CA Inter Taxation - GST MCQ Test 11: answer key

Question 1 · 2 marks · Registration; Tax Invoice · hard

Scenario. Vardhman Precision Tools LLP (VPT) manufactures and trades in industrial fasteners at Ahmedabad, Gujarat. It began business on 1 April 2025 and is engaged exclusively in supply of goods. Its aggregate turnover crossed Rs. 40,00,000 on 12 May 2025. VPT applied for registration on 5 June 2025; the certificate showing the effective date as 12 May 2025 was made available on 18 June 2025. It issued ordinary tax invoices for supplies made from 12 May to 18 June and now wishes to issue revised invoices. On 1 August 2025 VPT opened two new places of business at Surat and Rajkot within Gujarat and obtained separate registrations for them on 20 August 2025. The value of assets of the Ahmedabad, Surat and Rajkot places at registration was in the ratio 3:1:1. On 5 September 2025 VPT filed FORM GST ITC-02A seeking to transfer the entire unutilised ITC of Rs. 2,40,000 from Ahmedabad to Surat. In August 2025 VPT bought a 7-seater SUV for Rs. 35,00,000 plus GST at 28% for the managing partner's official visits, and a truck for Rs. 18,00,000 plus GST at 18% for transporting finished goods. It also paid general insurance on the SUV Rs. 40,000 plus GST at 18% and on the truck Rs. 25,000 plus GST at 18%. On 10 September 2025 VPT received raw material invoice R-88 for Rs. 12,00,000 plus IGST at 18%. The supplier uploaded R-88 in GSTR-1 on 11 October 2025 and it appeared in VPT's GSTR-2B for October. VPT paid the supplier on 15 April 2026. VPT's aggregate turnover in FY 2024-25 was Rs. 6.2 crore. On 30 September 2025 it issued a B2C invoice to an unregistered customer without reporting it to the Invoice Registration Portal. In February 2026 VPT's taxable supply other than exempt and zero-rated supply was Rs. 68,00,000 and output tax was Rs. 12,24,000. VPT is a manufacturer and also trades in pressure regulators notified under rule 31D on which the supplier paid tax on retail sale price. It proposed to pay only Rs. 6,000 in cash and discharge the balance through ITC.

What is the effective date of VPT's registration and the last date for issuing revised tax invoices for supplies made from 12 May to 18 June 2025?

1. 12 May 2025; revised invoices may be issued up to 18 June 2025 for supplies made between 12 May and 18 June 2025.
2. 12 May 2025; revised invoices may be issued up to 18 July 2025 for supplies made between 12 May and 18 June 2025. (correct answer)
3. 18 June 2025; revised invoices may be issued up to 18 July 2025 for supplies made between 12 May and 18 June, as registration is effective from certificate date.
4. 5 June 2025; revised invoices may be issued up to 18 July 2025 for supplies made between 5 June and 18 June, since application was made on that date.

Answer: B — 12 May 2025; revised invoices may be issued up to 18 July 2025 for supplies made between 12 May and 18 June 2025.

Working. Threshold for exclusive goods in Gujarat = Rs. 40,00,000. Liable date = 12 May 2025. Application 5 June 2025 is within 30 days, so effective date = 12 May 2025. Revised invoice period = 12 May to 18 June 2025; deadline = one month from 18 June 2025 = 18 July 2025.

Explanation. VPT crossed the Rs. 40 lakh goods threshold on 12 May 2025 and applied on 5 June 2025, within 30 days, so registration is effective from 12 May 2025. Revised invoices may be issued within one month from 18 June 2025, i.e. up to 18 July 2025, for supplies made from the effective date to the certificate date. Option c errs by taking the certificate date as the effective date.

Where it goes wrong. Certificate date is not the effective date when application is made within 30 days.

Authority. Section 22; Rule 10; Section 31(3)(a) read with rule 53

Question 2 · 2 marks · Input Tax Credit · medium

How much of the unutilised ITC of Rs. 2,40,000 can be credited to the newly registered Surat place under rule 41A on the facts given?

1. Rs. 2,40,000, because the entire unutilised credit of the Ahmedabad place can be transferred to the Surat place if the application is made within 30 days.
2. Rs. 60,000, because the transfer must follow the 3:1 ratio of assets between the old Ahmedabad place and the new Surat place at registration.
3. Rs. 1,20,000, because rule 41A requires allocation among the newly registered places in the ratio of their assets and Surat and Rajkot held equal assets. (correct answer)
4. Nil, because unutilised ITC cannot be transferred when two new places of business in the same State are separately registered under rule 11.

