditya Tech Labs LLP under RCM on the four freight arrangements described in the scenario. Consider Sarathi's unregistered GTA service, Northstar's valid forward-charge invoice, FleetLine's non-GTA road transportation and Bharat Roadways' service to a TDS-only government department.

1. ₹30,000 total, applying 5% to Northstar's freight value only.
2. ₹72,000 total, applying 12% to Northstar's freight value under RCM.
3. ₹52,500 total, applying 5% to Sarathi and FleetLine's combined freight.
4. ₹40,000 total, applying 5% only to Sarathi's qualifying freight. (correct answer)

Answer: D — ₹40,000 total, applying 5% only to Sarathi's qualifying freight.

Explanation. Only Sarathi's service attracts recipient-side RCM. Its freight value is ₹8,00,000. Total GST = ₹8,00,000 × 5% = ₹40,000. CGST = ₹8,00,000 × 2.5% = ₹20,000, and SGST is also ₹20,000. Northstar pays under forward charge; FleetLine's non-GTA road transport is exempt; Bharat Roadways' specified government recipient is covered by the TDS-only exception. Therefore, the other three values are excluded.

Where it goes wrong. Adding every freight invoice to the RCM base or including the 12% tax already discharged by Northstar.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 1; Notification No. 12/2017-Central Tax (Rate), Sl. Nos. 18 and 21B; Notification No. 11/2017-Central Tax (Rate), Sl. No. 9(iii)

Question 5 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. Nandini Real Estates Pvt. Ltd., registered in Delhi, manages commercial properties and is expanding its leasing portfolio during FY 2026-27. Its all-India aggregate turnover under the same PAN for FY 2025-26 was ₹19,60,000, although its turnover for FY 2026-27 had reached ₹28,00,000 by 31 August 2026. On 5 August, Ms. Meera Rao, an individual advocate, completed legal due diligence and issued an invoice for ₹4,00,000. Nandini entered the amount in its books on 18 September, and its bank account was debited on 19 September. The company believes that its current-year turnover should determine the exemption available on legal services. Aryan Steels Ltd., another Delhi business entity, had aggregate turnover of ₹26,40,000 during FY 2025-26. A firm of advocates provided legal representation services to Aryan on 12 August and issued its invoice for ₹5,00,000 on that date. Aryan entered the payment in its books on 30 September, while the bank account was debited on 1 October. Vikramaditya Tech Labs LLP had aggregate turnover of ₹23,80,000 during FY 2025-26 and received services from an arbitral tribunal on 16 September in connection with a commercial dispute. The tribunal issued an invoice for ₹3,00,000 on that date. Vikramaditya entered the payment in its books on 21 October, and its bank account was debited on 20 October. All three recipients are business entities located in Delhi, and all supplies are intra-State. Assume that the ordinary-State registration threshold applicable to these entities is ₹20,00,000 and the aggregate turnover figures are determined under section 2(6). Legal and arbitral services are assumed to attract GST at 18% wherever no exemption applies. There are no other exemptions or valuation adjustments. The finance department must determine the applicability of the preceding-year turnover exemption, the person liable to pay GST and the time of supply of the services received under reverse charge.

Aryan Steels Ltd. receives legal representation services from a firm of advocates for ₹5,00,000. Its aggregate turnover in FY 2025-26 was ₹26,40,000. Assuming that the service is an intra-State taxable supply at 18%, determine the recipient's liability under RCM after considering the exemption in Notification No. 12/2017-Central Tax (Rate).

1. Aryan pays ₹45,000 under RCM, being 9% of the legal-service consideration.
2. Aryan pays ₹90,000 under RCM, being 18% of the legal-service consideration. (correct answer)
3. The advocate pays ₹90,000 because the legal fee exceeds the registration threshold.
4. No GST applies because legal services from a firm of advocates are exempt.

Answer: B — Aryan pays ₹90,000 under RCM, being 18% of the legal-service consideration.

Explanation. Sl. No. 2 of Notification No. 13/2017 covers legal services supplied by a firm of advocates to a business entity in the taxable territory. Aryan's preceding-year turnover of ₹26,40,000 exceeds the assumed ₹20,00,000 exemption threshold. Therefore, RCM applies. GST = ₹5,00,000 × 18% = ₹90,000, comprising CGST ₹45,000 and SGST ₹45,000. The exemption in entry 45 is consequently unavailable.

