Taxation - GST Ch 07: Itc - Test 1: answer key

Question 1 · 2 marks · Taxation - GST Ch 07: Itc · medium

Scenario. Vikramaditya Tech Labs LLP (VTL), registered in Delhi, manufactures industrial sensors and uses all inward supplies described below solely for taxable business operations. On 5 July 2026, Northstar Components, a registered supplier in Haryana, issued VTL a tax invoice for control modules priced at ₹4,00,000 plus IGST of ₹72,000. At VTL’s written instruction, Northstar delivered the modules on 7 July directly to VTL’s customer, Orion Systems, in Jaipur; Northstar’s invoice was addressed to VTL, and VTL separately invoiced Orion. The supplier initially omitted the invoice from its July GSTR-1. It furnished the invoice through GSTR-1A on 18 August, and VTL first saw it in its August GSTR-2B. Northstar furnished its corresponding GSTR-3B and discharged the tax in September. On 1 August 2026, VTL received a single tax invoice from a registered supplier for 12 tonnes of resin, with taxable value of ₹10,00,000 and GST of ₹1,80,000. The supplier reported the invoice in GSTR-1 and it appeared in VTL’s August GSTR-2B. The contract required delivery in three lots: 4 tonnes on 8 August, 5 tonnes on 22 August and the remaining 3 tonnes on 24 September. VTL paid the entire invoice amount on 2 August. A separate registered service provider issued VTL an invoice dated 12 August for calibration services of ₹1,50,000 plus GST of ₹27,000. On VTL’s direction and at VTL’s cost, the provider performed the calibration at VTL’s customer’s factory; the service report and invoice named VTL as the customer. The invoice was furnished in GSTR-1 and communicated in VTL’s August GSTR-2B. The provider discharged the tax through its September GSTR-3B. Finally, an office-network invoice dated 29 August for GST of ₹14,400 was absent from both August and September GSTR-2B. The vendor uploaded it in October GSTR-1, after which it appeared in VTL’s October GSTR-2B. VTL filed each relevant GSTR-3B only after reviewing the corresponding GSTR-2B.

VTL is preparing its August 2026 GSTR-3B, filed on 20 September after the two service/goods suppliers discharged their tax. The resin invoice is in August GSTR-2B, but its final lot has not yet arrived by the filing date. Considering invoice reporting, GSTR-2B appearance and receipt status, what is the aggregate ITC available from the four transactions described?

1. ₹99,000, comprising ₹72,000 on modules and ₹27,000 on calibration. (correct answer)
2. ₹72,000, comprising only the modules invoice and no service credit.
3. ₹2,79,000, including the resin invoice before its final lot arrived.
4. ₹1,13,400, including the office-network invoice absent from GSTR-2B.

Answer: A — ₹99,000, comprising ₹72,000 on modules and ₹27,000 on calibration.

Explanation. The modules invoice appears in August GSTR-2B and the supplier discharged ₹72,000 tax by the date VTL files its return; direct delivery to Orion is deemed receipt under section 16(2)(b). The calibration invoice appears in GSTR-2B, the service was supplied on VTL’s direction and account, and its supplier discharged ₹27,000 tax. Resin is excluded because its last lot arrived on 24 September, after filing on 20 September. The office-network invoice is excluded because it is absent from the relevant GSTR-2B. Available ITC = ₹72,000 + ₹27,000 = ₹99,000.

Where it goes wrong. Counting the entire resin credit merely because its invoice was uploaded and paid, or claiming the office-network credit without GSTR-2B communication.

Authority. Section 16(2)(aa), (b) and (c) of the CGST Act, 2017; Rule 36(4) of the CGST Rules, 2017

Question 2 · 2 marks · Taxation - GST Ch 07: Itc · hard

Northstar’s invoice is addressed to VTL, but the modules travelled directly from Haryana to Orion in Rajasthan on VTL’s instruction. VTL never stored or physically handled the modules. Which conclusion follows for the receipt condition, assuming the other ITC conditions are met?

1. Only Orion is deemed to receive the modules because it took physical delivery.
2. VTL is deemed to receive the modules because delivery followed its direction. (correct answer)
3. Neither party is treated as receiving the modules until VTL takes possession.
4. VTL can claim credit only after it transfers title documents to Orion.

Answer: B — VTL is deemed to receive the modules because delivery followed its direction.

Explanation. Section 16(2)(b), Explanation clause (i), deems the registered person to have received goods where the supplier delivers them to another person on that registered person’s direction, before or during movement, whether by transfer of title documents or otherwise. Northstar delivered the modules directly to Orion on VTL’s instruction. Thus, VTL satisfies the receipt condition despite not handling the goods. Taxable value ₹4,00,000 × 18% IGST = ₹72,000; that credit is available if the other conditions are met.

Where it goes wrong. Treating physical possession at VTL’s own premises as compulsory and overlooking the statutory deemed-receipt rule.

Authority. Section 16(2)(b), Explanation, clause (i) of the CGST Act, 2017

Question 3 · 2 marks · Taxation - GST Ch 07: Itc · hard

The resin invoice and its GST of ₹1,80,000 appeared in VTL’s August GSTR-2B, and the full invoice price was paid on 2 August. However, the supplier delivered the 12 tonnes in three lots, with the final 3 tonnes reaching VTL only on 24 September. When can VTL take the credit?

1. On 2 August, since payment of the entire invoice preceded delivery.
2. On 22 August, after receipt of the second lot covering most of the order.
3. Only after 24 September, when the final lot under that invoice is received. (correct answer)
4. In August, in proportion to the 9 tonnes delivered before the return is filed.

