CA Inter Taxation - GST MCQ Test 1: answer key

Question 1 · 2 marks · Supply under GST (Chapter 2) · easy

Scenario. Vistara Components Pvt. Ltd. is registered in Indore, Madhya Pradesh and holds a separate GST registration in Jaipur, Rajasthan under the same PAN. In FY 2025-26, its Indore unit (i) transfers components worth ₹7,80,000 to the Jaipur registration for business use without consideration; (ii) gives one employee gifts worth ₹50,000 in total, with no other gifts to that employee during the year; and (iii) sells a production machine for one price with installation and commissioning, which are ordinarily bundled with the machine and ancillary to it. In a separate sale, Vistara invoices goods to a buyer whose principal place of business is Jaipur; before the movement ends, on the buyer's instruction, Vistara delivers the goods directly to an independent factory in Pune. Vistara also sells a packaging machine assembled at the buyer’s site in Surat. Vistara operates Vistara Local, an electronic commerce platform. On 10 October 2025, an independent provider with aggregate turnover of ₹14,00,000, not liable for registration under section 22(1), supplies local delivery services through that platform. Vistara also receives legal services from an individual advocate. Its aggregate turnover in the preceding financial year was ₹80,00,000; the advocate issues the invoice on 1 December 2025, and the payment is recorded and debited from Vistara’s bank account on 5 February 2026.

With reference to the gifts given to the employee, which statement correctly describes their treatment under GST for FY 2025-26?

1. The gifts constitute supply because the exclusion applies only when their value is below ₹50,000.
2. The gifts are not treated as supply because their aggregate value for the employee does not exceed ₹50,000 during the financial year. (correct answer)
3. The gifts constitute supply because every transaction between an employer and employee is taxable.
4. The gifts are not treated as supply only when the employee is not a related person.

Answer: B — The gifts are not treated as supply because their aggregate value for the employee does not exceed ₹50,000 during the financial year.

Explanation. Schedule I, paragraph 2, treats supplies between related persons in the course or furtherance of business as supply even without consideration. However, its proviso excludes gifts by an employer to an employee not exceeding ₹50,000 in value during a financial year. Here, the aggregate value is exactly ₹50,000. Option a incorrectly interprets the expression not exceeding as strictly below ₹50,000.

Where it goes wrong. Confusing not exceeding ₹50,000 with strictly less than ₹50,000.

Authority. Section 7(1)(c) of the CGST Act; Paragraph 2 of Schedule I to the CGST Act, including its proviso

Question 2 · 2 marks · Supply under GST (Chapter 2) · medium

How should the transfer of components from Vistara's Indore registration to its Jaipur registration be treated under GST?

1. It is a supply only if the transferred components have a value exceeding ₹50,000.
2. It is not a supply because both registrations belong to the same legal entity and share one PAN.
3. It is not a supply because no consideration has been charged between the two registrations.
4. It is a supply under Schedule I because the two registrations are distinct persons and the transfer is in the course or furtherance of business. (correct answer)

Answer: D — It is a supply under Schedule I because the two registrations are distinct persons and the transfer is in the course or furtherance of business.

Explanation. Under section 25, registrations obtained by the same person in different States are treated as registrations of distinct persons. Paragraph 2 of Schedule I specifically covers supplies between distinct persons made in the course or furtherance of business, even without consideration. Therefore, the inter-registration transfer is a supply. Option b incorrectly assumes that having a common PAN prevents separate GST registrations from being treated as distinct persons.

Where it goes wrong. Confusing a common PAN and legal entity with the distinct-person treatment of separate State registrations.

Authority. Section 7(1)(c) of the CGST Act; Section 25(4) and Section 25(5) of the CGST Act; Paragraph 2 of Schedule I to the CGST Act

Question 3 · 2 marks · Supply under GST (Chapter 2) · medium

Considering the ordinary business practice and the relationship between the machine and the ancillary activities, how should the production machine package be classified?