Where it goes wrong. Applying the legal-service exemption merely because the recipient is a business entity, without testing its aggregate turnover in the preceding financial year.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 2; Notification No. 12/2017-Central Tax (Rate), Sl. No. 45; Notification No. 11/2017-Central Tax (Rate), Heading 9982

Question 6 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Vikramaditya Tech Labs LLP receives services from an arbitral tribunal for ₹3,00,000 to resolve a commercial dispute. Its aggregate turnover in FY 2025-26 was ₹23,80,000. Assuming the ordinary-State threshold is ₹20,00,000 and the applicable combined GST rate is 18%, determine the person liable to discharge GST and the amount payable.

1. The tribunal pays ₹54,000 under forward charge because arbitration is always taxable.
2. No GST arises because the recipient is an LLP rather than a company.
3. Vikramaditya pays ₹54,000 under RCM because its preceding-year turnover exceeds the threshold. (correct answer)
4. Vikramaditya pays ₹27,000 under RCM as only the CGST component applies.

Answer: C — Vikramaditya pays ₹54,000 under RCM because its preceding-year turnover exceeds the threshold.

Explanation. Sl. No. 3 of Notification No. 13/2017 covers services supplied by an arbitral tribunal to a business entity located in the taxable territory. Entry 45 exempts qualifying recipients whose preceding-year turnover does not exceed the applicable registration threshold. Here, ₹23,80,000 exceeds ₹20,00,000. Thus, GST under RCM is ₹3,00,000 × 18% = ₹54,000, comprising ₹27,000 CGST and ₹27,000 SGST.

Where it goes wrong. Assuming that the turnover exemption applies to arbitration services irrespective of the recipient's preceding-year turnover.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 3; Notification No. 12/2017-Central Tax (Rate), Sl. No. 45

Question 7 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Aryan Steels Ltd. receives legal services under RCM against an advocate firm's invoice dated 12 August 2026. Aryan enters the payment in its books on 30 September 2026, while its bank account is debited on 1 October 2026. The date immediately following sixty days from the supplier's invoice is 12 October 2026. Determine the time of supply under section 13(3) of the CGST Act.

1. 12 August 2026, being the date of issue of the advocate firm's invoice.
2. 1 October 2026, being the date on which payment is debited from the bank.
3. 12 October 2026, being the date immediately following sixty days from invoice.
4. 30 September 2026, being the earlier payment date in the recipient's books. (correct answer)

Answer: D — 30 September 2026, being the earlier payment date in the recipient's books.

Explanation. Under section 13(3), the time of supply of a service under RCM is the earlier of the recipient's payment date and the date immediately following sixty days from the supplier's invoice. Payment is taken at the earlier of the books entry and bank debit: 30 September versus 1 October. The alternative date is 12 October. Comparing 30 September and 12 October, the earlier date is 30 September 2026.

Where it goes wrong. Selecting the bank-debit date or the sixty-day backstop without first comparing the two payment dates recorded by the recipient.

Authority. Section 13(3) of the CGST Act, 2017

Question 8 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Nandini Real Estates Pvt. Ltd. receives legal services from an individual advocate for ₹4,00,000. Its preceding-year aggregate turnover was ₹19,60,000, whereas its current-year turnover had reached ₹28,00,000 by August 2026. It is already registered under GST. Assuming an ordinary-State threshold of ₹20,00,000, determine whether the advocate's legal service is taxable under RCM.

1. The service is exempt because preceding-year turnover is within the applicable threshold. (correct answer)
2. The service attracts RCM because current-year turnover has exceeded ₹20,00,000.
3. The advocate pays forward-charge GST because Nandini has voluntary registration.
4. Nandini pays GST because every registered business entity receiving legal advice attracts RCM.

Answer: A — The service is exempt because preceding-year turnover is within the applicable threshold.

Explanation. Entry 45 of Notification No. 12/2017 exempts qualifying legal services supplied to a business entity whose aggregate turnover in the preceding financial year is within its registration threshold. Nandini's relevant turnover is ₹19,60,000, below ₹20,00,000. Its current-year ₹28,00,000 turnover does not replace the preceding-year test. The normal tax computation would be ₹4,00,000 × 18% = ₹72,000, but the exemption makes the liability nil.