Answer: C — Only after 24 September, when the final lot under that invoice is received.

Explanation. The first proviso to section 16(2) postpones ITC where goods covered by one invoice are received in lots or instalments until the last lot or instalment is received. Here, the lots total 4 + 5 + 3 = 12 tonnes. The last 3 tonnes were received on 24 September 2026. Payment on 2 August and August GSTR-2B reflection do not accelerate the statutory receipt point. Therefore, the full ITC of ₹1,80,000 becomes claimable only after 24 September, subject to the other conditions and filing of the return.

Where it goes wrong. Claiming proportionate credit for the first two lots or treating payment and GSTR-2B reflection as substitutes for receipt of the final lot.

Authority. First proviso to Section 16(2) of the CGST Act, 2017

Question 4 · 2 marks · Taxation - GST Ch 07: Itc · medium

The office-network invoice carries GST of ₹14,400, but the supplier did not report it in GSTR-1 for August or September. It first appeared in VTL’s October GSTR-2B after the supplier uploaded the details in October. The goods and invoice were otherwise in order and the supplier discharged the tax. What is the earliest return in which VTL may claim this credit?

1. August 2026, since the invoice date is in August and goods were delivered.
2. September 2026, after the supplier later gives VTL its invoice copy.
3. Any earlier month, if VTL keeps the supplier upload confirmation.
4. October 2026, after the details are communicated in GSTR-2B. (correct answer)

Answer: D — October 2026, after the details are communicated in GSTR-2B.

Explanation. Section 16(2)(aa), read with rule 36(4), requires the supplier to furnish invoice details in its outward-supplies statement and those details to be communicated to the recipient in GSTR-2B. A copy of the invoice or evidence that the supplier later uploaded it does not satisfy the communication condition for August or September. The invoice first appears in October GSTR-2B, so the earliest eligible return is October. Credit = tax shown on invoice = ₹14,400; amount claimable in August or September = nil.

Where it goes wrong. Using the invoice date or possession of a paper copy to override the GSTR-2B communication condition.

Authority. Section 16(2)(aa) of the CGST Act, 2017; Rule 36(4) of the CGST Rules, 2017

Question 5 · 2 marks · Taxation - GST Ch 07: Itc · hard

Scenario. Aryan Steels Ltd., registered in Maharashtra, purchased business raw materials from three suppliers during February and September 2026. Kaveri Metals’ tax invoice, dated 12 February, carried CGST of ₹54,000 and SGST of ₹54,000. The supplier furnished the invoice in February GSTR-1; it appeared in Aryan’s February GSTR-2B. Aryan availed ₹1,08,000 in its February GSTR-3B furnished on 20 March 2026. Kaveri Metals furnished its corresponding GSTR-3B and discharged the tax on 19 March 2026, using admissible input tax credit of ₹80,000 and cash of ₹28,000 across the tax heads. A second supplier, Neel Metalworks, issued an invoice dated 18 February carrying IGST of ₹72,000. Neel reported it in GSTR-1 and it appeared in Aryan’s February GSTR-2B. Aryan availed the credit in its February GSTR-3B. However, Neel did not furnish GSTR-3B for the corresponding February tax period on or before 30 September 2026. Aryan’s finance team identifies this non-filing on 5 October 2026. Neel files that GSTR-3B and discharges the corresponding liability on 18 November 2026. Aryan proposes to reverse the credit in its October GSTR-3B filed on 20 November and to take it back in the same return. A third supplier, Pratham Industrial Gases, reported an invoice carrying GST of ₹36,000 in its September 2026 GSTR-1, and the invoice appeared in Aryan’s September GSTR-2B. Pratham furnished its September GSTR-3B, but the tax of ₹36,000 attributable to this invoice remained unpaid to the Government. Aryan has received the goods, holds the tax invoice and has furnished its own GSTR-3B for September. All three purchases were for taxable manufacturing.

Aryan availed Neel Metalworks’ IGST credit of ₹72,000 in its February 2026 GSTR-3B. Neel had reported the invoice in GSTR-1, but had not furnished its corresponding GSTR-3B by 30 September 2026. What action and deadline apply to Aryan under the supplier-default mechanism?

1. Reverse ₹72,000 in GSTR-3B on or before 30 November 2026. (correct answer)
2. Reverse ₹72,000 only after the supplier’s registration is cancelled.
3. Retain ₹72,000 because it appears in GSTR-2B and has invoice support.
4. Reverse ₹36,000 by 30 September and retain the remaining credit.

Answer: A — Reverse ₹72,000 in GSTR-3B on or before 30 November 2026.

Explanation. Rule 37A applies because Aryan availed the credit in FY 2025-26 and Neel had not furnished the corresponding GSTR-3B by 30 September following that financial year. FY 2025-26 ended on 31 March 2026; supplier-status checkpoint = 30 September 2026. Aryan must reverse the full credit by 30 November 2026. Reversal = ₹72,000 × 1 = ₹72,000. GSTR-2B reflection does not displace this later supplier-filing safeguard.

Where it goes wrong. Treating GSTR-1 reporting and GSTR-2B reflection as conclusive proof that the supplier furnished GSTR-3B and paid the tax.

Authority. Section 41(2) of the CGST Act, 2017; Rule 37A of the CGST Rules, 2017; Section 20 of the IGST Act, 2017

Question 6 · 2 marks · Taxation - GST Ch 07: Itc · medium

Aryan reverses Neel’s ₹72,000 credit in its October 2026 GSTR-3B filed on 20 November. Neel had furnished the missing GSTR-3B and discharged the corresponding liability on 18 November. How should Aryan deal with the reversed credit?