1. Two independent supplies, because installation and commissioning are services whereas the machine is goods.
2. Mixed supply, because more than one taxable supply is included for a single price.
3. Composite supply, with the production machine as the principal supply and the tax treatment determined by the rate applicable to that principal supply. (correct answer)
4. Composite supply, with installation and commissioning necessarily constituting the principal supply.

Answer: C — Composite supply, with the production machine as the principal supply and the tax treatment determined by the rate applicable to that principal supply.

Explanation. A composite supply comprises two or more taxable supplies that are naturally bundled and supplied together in the ordinary course of business, with one constituting the principal supply. Here, the machine is the predominant element, while installation and commissioning are ancillary. Section 8(a) consequently applies the tax treatment of the principal supply. Option b confuses a single price with a mixed supply, overlooking the natural bundling of the package.

Where it goes wrong. Assuming that every package sold for one price is a mixed supply.

Authority. Section 2(30) of the CGST Act; Section 2(90) of the CGST Act; Section 8(a) of the CGST Act

Question 4 · 2 marks · Place of Supply (Chapter 4) · medium

Identify the respective places of supply for (i) the goods directed by the Jaipur buyer to Pune and (ii) the packaging machine assembled at the buyer's site in Surat.

1. Pune and Surat, respectively.
2. Pune and Indore, respectively.
3. Jaipur and Surat, respectively. (correct answer)
4. Jaipur and Indore, respectively.

Answer: C — Jaipur and Surat, respectively.

Explanation. Under section 10(1)(b) of the IGST Act, where goods are delivered to another person on the direction of a third person before or during movement, the third person is deemed to have received the goods. The place of supply is the principal place of business of that third person, Jaipur. Under section 10(1)(d), goods assembled or installed at a site have their place of supply at that installation or assembly site, Surat. Option a incorrectly uses the physical delivery address for the first transaction.

Where it goes wrong. Applying the ordinary movement-of-goods rule instead of the bill-to-ship-to rule.

Authority. Section 10(1)(b) of the IGST Act; Section 10(1)(d) of the IGST Act

Question 5 · 2 marks · Charge of GST (Chapter 3) · hard

Who is liable to pay GST on the local delivery service supplied through Vistara Local on 10 October 2025?

1. No person, because all local delivery services by road remain exempt from GST.
2. Vistara Components Pvt. Ltd., as the electronic commerce operator, under section 9(5). (correct answer)
3. The customer receiving the delivery service, under the reverse charge mechanism.
4. The independent delivery provider, because the actual service provider always pays GST.

Answer: B — Vistara Components Pvt. Ltd., as the electronic commerce operator, under section 9(5).

Explanation. The September 2026 statutory update includes local delivery services supplied through an electronic commerce operator in the notified categories under section 9(5), effective from 22 September 2025. The exception applies where the underlying service provider is liable for registration under section 22(1). Since the provider in this case is not liable for registration, Vistara, as the electronic commerce operator, pays the tax. Option a overlooks the specific exclusion of local delivery services from the general road-transport exemption.

Where it goes wrong. Overlooking the registration-based exception in the updated list of services taxable through an electronic commerce operator.

Authority. Section 9(5) of the CGST Act; Notification No. 17/2017 CT(R) dated 28.06.2017, as amended by Notification No. 17/2025 CT(R) dated 17.09.2025; September 2026 Statutory Update, Chapter 3, effective 22.09.2025

Question 6 · 2 marks · Time of Supply (Chapter 6) · hard

Determine the time of supply of the legal services received by Vistara under the reverse charge mechanism, considering the invoice and payment dates given in the scenario.

1. 31 January 2026. (correct answer)
2. 2 March 2026.
3. 1 December 2025.
4. 5 February 2026.

Answer: A — 31 January 2026.

Working. Invoice date: 1 December 2025. Exclude the invoice date while counting 60 days. From 2 December to 31 December = 30 days. From 1 January to 30 January = 30 days. Total = 60 days. The date immediately following this 60-day period is 31 January 2026. Payment is recorded and debited on 5 February 2026. Comparing the two dates, 31 January 2026 is earlier and is therefore the time of supply.