Where it goes wrong. Using current financial-year turnover instead of preceding financial-year aggregate turnover, or denying exemption merely because the recipient holds GST registration.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 2; Notification No. 12/2017-Central Tax (Rate), Sl. No. 45; Section 22 of the CGST Act, 2017

Question 9 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. Prerna Events, a sole proprietorship registered in Karnataka, organises industrial exhibitions and offers sponsorship packages involving naming rights, promotional displays, logo placement and exhibition branding. On 7 September 2026, it provides a sponsorship package to Aryan Steels Ltd., a registered company, for ₹10,00,000. The agreement identifies Prerna Events as the service provider and Aryan Steels as the recipient of the sponsorship benefits. On 16 September, Stagecraft Media Pvt. Ltd., a registered company, provides a similar sponsorship package to Aryan Steels for ₹6,00,000. Stagecraft is incorporated under the Companies Act, 2013. On 21 September, Prerna Events supplies another sponsorship package to Vikramaditya Tech Labs LLP for ₹4,00,000. Vikramaditya is registered under GST as an LLP, and its aggregate turnover during FY 2025-26 was only ₹8,50,000. Its accountant argues that the exemption available to small business entities receiving legal services should also cover this sponsorship transaction. On 26 September, Prerna Events provides branding and promotional benefits to Smt. Anuradha Sen, an individual organising a personal cultural programme, for ₹2,00,000. Anuradha does not carry on the activity through a company or partnership firm. All parties are located in Karnataka, all four supplies are intra-State, and the applicable GST rate on sponsorship services is assumed to be 18%. The stated amounts are transaction values before GST. Prerna Events is not a body corporate. The parties have not entered into any arrangement that changes the legal identity of the supplier or recipient. Aryan Steels proposes to discharge RCM only on payments made to sole proprietors, while the accountant of Vikramaditya proposes to claim the small-turnover exemption. The tax manager must determine the supplier and recipient conditions independently for each package, examine the special treatment of LLPs, and distinguish sponsorship services from the legal and arbitration services covered by the turnover-based exemption.

Prerna Events, a sole proprietorship, provides a sponsorship package worth ₹10,00,000 to Aryan Steels Ltd. on 7 September 2026. Aryan is a body corporate located in the taxable territory. The supplier is not incorporated as a company or any other body corporate. Determine the applicable mechanism and the total GST liability at the assumed combined rate of 18%.

1. Prerna pays ₹1,80,000 under forward charge because it organises the exhibition.
2. Aryan pays ₹90,000 under RCM because only the central component shifts to the recipient.
3. Aryan pays ₹1,80,000 under RCM because the supplier and recipient conditions are satisfied. (correct answer)
4. No GST arises because sponsorship services are covered by the legal-service exemption.

Answer: C — Aryan pays ₹1,80,000 under RCM because the supplier and recipient conditions are satisfied.

Explanation. Sl. No. 4 covers sponsorship services supplied by any person other than a body corporate to a body corporate or partnership firm located in the taxable territory. Prerna is a sole proprietorship and is not a body corporate; Aryan is a company. Accordingly, Aryan pays RCM. Total GST = ₹10,00,000 × 18% = ₹1,80,000, consisting of CGST ₹90,000 and SGST ₹90,000.

Where it goes wrong. Assuming that sponsorship supplied by an individual or sole proprietor is always forward charge, without checking the recipient's legal form.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 4; Section 2(84) of the CGST Act, 2017

Question 10 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

On 16 September 2026, Stagecraft Media Pvt. Ltd., a body corporate, supplies sponsorship services to Aryan Steels Ltd. for ₹6,00,000. Aryan is registered under GST and is a company. The accounts manager seeks to apply RCM because Aryan is a body corporate receiving sponsorship services. Which party is liable to pay GST, assuming that no specific exemption applies?

1. Aryan pays ₹1,08,000 under RCM because the recipient is a registered company.
2. Both companies pay ₹54,000 each under a shared reverse-charge arrangement.
3. No tax arises because sponsorship services supplied by companies are exempt.
4. Stagecraft pays ₹1,08,000 under forward charge because it is a body corporate. (correct answer)

Answer: D — Stagecraft pays ₹1,08,000 under forward charge because it is a body corporate.

Explanation. The sponsorship entry applies only when the supplier is a person other than a body corporate. Stagecraft is a company and therefore a body corporate. The supplier condition fails, notwithstanding Aryan's corporate status. Stagecraft is liable under forward charge. GST = ₹6,00,000 × 18% = ₹1,08,000, split into CGST ₹54,000 and SGST ₹54,000.

Where it goes wrong. Checking only the recipient's status as a body corporate and overlooking the separate supplier-side condition.

Authority. Section 9(1) of the CGST Act, 2017; Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 4; Section 2(11) of the Companies Act, 2013

Question 11 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Calculate the aggregate RCM liability of Aryan Steels Ltd. and Vikramaditya Tech Labs LLP on the sponsorship services supplied by Prerna Events. Exclude Stagecraft's corporate-provider transaction and Prerna's service to Smt. Anuradha Sen. Assume an 18% combined GST rate on the qualifying packages.