1. Re-avail ₹72,000 in the same October return because Neel paid before filing.
2. Re-avail ₹72,000 in a later return after the supplier files and pays. (correct answer)
3. Permanently forgo ₹72,000 because the 30 September checkpoint was missed.
4. Re-avail ₹36,000 in October and defer the balance to the annual return.

Answer: B — Re-avail ₹72,000 in a later return after the supplier files and pays.

Explanation. Rule 37A requires the recipient to reverse the credit because the supplier missed the 30 September 2026 filing checkpoint. The supplier’s later filing and tax discharge on 18 November allow the recipient to re-avail the amount reversed. Aryan reverses ₹72,000 in the October return filed on 20 November; re-availment is in a subsequent tax period, not as a second entry in that same return. Later credit = ₹72,000 × 1 = ₹72,000, subject to the statutory procedure.

Where it goes wrong. Assuming a later supplier payment erases the reversal requirement retrospectively or permits re-availment in the same return.

Authority. Section 41(2) of the CGST Act, 2017; Rule 37A of the CGST Rules, 2017; Section 20 of the IGST Act, 2017

Question 7 · 2 marks · Taxation - GST Ch 07: Itc · hard

Kaveri Metals discharged the tax on Aryan’s invoice by using ₹80,000 of admissible ITC and paying ₹28,000 in cash. The invoice tax comprised CGST of ₹54,000 and SGST of ₹54,000. Does the use of ITC rather than cash for part of the supplier’s payment defeat Aryan’s condition under section 16(2)(c)?

1. Yes, because the supplier must deposit the entire tax charged through cash.
2. Yes, unless Aryan separately deposits the ITC portion on the supplier’s behalf.
3. No, because ₹80,000 plus ₹28,000 discharges the full tax of ₹1,08,000. (correct answer)
4. No, but only the ₹28,000 cash portion can support recipient credit.

Answer: C — No, because ₹80,000 plus ₹28,000 discharges the full tax of ₹1,08,000.

Explanation. Section 16(2)(c) requires the tax charged on the supply to have been actually paid to the Government, either in cash or through utilisation of admissible ITC. Kaveri paid ₹80,000 through admissible ITC and ₹28,000 in cash. Total tax discharged = ₹80,000 + ₹28,000 = ₹1,08,000, which equals the invoice tax of ₹54,000 CGST + ₹54,000 SGST. The mode of payment does not invalidate Aryan’s credit when the full tax has been discharged and the other conditions are met.

Where it goes wrong. Reading ‘actually paid’ as requiring a cash deposit for every rupee of the supplier’s output tax.

Authority. Section 16(2)(c) of the CGST Act, 2017; Section 41(1) of the CGST Act, 2017

Question 8 · 2 marks · Taxation - GST Ch 07: Itc · medium

Pratham furnished its September GSTR-3B, so the non-filing trigger in rule 37A does not arise. However, the ₹36,000 tax attributable to Aryan’s invoice remains unpaid to the Government. Aryan has the invoice, has received the goods, sees the entry in GSTR-2B and has filed its own GSTR-3B. What follows from the unpaid-tax fact?

1. Aryan may retain credit because a filed GSTR-3B establishes payment of the invoice tax.
2. Aryan must reverse only half the credit because the supplier furnished GSTR-3B.
3. Aryan may retain credit until the supplier’s registration is cancelled by the officer.
4. Aryan must reverse the unpaid credit with interest and may re-avail after tax payment. (correct answer)

Answer: D — Aryan must reverse the unpaid credit with interest and may re-avail after tax payment.

Explanation. Filing the supplier’s GSTR-3B is not the same as paying the tax. Section 16(2)(c) requires actual payment of the tax charged, while section 41(2) requires reversal with applicable interest where the supplier has not paid the corresponding tax. Here the unpaid amount is ₹36,000, so Aryan cannot retain that credit merely because the invoice is in GSTR-2B and Pratham filed a return. Reversal principal = ₹36,000; after Pratham pays, Aryan may re-avail ₹36,000.

Where it goes wrong. Equating a filed GSTR-3B with actual discharge of the tax liability and overlooking section 41(2).

Authority. Section 16(2)(c) of the CGST Act, 2017; Section 41(2) of the CGST Act, 2017

Question 9 · 2 marks · Taxation - GST Ch 07: Itc · hard

Scenario. Nandini Real Estates Pvt Ltd, registered in Karnataka, undertakes taxable commercial property leasing and related services. During September 2026 it considered four inward supply records. Kaveri Electricals, a registered Karnataka supplier, issued a tax invoice on 8 September for control panels of ₹6,00,000 plus CGST and SGST of ₹54,000 each. The invoice showed the tax amount, description, total supply value, supplier and recipient GSTINs, but omitted the HSN code required in the ordinary particulars. Goods were delivered on 10 September, the invoice details were furnished in GSTR-1, the credit appeared in Nandini’s GSTR-2B, and Kaveri discharged the tax in GSTR-3B. From Delta Drives, a registered Tamil Nadu supplier, Nandini received machinery spares under an inter-State invoice dated 12 September, with taxable value of ₹4,00,000 plus IGST of ₹72,000. The invoice showed the tax amount, description, total value and both GSTINs, but omitted the place of supply. It was uploaded in GSTR-1 and appeared in Nandini’s GSTR-2B; the goods were received and the supplier paid the tax. Nandini also procured security services of ₹2,00,000 from an unregistered local provider, on which GST of ₹36,000 was payable by Nandini under reverse charge. Nandini issued the prescribed invoice on 25 September and paid the reverse-charge tax in cash on 20 October before filing the September GSTR-3B. The services were received and used for its taxable leasing business. Finally, a vendor sent only a pro-forma invoice for office equipment on 28 September, carrying a tentative GST figure of ₹18,000; no tax invoice or debit note was issued by 20 October, although the equipment had arrived. Nandini planned to file its September GSTR-3B on 20 October and sought to include all four amounts.