Explanation. Legal services supplied by an individual advocate to a business entity located in the taxable territory are generally subject to reverse charge. The exemption for qualifying small business entities does not apply here because Vistara's preceding-year aggregate turnover is ₹80 lakh. For services under reverse charge, the relevant time-of-supply rule compares the payment date with the date immediately following 60 days from the invoice date. The latter occurs first in this case. Option d incorrectly selects the payment date without applying the 60-day provision.

Where it goes wrong. Using the invoice date or payment date directly without calculating the date immediately following 60 days from the invoice under reverse charge.

Authority. Section 9(3) of the CGST Act; Notification No. 13/2017 CT(R) dated 28.06.2017; check

Question 7 · 2 marks · Registration (Chapter 9) · easy

Scenario. Neel Traders applies for registration under rule 8 in Madhya Pradesh. Its monthly output tax liability on supplies to registered persons, including CGST, SGST/UTGST, IGST and compensation cess, is ₹2,50,000. Aadhaar authentication has been completed, and it seeks one registration under the same PAN in the State.

Which statement correctly describes Neel Traders' eligibility and the registration procedure under Rule 14A of the CGST Rules?

1. It is ineligible because Rule 14A requires monthly output tax liability to exceed ₹2.50 lakh.
2. It is ineligible because the monthly output tax liability must be strictly below ₹2.50 lakh.
3. It is eligible and may obtain multiple registrations in the same State under this option against the same PAN.
4. It is eligible because its monthly liability does not exceed ₹2.50 lakh; following successful Aadhaar authentication, registration is granted electronically within 3 working days from submission. (correct answer)

Answer: D — It is eligible because its monthly liability does not exceed ₹2.50 lakh; following successful Aadhaar authentication, registration is granted electronically within 3 working days from submission.

Explanation. Rule 14A permits an applicant who has applied under rule 8 to use the electronic registration option when its total output tax liability on supplies to registered persons does not exceed ₹2.5 lakh per month and the required Aadhaar authentication is completed. Equality is included within the prescribed ceiling. The common portal grants registration electronically within 3 working days from submission after successful authentication. Option c overlooks the restriction of one registration per State or Union territory under this option against the same PAN.

Where it goes wrong. Reading the monthly liability ceiling as strictly below ₹2.50 lakh and overlooking the single-registration restriction.

Authority. Rule 14A of the CGST Rules; Rule 11 of the CGST Rules; September 2026 Statutory Update, Chapter 9

Question 8 · 1 marks · Exemptions from GST (Chapter 5) · easy

Scenario. On 1 October 2025, Surya General Insurance Ltd. provides a health insurance contract to Meera, an individual. The policy covers Meera, her spouse and child, each expressly included as family under the contract. The contract does not insure an employer group or any other group of persons.

What is the GST treatment of the health insurance service supplied under the contract, considering the exemption effective from 22 September 2025?

1. Exempt, because the insured is an individual and the contract also covers that individual's family. (correct answer)
2. Exempt only when the insured person is a registered business entity.
3. Taxable, unless every insured family member holds a separate individual contract.
4. Taxable, because the inclusion of family members automatically makes the policy a group insurance contract.

Answer: A — Exempt, because the insured is an individual and the contract also covers that individual's family.

Explanation. The September 2026 statutory update introduces an exemption for health insurance business supplied by an insurer to an insured who is not a group, effective from 22 September 2025. It expressly covers contracts where the insured is an individual or an individual and family. Family includes all individuals insured as family under the contract. Meera's policy therefore qualifies. Option d wrongly treats family coverage as a group insurance arrangement.

Where it goes wrong. Confusing an individual health insurance policy covering family members with a group insurance policy.

Authority. Notification No. 16/2025 CT(R) dated 17.09.2025; Notification No. 16/2025 IT(R) dated 17.09.2025; Notifications No. 12/2017 CT(R) and No. 9/2017 IT(R), as amended, effective 22.09.2025; September 2026 Statutory Update, Chapter 5