1. ₹2,52,000 total GST, consisting of ₹1,26,000 CGST and ₹1,26,000 SGST. (correct answer)
2. ₹1,80,000 total GST, being 18% of Aryan's sponsorship package alone.
3. ₹3,60,000 total GST, including Stagecraft's sponsorship package also under RCM.
4. ₹2,16,000 total GST, being 18% of the ₹12,00,000 qualifying packages.

Answer: A — ₹2,52,000 total GST, consisting of ₹1,26,000 CGST and ₹1,26,000 SGST.

Explanation. Prerna's qualifying supplies are ₹10,00,000 to Aryan and ₹4,00,000 to Vikramaditya. An LLP is treated as a partnership firm for this RCM entry. Aggregate qualifying value = ₹10,00,000 + ₹4,00,000 = ₹14,00,000. GST = ₹14,00,000 × 18% = ₹2,52,000. CGST = ₹1,26,000 and SGST = ₹1,26,000. Stagecraft's body-corporate supply and the individual recipient's package are excluded.

Where it goes wrong. Including all sponsorship invoices in one RCM base or excluding an LLP merely because it is incorporated as a body corporate under its governing legislation.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 4; Explanation to Notification No. 13/2017-Central Tax (Rate) relating to LLPs

Question 12 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Prerna Events provides sponsorship benefits worth ₹2,00,000 to Smt. Anuradha Sen, an individual organising a personal cultural programme. Prerna is a sole proprietorship and is not a body corporate. Anuradha does not carry on the programme through a company or partnership firm. Assuming an 18% GST rate, determine the person liable to pay tax and the amount of GST.

1. Anuradha pays ₹36,000 under RCM because the supplier is not a body corporate.
2. Prerna pays ₹36,000 under forward charge because Anuradha is not a specified recipient. (correct answer)
3. Both parties pay ₹18,000 each because the sponsorship service has mixed recipients.
4. No GST is payable because all sponsorship services to individuals are exempt.

Answer: B — Prerna pays ₹36,000 under forward charge because Anuradha is not a specified recipient.

Explanation. The sponsorship RCM entry requires the recipient to be a body corporate or partnership firm. Anuradha is an individual, so the recipient condition fails. Consequently, Prerna is liable under forward charge. GST = ₹2,00,000 × 18% = ₹36,000, consisting of CGST ₹18,000 and SGST ₹18,000. The fact that Prerna itself is a sole proprietorship satisfies only the supplier-side condition, not the recipient-side condition.

Where it goes wrong. Applying RCM merely because the sponsorship provider is not a body corporate, without checking whether the recipient belongs to a specified category.

Authority. Section 9(1) of the CGST Act, 2017; Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 4

Question 13 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

On 18 September 2026, Aryan Steels Ltd. pays ₹8,40,000 to FleetLine Transport for carrying industrial equipment by road. FleetLine issues an ordinary receipt and a freight bill but does not issue a consignment note. It is neither a courier agency nor a registered GTA. Aryan argues that its GST registration automatically brings the transportation service under RCM. Determine the correct treatment under the GTA definition and the exemption for transportation of goods by road.

1. No GST applies because the service is road transportation other than GTA or courier service. (correct answer)
2. Aryan pays ₹42,000 under RCM because the recipient is a registered body corporate.
3. FleetLine pays ₹1,00,800 under forward charge because it carries commercial equipment.
4. Aryan pays ₹1,51,200 under RCM because the transporter has not taken registration.

Answer: A — No GST applies because the service is road transportation other than GTA or courier service.

Explanation. A GTA must issue a consignment note in relation to road transportation of goods. FleetLine does not do so, and is therefore not a GTA. Entry 18 of Notification No. 12/2017 exempts transportation of goods by road other than services of GTA and courier agencies. Hence, GST = ₹8,40,000 × 0% = nil. The registered status of Aryan cannot independently convert an exempt transport service into an RCM supply.

Where it goes wrong. Confusing registration of the recipient with the statutory definition of GTA and ignoring the exemption for ordinary road transportation.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 11/2017-Central Tax (Rate), Explanation relating to GTA; Notification No. 12/2017-Central Tax (Rate), Sl. No. 18

Question 14 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

An unregistered partnership firm in Haryana has aggregate turnover of ₹9,40,000 in FY 2025-26. On 8 September 2026, it receives road transportation services from a GTA that has not exercised the forward-charge option. The GTA issues a consignment note and charges freight of ₹4,00,000. The partnership firm argues that it is outside the notified recipient category because it does not possess a GSTIN. Assuming a combined GST rate of 5%, determine the RCM liability and registration consequence.

1. No RCM applies because the partnership firm has not obtained GST registration.
2. RCM is ₹20,000, and compulsory registration follows under section 24(iii). (correct answer)
3. The GTA must pay ₹20,000 under forward charge because the firm is unregistered.
4. RCM is ₹72,000 because the normal GTA forward-charge rate is 18%.