Nandini received office equipment and a pro-forma invoice showing a tentative GST figure of ₹18,000. By the time it files the September return, the supplier has issued neither a tax invoice nor a debit note. What is the ITC treatment of this ₹18,000?

1. Nil, because a pro-forma invoice is not a prescribed tax-paying document. (correct answer)
2. ₹18,000, because physical receipt of the equipment cures the document gap.
3. ₹9,000, because half the GST may be claimed until the tax invoice arrives.
4. ₹18,000, provided the vendor confirms the invoice details by email.

Answer: A — Nil, because a pro-forma invoice is not a prescribed tax-paying document.

Explanation. Possession of a tax invoice, debit note or another prescribed tax-paying document is a condition under section 16(2)(a). Rule 36(1) lists recognised documents, including a supplier’s invoice under section 31 and a debit note under section 34. A pro-forma invoice is not one of those tax-paying documents. Despite receipt of equipment, the document condition fails. Eligible amount now = tentative GST ₹18,000 × 0% = ₹0; ITC can be considered only after a qualifying document is issued and the other conditions are satisfied.

Where it goes wrong. Treating physical receipt or a tentative GST figure on a pro-forma invoice as a substitute for a prescribed document.

Authority. Section 16(2)(a) of the CGST Act, 2017; Rule 36(1) of the CGST Rules, 2017

Question 10 · 2 marks · Taxation - GST Ch 07: Itc · medium

Kaveri’s intra-State tax invoice omits the HSN code, although it contains the tax amount, goods description, total value, supplier GSTIN and recipient GSTIN. Goods are received, the supplier reports the invoice in GSTR-1, the entry appears in GSTR-2B and the tax is paid. Assuming the omitted HSN code is an otherwise applicable invoice particular, may Nandini claim the ₹1,08,000 ITC?

1. No, omission of any prescribed invoice particular always defeats an ITC claim.
2. Yes, the minimum particulars under rule 36(2) suffice for this local supply. (correct answer)
3. No, GSTR-2B cannot cure a missing HSN code on the supplier invoice.
4. Yes, but only after the supplier issues a debit note adding the HSN code.

Answer: B — Yes, the minimum particulars under rule 36(2) suffice for this local supply.

Explanation. Rule 36(2) permits ITC where a document lacks some prescribed particulars but contains the amount of tax charged, description of goods or services, total value of supply, and GSTINs of both supplier and recipient; place of supply is additionally required for an inter-State supply. Kaveri’s invoice contains each applicable minimum particular for this intra-State supply. Thus, the omission of the HSN code does not by itself defeat credit. CGST ₹54,000 + SGST ₹54,000 = ₹1,08,000 may be claimed, subject to all other conditions.

Where it goes wrong. Ignoring the relaxation in rule 36(2), or incorrectly requiring a place-of-supply field for an intra-State supply.

Authority. Section 16(2)(a) of the CGST Act, 2017; Rule 36(2) of the CGST Rules, 2017

Question 11 · 2 marks · Taxation - GST Ch 07: Itc · hard

Nandini receives security services from an unregistered provider on which it must pay GST of ₹36,000 under reverse charge. It issues the prescribed invoice and pays the tax to the Government on 20 October before filing its September GSTR-3B. The document is not reflected in GSTR-2B. Which treatment is correct?

1. Claim is blocked until the service provider reports the invoice in GSTR-1.
2. Only ₹18,000 is claimable because the supplier has no GST registration.
3. Nandini may claim ₹36,000 after paying RCM tax and filing its return. (correct answer)
4. Claim is barred because all inward supplies must appear in GSTR-2B.

Answer: C — Nandini may claim ₹36,000 after paying RCM tax and filing its return.

Explanation. For a reverse-charge supply from an unregistered supplier, the recipient’s invoice under section 31(3)(f) is a recognised document under rule 36(1)(b), subject to payment of tax. The invoice and tax payment are completed on 20 October, and Nandini files its September GSTR-3B thereafter. Such reverse-charge documents are outside the supplier-reporting condition under section 16(2)(aa), as they are not ordinary outward-supply invoices furnished under section 37(1). Claimable credit is ₹36,000, not nil merely because GSTR-2B is silent.

Where it goes wrong. Applying the GSTR-1/GSTR-2B requirement to recipient-issued reverse-charge documents and forgetting the payment-of-tax condition.

Authority. Section 16(2)(a), (c) and (d) of the CGST Act, 2017; Rule 36(1)(b) of the CGST Rules, 2017

Question 12 · 2 marks · Taxation - GST Ch 07: Itc · hard

On filing its September 2026 GSTR-3B after paying reverse-charge tax, Nandini must determine the total credit from the four records. Kaveri’s intra-State invoice has ₹1,08,000 GST; Delta’s inter-State invoice has ₹72,000 GST but omits place of supply; the reverse-charge invoice has ₹36,000 GST; and the pro-forma invoice shows ₹18,000. What amount may Nandini claim?

1. ₹72,000, comprising only the Delta invoice reported in GSTR-1.
2. ₹1,08,000, comprising only the control-panel invoice from Kaveri Electricals.
3. ₹2,16,000, comprising Kaveri, Delta and reverse-charge credit.
4. ₹1,44,000, comprising Kaveri’s invoice and paid reverse-charge tax. (correct answer)

Answer: D — ₹1,44,000, comprising Kaveri’s invoice and paid reverse-charge tax.

Explanation. Kaveri’s invoice satisfies the minimum particulars under rule 36(2), and its ₹1,08,000 tax is reported, reflected, paid and supported by receipt. Delta’s inter-State invoice omits place of supply, a required minimum particular, so its ₹72,000 is excluded. The reverse-charge invoice supports ₹36,000 after Nandini pays the tax and files its return. The pro-forma document supports nil credit. Total = ₹1,08,000 + ₹36,000 + ₹0 + ₹0 = ₹1,44,000.

Where it goes wrong. Adding every amount appearing in GSTR-2B or on a paper carrying GST, without separately testing the invoice particulars and reverse-charge payment.

Authority. Section 16(2)(a), (aa), (c) and (d) of the CGST Act, 2017; Rule 36(1)(b), (2) and (4) of the CGST Rules, 2017

Question 13 · 2 marks · Taxation - GST Ch 07: Itc · 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.

Vikramaditya Tech Labs imports a production sensor on 6 June 2026 and holds a bill of entry showing IGST of ₹2,40,000 paid to Customs. The sensor is received and intended for taxable manufacturing. The bill of entry does not appear in GSTR-2B, which is populated from supplier statements. VTL has furnished its relevant GSTR-3B and no other restriction applies. Which treatment follows under Section 16 and Rule 36? The bill of entry is in VTL’s name and the sensor is not diverted for a non-business purpose.

1. The ₹2,40,000 may be claimed on the bill of entry, subject to the other conditions. (correct answer)
2. The credit must await a foreign supplier’s GSTR-1 and recipient GSTR-2B entry.
3. Only ₹1,20,000 may be claimed because imports are outside the domestic invoice chain.
4. No credit is available because every tax-paying document must appear in GSTR-2B.

Answer: A — The ₹2,40,000 may be claimed on the bill of entry, subject to the other conditions.

Explanation. Rule 36(1)(d) recognises a bill of entry or similar Customs document for assessment of IGST on imports. Section 16(2)(aa), read with rule 36(4), concerns supplier-furnished invoices or debit notes required under section 37(1); it does not require an import bill of entry to appear in GSTR-2B. IGST paid on the bill of entry = ₹2,40,000. Goods are received and intended for taxable business, tax is paid and VTL has filed its return. Claimable ITC = ₹2,40,000 × 1 = ₹2,40,000.

Where it goes wrong. Extending the GSTR-2B supplier-reporting test to import documents that are outside section 37(1).

Authority. Section 16(2)(a), (c) and (d) of the CGST Act, 2017; Rule 36(1)(d) of the CGST Rules, 2017; Section 20 of the IGST Act, 2017

Question 14 · 2 marks · Taxation - GST Ch 07: Itc · 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.

Aryan Steels receives inter-State components under an invoice carrying IGST of ₹54,000. Goods are received, the supplier has furnished the invoice in GSTR-1, it appears in Aryan’s GSTR-2B and the supplier has paid the tax. The invoice contains the tax amount, description, value and both GSTINs, but no place of supply. What is the effect of Rule 36(2) on the document condition? Aryan has not altered the supplier’s document and seeks to rely only on the particulars originally issued.

1. Credit is allowed because GSTR-2B reflection cures every missing invoice particular.
2. Credit is not allowed under the relaxation because place of supply is missing. (correct answer)
3. Half the IGST is allowed because the goods have physically reached Aryan.
4. Credit is allowed if the recipient writes the place of supply on its copy.

Answer: B — Credit is not allowed under the relaxation because place of supply is missing.

Explanation. The relaxation in rule 36(2) applies only where an incomplete document contains the tax amount, description, total value, both GSTINs and, for an inter-State supply, the place of supply. This is an inter-State invoice, so the omitted place of supply is one of the minimum particulars. Invoice tax = ₹54,000; eligible amount under the incomplete-document relaxation = ₹54,000 × 0% = ₹0. GSTR-2B reflection, receipt and supplier payment do not cure the documentary shortfall.

Where it goes wrong. Assuming that GSTR-2B reflection overrides a minimum document particular expressly required by rule 36(2).

Authority. Section 16(2)(a) of the CGST Act, 2017; Rule 36(2) of the CGST Rules, 2017

Question 15 · 2 marks · Taxation - GST Ch 07: Itc · 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.

Nandini holds a valid supplier invoice for taxable business services carrying GST of ₹36,000. The supplier has furnished the invoice in its GSTR-1, but the details have not been communicated in Nandini’s GSTR-2B for the month. The services are received and the supplier says that it will correct the reporting in a later period. What amount can Nandini claim in the current return on this invoice? No restriction under section 38 has been communicated, and the supplier’s tax payment is not in dispute.

1. ₹36,000, since a valid tax invoice alone overrides delayed GSTR-2B reporting.
2. ₹18,000, because half the credit may be taken pending GSTR-2B reflection.
3. Nil now; ₹36,000 may be claimed in a later period when it appears in GSTR-2B. (correct answer)
4. ₹36,000, provided Nandini retains the supplier’s written assurance.

Answer: C — Nil now; ₹36,000 may be claimed in a later period when it appears in GSTR-2B.

Explanation. Section 16(2)(aa) imposes two linked requirements: the supplier must furnish invoice details in its outward-supplies statement, and those details must be communicated to the recipient in the prescribed manner. Rule 36(4) identifies GSTR-2B as the communication mechanism. Since the ₹36,000 entry is absent from Nandini’s current GSTR-2B, current-period credit = ₹36,000 × 0% = ₹0. Once the entry appears in a succeeding GSTR-2B, Nandini may claim ₹36,000 then, subject to other conditions.