Answer: B — RCM is ₹20,000, and compulsory registration follows under section 24(iii).

Explanation. The GTA RCM entry expressly includes a partnership firm whether registered or not. Therefore, the low aggregate turnover and absence of GSTIN do not remove the firm's recipient-side liability. GST = ₹4,00,000 × 5% = ₹20,000, comprising CGST ₹10,000 and SGST ₹10,000. Section 24(iii) requires compulsory registration for persons liable to pay tax under RCM, notwithstanding the ordinary section 22 threshold.

Where it goes wrong. Assuming that the GTA recipient must already hold GST registration to fall within the notified category of partnership firms.

Authority. Section 9(3) of the CGST Act, 2017; Section 24(iii) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 1

Question 15 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A registered GTA exercised the forward-charge option by filing Annexure V on 15 February 2025 for FY 2025-26. It did not file Annexure VI during the prescribed period preceding FY 2026-27. On 17 August 2026, it transports goods for a registered company for freight of ₹7,50,000 and issues an invoice charging 12% GST with the prescribed declaration. Which position correctly follows from the continuing-option provision introduced in 2023?

1. The recipient pays 5% under RCM because the GTA's first-year election automatically expires.
2. The recipient and the GTA each discharge 6% of the freight value.
3. The GTA continues under forward charge and pays ₹90,000 GST on the transaction. (correct answer)
4. The GTA must charge 5% and cannot claim ITC in any subsequent financial year.

Answer: C — The GTA continues under forward charge and pays ₹90,000 GST on the transaction.

Explanation. The forward-charge option continues for future financial years unless the GTA files Annexure VI to revert to RCM between 1 January and 31 March of the preceding financial year. No Annexure VI was filed. The GTA therefore continues under forward charge. At 12%, GST = ₹7,50,000 × 12% = ₹90,000, comprising CGST ₹45,000 and SGST ₹45,000. The 12% rate permits eligible input tax credit to the GTA.

Where it goes wrong. Treating the forward-charge option as an annual election that automatically lapses at the end of the first financial year.

Authority. Notification No. 11/2017-Central Tax (Rate), Sl. No. 9(iii); Notification No. 6/2023-Central Tax (Rate), dated 26.07.2023; Notification No. 13/2017-Central Tax (Rate), Sl. No. 1

Question 16 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A new GTA commences business on 1 July 2026 and applies for GST registration on 5 July 2026. Its registration certificate is issued on 22 July 2026. The GTA wishes to exercise the option to pay GST under forward charge for its services during FY 2026-27. It is eligible to use the special timeline for new businesses. Determine the last permissible date for filing Annexure V, considering the alternative periods prescribed under the GTA option procedure.

1. 19 August 2026, being 45 days from the registration application date.
2. 5 August 2026, being one month from the registration application date.
3. 15 August 2026, being the ordinary annual election deadline for all GTAs.
4. 22 August 2026, being one month from registration, the later of the two dates. (correct answer)

Answer: D — 22 August 2026, being one month from registration, the later of the two dates.

Explanation. A GTA commencing business or crossing the registration threshold during a financial year may exercise the forward-charge option within 45 days of applying for registration or one month from obtaining registration, whichever is later. The 45-day period from 5 July expires on 19 August. One month from 22 July expires on 22 August. The later date is 22 August 2026. Filing Annexure V by that date is therefore within the special permitted period.

Where it goes wrong. Applying the ordinary 31 March deadline to a new GTA instead of using the special registration-related period.

Authority. Notification No. 11/2017-Central Tax (Rate), Sl. No. 9(iii); Notification No. 3/2022-Central Tax (Rate), dated 13.07.2022; Notification No. 6/2023-Central Tax (Rate), dated 26.07.2023

Question 17 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A registered GTA exercises forward charge for FY 2026-27 and transports goods for a registered company for freight of ₹10,00,000. It has incurred eligible input GST of ₹40,000 on expenses used to provide the service. The GTA is considering the 5% and 12% rate alternatives. Which comparison correctly reflects the tax rates and the input-credit condition applicable to the GTA?

1. At 5%, GST is ₹50,000 without ITC; at 12%, GST is ₹1,20,000 with eligible ITC. (correct answer)
2. At 5%, GST is ₹50,000 with ITC; at 12%, GST is ₹1,20,000 without ITC.
3. At either rate, GST is ₹50,000 and ITC of ₹40,000 is available.
4. At 5%, GST is ₹1,20,000 without ITC; at 12%, GST is ₹50,000 with ITC.