Where it goes wrong. Treating the supplier’s assertion or GSTR-1 filing alone as sufficient, without checking communication to the recipient in GSTR-2B.

Authority. Section 16(2)(aa) of the CGST Act, 2017; Rule 36(4) of the CGST Rules, 2017

Question 16 · 2 marks · Taxation - GST Ch 07: Itc · 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 supplier furnished its September 2026 GSTR-1 on 11 October but omitted a service invoice carrying GST of ₹1,08,000. Before filing its September GSTR-3B, the supplier furnished the omitted details through GSTR-1A on 18 October. The invoice was then communicated in the recipient’s October GSTR-2B. The recipient has the invoice and has received the service. In which period can it claim this credit? The recipient is considering the period of availment before it submits the return for the month.

1. September, because the invoice date controls over later GSTR-1A reporting for ITC.
2. September, because a GSTR-1A amendment relates back automatically for ITC.
3. October only if the recipient obtains a second invoice from the supplier.
4. October, after the GSTR-1A details are communicated in the October GSTR-2B. (correct answer)

Answer: D — October, after the GSTR-1A details are communicated in the October GSTR-2B.

Explanation. GSTR-1A allows a supplier, after furnishing GSTR-1 but before filing the corresponding GSTR-3B, to furnish or amend outward-supply details. Section 16(2)(aa) and rule 36(4) still require those details to be communicated to the recipient in GSTR-2B. The recipient first receives that communication in October, so September invoice dating does not permit a September claim. October credit = invoice tax ₹1,08,000 × 1 = ₹1,08,000, assuming supplier tax payment and recipient return.

Where it goes wrong. Giving GSTR-1A retrospective ITC effect before the amended invoice details are communicated in the recipient’s GSTR-2B.

Authority. Section 16(2)(aa) of the CGST Act, 2017; Rule 36(4) of the CGST Rules, 2017

Question 17 · 2 marks · Taxation - GST Ch 07: Itc · 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 QRMP supplier issues a tax invoice in the second month of a quarter for consulting services of ₹1,50,000 plus GST of ₹27,000. It furnishes the invoice details through the Invoice Furnishing Facility (IFF), and the recipient sees the entry in its GSTR-2B. The recipient has the invoice, received the service and filed its GSTR-3B. Assuming the supplier discharges the tax, which statement is correct? The recipient is a monthly return filer and is not under any special restriction on credit.

1. The ₹27,000 may be claimed because IFF reporting appears in GSTR-2B. (correct answer)
2. Credit must await quarterly GSTR-1 despite the IFF and GSTR-2B entry.
3. Only half the GST may be claimed because IFF gives provisional credit.
4. No credit is allowed until the supplier furnishes its quarterly return.

Answer: A — The ₹27,000 may be claimed because IFF reporting appears in GSTR-2B.

Explanation. For a supplier under QRMP, invoice details for the first two months of a quarter may be furnished through IFF. The chapter treats IFF reporting as an accepted route for furnishing invoice details, with the recipient communication appearing in GSTR-2B. The services were received, the tax invoice is held, the supplier discharged tax and the recipient furnished GSTR-3B. The GST amount is ₹27,000 (18% of ₹1,50,000); that amount may be claimed. There is no half-credit limitation merely because IFF was used.

Where it goes wrong. Assuming that a QRMP supplier must wait until its quarterly GSTR-1 to communicate invoices for the first two months.

Authority. Section 16(2)(aa) of the CGST Act, 2017; Rule 36(4) of the CGST Rules, 2017

Question 18 · 2 marks · Taxation - GST Ch 07: Itc · 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 engineering company contracts and pays for calibration services of ₹3,00,000 plus GST of ₹54,000. At its direction, the service provider performs the work at the company’s customer’s plant, and the service is provided on the company’s account. The supplier invoices the registered company, reports the invoice in GSTR-1 and it appears in GSTR-2B. The company has filed its return. What follows for the receipt condition? The supplier’s invoice identifies the engineering company as recipient and the service fee is borne by it.

1. The customer alone is treated as recipient because the work occurred at its plant.
2. The engineering company is deemed to receive the service supplied on its direction and account. (correct answer)
3. Neither person receives the service until the engineering company uses the report itself.
4. The engineering company may claim only if the service provider performs the work at its own premises.

Answer: B — The engineering company is deemed to receive the service supplied on its direction and account.

Explanation. The explanation to section 16(2)(b) deems receipt where the supplier provides services to any person on the direction of and on account of the registered recipient. Both elements are present: the engineering company directed performance at its customer’s plant and bore the service account. Physical performance at the customer’s site does not defeat deemed receipt. GST = ₹3,00,000 × 18% = ₹54,000; this may be claimed if invoice-reporting, supplier-payment and return conditions are also fulfilled.

Where it goes wrong. Reading the service-receipt explanation as requiring the registered recipient to be the person at whose premises the service is physically performed.

Authority. Section 16(2)(b), Explanation, clause (ii) of the CGST Act, 2017

Question 19 · 2 marks · Taxation - GST Ch 07: Itc · 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.

Aryan Steels purchases control cabinets under an Ex-Works contract. The contract provides that ownership and risk pass to Aryan at the supplier’s factory gate. On 1 June 2026, the supplier hands the cabinets to a transporter appointed by Aryan for onward carriage; the cabinets reach Aryan’s plant on 5 June. The invoice carries IGST of ₹3,60,000 and is otherwise eligible. When is the receipt condition treated as fulfilled? The transport document records Aryan as the consignee and the transporter acts on Aryan’s behalf.