Answer: A — At 5%, GST is ₹50,000 without ITC; at 12%, GST is ₹1,20,000 with eligible ITC.

Explanation. The GTA may pay 5% without ITC or 12% with eligible ITC under the forward-charge option. Under the 5% alternative, tax = ₹10,00,000 × 5% = ₹50,000, but the GTA cannot claim the ₹40,000 input credit. Under the 12% alternative, tax = ₹10,00,000 × 12% = ₹1,20,000. After eligible credit of ₹40,000, the net payment is ₹80,000, subject to section 16 conditions.

Where it goes wrong. Confusing the 5% no-credit condition with the 12% credit-eligible alternative, or treating the input credit as an automatic deduction under both rates.

Authority. Section 9(1) of the CGST Act, 2017; Notification No. 11/2017-Central Tax (Rate), Sl. No. 9(iii); Notification No. 3/2022-Central Tax (Rate), dated 13.07.2022

Question 18 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Bharat Roadways, a GTA, transports office furniture for ₹8,00,000 to a State Government department. The department is registered under GST exclusively to deduct tax under section 51 and does not make taxable outward supplies. Bharat Roadways issues a consignment note, and the service is otherwise a GTA service. The accounts officer treats the department as an ordinary registered specified recipient. Determine the applicable RCM and exemption treatment.

1. The department pays ₹40,000 under RCM because it holds a GST registration.
2. RCM does not apply, and the transportation service is exempt under entry 21B. (correct answer)
3. Bharat Roadways pays ₹40,000 under forward charge because every government service is taxable.
4. The department pays ₹72,000 under RCM at the standard GTA rate.

Answer: B — RCM does not apply, and the transportation service is exempt under entry 21B.

Explanation. The GTA RCM entry excludes services supplied to a government department, establishment, local authority or governmental agency registered solely for TDS under section 51 and not for taxable outward supplies. Entry 21B of Notification No. 12/2017 also grants the corresponding exemption. Although the department holds GST registration, the specific condition is met. Accordingly, ₹8,00,000 × 0% = nil GST, and neither the GTA nor the department discharges tax on this service.

Where it goes wrong. Treating every GST-registered government department as an ordinary specified GTA recipient without checking its exclusive TDS-registration purpose.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 1; Notification No. 12/2017-Central Tax (Rate), Entry 21B; Section 51 of the CGST Act, 2017

Question 19 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A Delhi business entity has the following FY 2025-26 outward supplies under one PAN: taxable domestic supplies ₹15,60,000, exempt supplies ₹1,40,000, exports ₹2,00,000 and inter-State supplies ₹2,00,000. It also received inward supplies of ₹4,00,000 on which tax was payable under RCM, and its accounts include ₹2,20,000 of GST in the transaction records. In September 2026, an individual advocate charges legal fees of ₹3,50,000. Assuming a ₹20,00,000 ordinary-State threshold and 18% GST, determine the applicable exemption and tax.

1. Aggregate turnover is ₹17,60,000; legal services are exempt and RCM is nil.
2. Aggregate turnover is ₹25,20,000; legal services attract ₹63,000 under RCM.
3. Aggregate turnover is ₹21,00,000; the entity pays ₹63,000 under RCM. (correct answer)
4. Aggregate turnover is ₹23,20,000; the legal service attracts ₹31,500 under RCM.

Answer: C — Aggregate turnover is ₹21,00,000; the entity pays ₹63,000 under RCM.

Explanation. Aggregate turnover includes taxable outward supplies, exempt outward supplies, exports and inter-State outward supplies, but excludes inward RCM supplies and GST. Thus, turnover = ₹15,60,000 + ₹1,40,000 + ₹2,00,000 + ₹2,00,000 = ₹21,00,000. This exceeds ₹20,00,000, so entry 45 exemption is unavailable. RCM = ₹3,50,000 × 18% = ₹63,000, comprising CGST ₹31,500 and SGST ₹31,500.

Where it goes wrong. Including inward RCM purchases and GST in aggregate turnover, while overlooking exempt and export outward supplies.

Authority. Section 2(6) of the CGST Act, 2017; Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 2; Notification No. 12/2017-Central Tax (Rate), Sl. No. 45; Section 22 of the CGST Act, 2017

Question 20 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A registered business entity in Delhi had aggregate turnover of ₹20,00,000 during FY 2025-26. In September 2026, it receives legal services worth ₹8,00,000 from a senior advocate. Its current-year turnover has increased to ₹32,00,000, and it has obtained voluntary GST registration. Assuming that the ordinary-State registration threshold is ₹20,00,000, determine whether entry 45 of Notification No. 12/2017 applies and whether RCM is payable.