1. Only on 5 June, once the cabinets are unloaded and checked at Aryan’s plant.
2. Only after Aryan signs its own plant receipt note for the cabinets.
3. On 1 June, at transporter handover at the factory gate under EXW terms. (correct answer)
4. On invoice payment, even before the supplier hands over the cabinets.

Answer: C — On 1 June, at transporter handover at the factory gate under EXW terms.

Explanation. For an Ex-Works arrangement in which property transfers to the recipient when the supplier hands goods to a transporter acting on the recipient’s behalf, the goods are treated as received at that handover. The relevant date is 1 June 2026, not physical arrival on 5 June. The receipt condition for the ₹3,60,000 IGST invoice is therefore met on 1 June. Eligible credit = invoice IGST ₹3,60,000 × 1 = ₹3,60,000, subject to the other conditions.

Where it goes wrong. Waiting for physical arrival at the recipient’s premises despite transfer of property and handover to its transporter under the Ex-Works terms.

Authority. Section 16(2)(b) of the CGST Act, 2017; Circular No. 241/35/2024-GST dated 31.12.2024; Section 20 of the IGST Act, 2017

Question 20 · 2 marks · Taxation - GST Ch 07: Itc · 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 supplier’s invoice to a registered buyer carries GST of ₹2,40,000. The supplier’s tax records show discharge of ₹1,50,000 by utilisation of admissible ITC and ₹90,000 through its electronic cash ledger. The recipient has the invoice, received the goods, sees the invoice in GSTR-2B and has filed GSTR-3B. How should section 16(2)(c) be applied? No credit restriction is communicated under section 38, and the supplier has filed its corresponding GSTR-3B.

1. Only ₹90,000 counts, since payment through the cash ledger alone meets the tax-payment test.
2. The ITC-funded portion must be replaced with cash before the recipient can claim credit.
3. Only ₹1,50,000 counts; the supplier’s cash payment is not considered for this condition.
4. The full ₹2,40,000 counts: admissible credit of ₹1,50,000 plus cash payment of ₹90,000. (correct answer)

Answer: D — The full ₹2,40,000 counts: admissible credit of ₹1,50,000 plus cash payment of ₹90,000.

Explanation. Section 16(2)(c) expressly recognises payment of the supplier’s tax to the Government either in cash or through utilisation of admissible ITC. The supplier discharged ₹1,50,000 through admissible credit and ₹90,000 in cash. Total paid = ₹1,50,000 + ₹90,000 = ₹2,40,000, equal to the tax on the invoice. Therefore, the full ₹2,40,000 satisfies the tax-payment condition, provided the credit used by the supplier was admissible and all other conditions are met.

Where it goes wrong. Confusing payment of tax to the Government with payment made only through the electronic cash ledger.

Authority. Section 16(2)(c) of the CGST Act, 2017

Question 21 · 2 marks · Taxation - GST Ch 07: Itc · 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 recipient avails ITC of ₹96,000 in its GSTR-3B for August 2026. The supplier furnished the invoice in GSTR-1, but does not furnish the corresponding GSTR-3B by the statutory checkpoint following the financial year in which the recipient availed the credit. Identify the relevant dates under Rule 37A, assuming the supplier still has not filed by the checkpoint. What is the recipient’s outer date for reversal? The supplier’s GSTR-1 entry continues to appear in the recipient’s GSTR-2B, and the goods were received in August.

1. Supplier checkpoint: 30 September 2027; recipient reversal: on or before 30 November 2027. (correct answer)
2. Supplier checkpoint: 30 November 2026; recipient reversal: on or before 31 March 2027.
3. Supplier checkpoint: 31 March 2027; recipient reversal: by 30 September 2027 after that checkpoint.
4. Supplier checkpoint: 20 October 2026; recipient reversal: by 20 November 2026 for this invoice.

Answer: A — Supplier checkpoint: 30 September 2027; recipient reversal: on or before 30 November 2027.

Explanation. The relevant year is the financial year in which the recipient availed ITC, not merely the invoice year. Credit was availed in FY 2026-27, ending 31 March 2027. Rule 37A supplier checkpoint = 30 September 2027; recipient reversal deadline = 30 November 2027. If the supplier has not filed by the checkpoint, reversal = ₹96,000 × 1 = ₹96,000 by the outer date. If not reversed by then, the amount becomes payable with interest under section 50.

Where it goes wrong. Calculating the Rule 37A dates from the invoice month or invoice financial year instead of the financial year in which ITC was availed.

Authority. Section 41(2) of the CGST Act, 2017; Rule 37A of the CGST Rules, 2017

Question 22 · 2 marks · Taxation - GST Ch 07: Itc · 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 consulting invoice carrying GST of ₹18,000 is held by a registered recipient, the service has been received, supplier reporting is complete, the invoice is in GSTR-2B and the supplier has paid the tax. The recipient has not yet furnished its own return under section 39 for that tax period, but wants the amount credited to its electronic credit ledger immediately. Which statement is correct? The invoice is otherwise proper, the service has a taxable business use, and there is no blocked-credit issue.

1. The recipient can take credit merely by downloading the auto-generated GSTR-2B.
2. The recipient can avail ₹18,000 only in the return furnished under section 39. (correct answer)
3. The recipient may take half the credit before filing and the balance afterward.
4. The recipient can avail the credit through GSTR-1 because it is registered.

Answer: B — The recipient can avail ₹18,000 only in the return furnished under section 39.

Explanation. Section 16(2)(d) requires the recipient to have furnished the return under section 39. Section 41(1) provides for eligible ITC, as self-assessed, to be availed in the recipient’s return and credited to the electronic credit ledger. GSTR-2B communicates invoice information but is not the recipient’s section 39 return. Thus, current credit before filing = ₹18,000 × 0% = ₹0; after furnishing the return, the ₹18,000 may be availed if the other conditions remain satisfied.

Where it goes wrong. Treating an auto-generated GSTR-2B statement as if it were the recipient’s return under section 39.

Authority. Section 16(2)(d) of the CGST Act, 2017; Section 41(1) of the CGST Act, 2017

Question 23 · 2 marks · Taxation - GST Ch 07: Itc · 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 manufacturer avails ITC of ₹1,44,000 on a forward-charge invoice issued on 1 May 2026. The total invoice value, including tax, is ₹9,44,000. Within 180 days from the invoice date, the manufacturer pays the supplier only 75% of the value plus tax; the remaining 25% is still unpaid after the 180-day period. What amount of ITC must be reversed under Rule 37, before considering interest? The supplier has reported the invoice, the recipient has the document, and the credit is otherwise eligible.

1. ₹1,44,000, because any unpaid balance requires reversal of the full invoice credit.
2. ₹1,08,000, because credit is retained only to the extent of payment made.
3. ₹36,000, being 25% of the ₹1,44,000 credit attributable to the unpaid amount. (correct answer)
4. Nil, because payment of a majority of the invoice value satisfies the 180-day condition.

Answer: C — ₹36,000, being 25% of the ₹1,44,000 credit attributable to the unpaid amount.

Explanation. Rule 37 requires reversal only in proportion to the consideration that remains unpaid after 180 days. Payment made = 75%; unpaid proportion = 25%. ITC attributable to the unpaid portion = ₹1,44,000 × 25% = ₹36,000. The manufacturer must pay or reverse ₹36,000, together with applicable interest, in the prescribed GSTR-3B period. It does not reverse all credit merely because some consideration remains due, nor may it retain all credit because most of the invoice was paid.

Where it goes wrong. Applying an all-or-nothing reversal instead of computing credit proportionate to the unpaid value and tax.

Authority. Second proviso to Section 16(2) of the CGST Act, 2017; Rule 37(1) of the CGST Rules, 2017

Question 24 · 2 marks · Taxation - GST Ch 07: Itc · 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 recipient receives legal services of ₹2,50,000 from an advocate, with GST of ₹45,000 payable by the recipient under reverse charge. The recipient issues the prescribed invoice, pays the ₹45,000 tax to the Government and furnishes its GSTR-3B, but pays the advocate’s professional fee after 180 days. Assuming business use and no other restriction, how does the 180-day payment condition affect ITC? The tax invoice is issued by the recipient in accordance with the reverse-charge documentation requirement.

1. Reverse ₹45,000 because the general 180-day supplier-payment rule covers this service.
2. The recipient may retain only ₹22,500 until the remaining professional fee is paid.
3. The recipient may claim credit only after paying the advocate within 180 days.
4. The 180-day condition does not apply to RCM, but RCM tax must be paid. (correct answer)

Answer: D — The 180-day condition does not apply to RCM, but RCM tax must be paid.

Explanation. The second proviso to section 16(2), read with rule 37, excludes reverse-charge supplies from the 180-day supplier-payment reversal. Delayed payment of the advocate’s fee therefore does not require reversal of the ₹45,000 ITC. The exception does not waive section 16(2)(c): the recipient must pay RCM tax to the Government. Tax amount = ₹2,50,000 × 18% = ₹45,000; since that tax was paid and the return and prescribed invoice are in place, ₹45,000 may be claimed.

Where it goes wrong. Extending the 180-day supplier-payment rule to reverse-charge supplies, or treating that exception as dispensing with payment of reverse-charge tax.

Authority. Second proviso to Section 16(2) of the CGST Act, 2017; Rule 37(1) of the CGST Rules, 2017; Section 16(2)(c) of the CGST Act, 2017

Question 25 · 2 marks · Taxation - GST Ch 07: Itc · 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 buyer avails ITC on 20 June 2026 against an invoice dated 20 April 2026. The invoice carries total ITC of ₹73,000. By the end of 180 days from the invoice date, only 50% of the invoice value plus tax has been paid to the supplier. The buyer reverses the proportionate credit in its November 2026 GSTR-3B, filed and paid on 20 December 2026. For interest computation, use 18% per annum and 183 days from availment to payment. What is the interest payable under Rule 37(1), applying section 50(1)?

1. ₹1,647, being interest on ₹18,250 for 183 days at 18% per annum.
2. ₹2,700, being interest on ₹30,000 for 182.5 days at 18% per annum.
3. ₹6,588, being interest on the full ₹73,000 credit for 183 days at 18% p.a.
4. ₹3,294, being interest on ₹36,500 for 183 days at 18% per annum. (correct answer)

Answer: D — ₹3,294, being interest on ₹36,500 for 183 days at 18% per annum.

Explanation. Only the unpaid 50% proportion is reversed. Reversal principal = ₹73,000 × 50% = ₹36,500. Rule 37(1) requires reversal with interest under section 50. Applying the rate and 183-day period specified in the question, interest = ₹36,500 × 18% × 183 ÷ 365 = ₹3,294. Interest is not computed on the full ₹73,000 because the paid half does not require reversal; the question also specifies that the period begins when ITC was availed, not on the invoice date.

Where it goes wrong. Applying interest to the full invoice credit or using the invoice date as the starting date when the question specifies the ITC availment date.

Authority. Second proviso to Section 16(2) of the CGST Act, 2017; Rule 37(1) of the CGST Rules, 2017; Section 50(1) of the CGST Act, 2017; Notification No. 13/2017-Central Tax dated 28.06.2017