1. RCM applies because the entity holds GST registration, regardless of prior-year turnover.
2. RCM applies because the preceding-year aggregate turnover equals the exemption threshold.
3. Only the CGST component is exempt, while SGST remains payable under RCM.
4. The service is exempt because the preceding-year turnover is within the threshold, including its limit. (correct answer)

Answer: D — The service is exempt because the preceding-year turnover is within the threshold, including its limit.

Explanation. Entry 45 exempts legal services provided by a senior advocate to a business entity whose preceding-year aggregate turnover is up to the amount qualifying it for registration exemption. At ₹20,00,000, the entity has not exceeded the ordinary-State threshold. Voluntary registration and current-year growth do not change the preceding-year test. Normal tax would be ₹8,00,000 × 18% = ₹1,44,000; however, the exemption makes CGST and SGST liability nil.

Where it goes wrong. Interpreting the phrase 'up to' as excluding the threshold amount itself, or substituting current-year turnover for the preceding-year criterion.

Authority. Section 9(3) of the CGST Act, 2017; Section 22 of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 2; Notification No. 12/2017-Central Tax (Rate), Sl. No. 45; Notification No. 21/2019-Central Tax (Rate)

Question 21 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

An arbitral tribunal provides dispute-resolution services worth ₹7,00,000 to a GST-registered company located in Delhi during October 2026. The company's all-India aggregate turnover under its PAN during FY 2025-26 was ₹19,75,000. Its current-year business has expanded substantially. Assuming that the ordinary-State registration threshold is ₹20,00,000, determine whether the arbitration service attracts RCM after considering the exemption notification.

1. The service is exempt under entry 45 because preceding-year turnover is within the registration threshold. (correct answer)
2. The company pays ₹1,26,000 under RCM because every corporate arbitration service is taxable.
3. The tribunal pays ₹63,000 under forward charge because the recipient is registered.
4. The company pays ₹63,000 under RCM because current-year expansion removes the exemption.

Answer: A — The service is exempt under entry 45 because preceding-year turnover is within the registration threshold.

Explanation. Entry 45 specifically covers services of an arbitral tribunal supplied to a business entity whose preceding-year aggregate turnover is within the registration exemption threshold. The relevant figure is ₹19,75,000, below ₹20,00,000. Hence, the arbitration service is exempt. Without exemption, tax would be ₹7,00,000 × 18% = ₹1,26,000, but the amount payable under RCM is nil. Current-year business expansion does not alter the stated test.

Where it goes wrong. Applying the legal-service RCM notification in isolation without examining the separate exemption covering arbitral tribunal services.

Authority. Section 9(3) of the CGST Act, 2017; Section 2(6) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 3; Notification No. 12/2017-Central Tax (Rate), Sl. No. 45

Question 22 · 2 marks · Taxation - GST Ch 03: Charge Composition · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Vasudev Events, a registered partnership firm, provides sponsorship services to Vikramaditya Tech Labs LLP for ₹4,00,000 in September 2026. The recipient LLP is registered under the LLP Act, 2008 and carries on business in Delhi. Vasudev argues that RCM cannot apply because both the supplier and recipient are partnership-type entities. Assuming an 18% combined GST rate and no other exemption, determine the person liable and the tax amount.

1. Vasudev pays ₹72,000 under forward charge because partnership firms cannot provide RCM services.
2. Vikramaditya pays ₹72,000 under RCM because the supplier is non-corporate and the LLP is treated as a partnership firm. (correct answer)
3. Both parties pay ₹36,000 each because each entity is a firm under GST.
4. No GST applies because the recipient LLP has turnover below ₹20,00,000.

Answer: B — Vikramaditya pays ₹72,000 under RCM because the supplier is non-corporate and the LLP is treated as a partnership firm.

Explanation. The sponsorship entry covers supply by any person other than a body corporate to a body corporate or partnership firm. A partnership firm is not a body corporate for this entry, and an LLP registered under the LLP Act is treated as a partnership firm for RCM purposes. Therefore, Vikramaditya pays RCM. GST = ₹4,00,000 × 18% = ₹72,000, comprising CGST ₹36,000 and SGST ₹36,000. The legal-service turnover exemption does not apply.

Where it goes wrong. Assuming that an LLP's incorporation under a separate statute removes it from the partnership-firm recipient category.

Authority. Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 4; Explanation to Notification No. 13/2017-Central Tax (Rate) relating to LLPs

Question 23 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

An unregistered individual advocate provides legal advisory services to a registered company whose aggregate turnover in FY 2025-26 was ₹24,00,000. The service is received on 1 September 2026, and the advocate issues only a fee note on that date. As the supplier is unregistered, the recipient must issue the RCM invoice under section 31(3)(f). The company issues its self-invoice on 3 October 2026. Under Rule 47A, determine the last permissible date for issuing the recipient invoice and whether the company complied.

1. The deadline is 30 September, so the recipient invoice is three days late.
2. The deadline is 2 October, so the recipient invoice is one day late.
3. The deadline is 1 October, and the invoice issued on 3 October is late. (correct answer)
4. The deadline is 31 October, so the recipient invoice is issued within time.

Answer: C — The deadline is 1 October, and the invoice issued on 3 October is late.

Explanation. The company is liable under RCM because the supplier is an advocate and the recipient's preceding-year turnover of ₹24,00,000 exceeds the assumed ₹20,00,000 threshold. Section 31(3)(f) requires a recipient invoice for an unregistered supplier. Rule 47A allows thirty days from receipt. Excluding 1 September, days 1 to 29 run from 2 to 30 September, and day 30 is 1 October. The 3 October invoice is therefore delayed by two days.

Where it goes wrong. Applying the supplier's ordinary service-invoice period instead of Rule 47A's special thirty-day recipient-invoice period.

Authority. Section 31(3)(f) of the CGST Act, 2017; Rule 47A of the CGST Rules, 2017; Section 9(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 2

Question 24 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

On 10 August 2026, a registered GTA that has not opted for forward charge issues an invoice for freight services taxable under RCM. The recipient enters payment in its books on 21 September, while its bank account is debited on 19 September. The date immediately following sixty days from the invoice date is 10 October 2026. Determine the time of supply under section 13(3), assuming that no advance or earlier payment has occurred.

1. 10 August 2026, being the date on which the supplier issues its invoice.
2. 21 September 2026, being the date on which payment is entered in the books.
3. 10 October 2026, being the date immediately following sixty days from invoice.
4. 19 September 2026, being the earlier date of payment recorded by the recipient. (correct answer)

Answer: D — 19 September 2026, being the earlier date of payment recorded by the recipient.

Explanation. Section 13(3) selects the earlier of the recipient's payment date and the date immediately following sixty days from the supplier's invoice. The payment date is the earlier of the recipient's books entry and bank debit: 21 September versus 19 September. Thus, 19 September is the payment date. Comparing it with 10 October, the earlier date is 19 September 2026, which is the time of supply.

Where it goes wrong. Taking the recipient's books-entry date automatically, without comparing it with the bank debit date.

Authority. Section 13(3) of the CGST Act, 2017; Notification No. 13/2017-Central Tax (Rate), Sl. No. 1

Question 25 · 2 marks · Taxation - GST Ch 03: Charge Composition · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A registered company reported CGST of ₹1,50,000 payable under RCM on legal services in its September 2026 return, due on 20 October 2026, but did not deposit the amount until 15 February 2027. A show-cause notice was issued on 1 February 2027, and the company paid the tax and interest on 15 February, within sixty days of the notice. There is no fraud or wilful misstatement. Assuming interest at 18% per annum and a 365-day year, determine the applicable interest and penalty, considering section 74A(11).

1. Interest ₹8,728.77 and penalty ₹15,000, because the self-assessed tax remained unpaid beyond thirty days. (correct answer)
2. Interest ₹8,728.77 and nil penalty, because payment was made within sixty days of the notice.
3. Interest ₹7,988.00 and penalty ₹10,000, being the minimum penalty in every case.
4. Interest ₹8,728.77 and penalty ₹1,50,000, being the full amount of tax due.

Answer: A — Interest ₹8,728.77 and penalty ₹15,000, because the self-assessed tax remained unpaid beyond thirty days.

Explanation. Interest runs from 21 October 2026 to 15 February 2027: 11 October days + 30 November days + 31 December days + 31 January days + 15 February days = 118 days. Interest = ₹1,50,000 × 18% × 118/365 = ₹8,728.77. The ordinary non-fraud penalty is the higher of 10% of tax or ₹10,000: max(₹15,000, ₹10,000) = ₹15,000. Section 74A(11) preserves this penalty because self-assessed tax remained unpaid beyond thirty days from its due date, notwithstanding payment within sixty days of the notice.

Where it goes wrong. Applying the sixty-day notice-stage penalty relief without considering the overriding thirty-day default rule for unpaid self-assessed tax under section 74A(11).

Authority. Section 50(1) and section 50(2) of the CGST Act, 2017; Notification No. 13/2017-Central Tax dated 28.06.2017; Section 74A(5)(i) of the CGST Act, 2017; Section 74A(8)(ii) of the CGST Act, 2017; Section 74A(11) of the CGST Act, 2017