Answer: C — Rs. 1,20,000, because rule 41A requires allocation among the newly registered places in the ratio of their assets and Surat and Rajkot held equal assets.

Working. New places: Surat and Rajkot. Asset ratio Surat:Rajkot = 1:1. Total ITC proposed = Rs. 2,40,000. Surat share = 1/2 x Rs. 2,40,000 = Rs. 1,20,000. Filing date 5 September 2025 is within 30 days from 20 August 2025.

Explanation. Rule 41A allows transfer within 30 days from obtaining separate registration. The transfer to newly registered places is in the ratio of their assets. Surat and Rajkot are the new places and their asset ratio is 1:1, so Surat gets half of Rs. 2,40,000, i.e. Rs. 1,20,000. The 5 September filing is within 30 days of 20 August 2025.

Where it goes wrong. The old Ahmedabad place's 3 share is not the ratio for allocation among newly registered places.

Authority. Rule 41A

Question 3 · 2 marks · Input Tax Credit · medium

What is the ITC available to VPT in August 2025 on the SUV, truck and the two general insurance policies?

1. Rs. 3,28,500, since ITC on the truck and its insurance is allowed while ITC on the SUV and its insurance is blocked. (correct answer)
2. Rs. 13,08,500, since ITC on all the vehicles and all the insurances is allowed because they are used for business purposes.
3. Rs. 3,24,000, since only the truck is allowed and insurance on every motor vehicle is blocked as a related service.
4. Rs. 4,500, since only insurance on the truck is allowed and the truck itself is a blocked capital good for a manufacturer.

Answer: A — Rs. 3,28,500, since ITC on the truck and its insurance is allowed while ITC on the SUV and its insurance is blocked.

Working. SUV GST = 28% x Rs. 35,00,000 = Rs. 9,80,000 (blocked). SUV insurance = 18% x Rs. 40,000 = Rs. 7,200 (blocked). Truck GST = 18% x Rs. 18,00,000 = Rs. 3,24,000 (allowed). Truck insurance = 18% x Rs. 25,000 = Rs. 4,500 (allowed). Total allowed = Rs. 3,24,000 + Rs. 4,500 = Rs. 3,28,500.

Explanation. ITC on a motor vehicle for passenger transport with seating up to 13 persons is blocked unless used for further supply, passenger transport or driving training. The SUV is blocked, and so is insurance related to it. The truck used for transporting finished goods is not blocked; its insurance is also allowed. Thus Rs. 3,24,000 plus Rs. 4,500 is available.

Where it goes wrong. Business use alone does not save the SUV; related insurance follows the same block.

Authority. Section 17(5)(a); Section 17(5)(ab)

Question 4 · 2 marks · Input Tax Credit · hard

What is the correct treatment of the ITC of Rs. 2,16,000 on invoice R-88?

1. Available in October on GSTR-2B basis; no reversal is needed because the supplier was paid before 31 March 2026.
2. Not available at any time, because the supplier was not paid within 180 days from the date of the tax invoice.
3. Available only in March 2026, because ITC on every inward supply is tied to the date of payment to the supplier.
4. Available in October on GSTR-2B basis; but as payment came after 180 days, it is reversed with interest in the next return and re-availed later. (correct answer)

Answer: D — Available in October on GSTR-2B basis; but as payment came after 180 days, it is reversed with interest in the next return and re-availed later.

Working. ITC = 18% x Rs. 12,00,000 = Rs. 2,16,000. 180 days from 10 September 2025 ends 9 March 2026. Payment on 15 April 2026 is beyond 180 days. ITC available in October when reflected in GSTR-2B; later reversed with interest; re-availed on payment.

Explanation. R-88 appeared in GSTR-2B for October, so ITC could be taken then. Payment was due within 180 days of 10 September 2025, i.e. by 9 March 2026; payment on 15 April 2026 was late. The ITC must be reversed with interest in the return for the period after the 180-day period, and can be re-availed when payment is made. Option b wrongly treats the credit as permanently lost.

Where it goes wrong. Late payment causes reversal and re-availment, not permanent denial.

Authority. Section 16(2)(aa); Second proviso to section 16(2); Rule 37

Question 5 · 2 marks · Tax Invoice · hard

Is the B2C invoice issued on 30 September 2025 without reporting to the Invoice Registration Portal valid, given VPT's turnover?

1. Invalid, because every invoice of a registered person whose turnover exceeds Rs. 5 crore must be reported to the IRP before it is issued to any customer.
2. Valid, because e-invoicing presently covers B2B supplies and exports, not the B2C invoice issued to an unregistered customer. (correct answer)
3. Invalid, because a B2C invoice of a person with turnover above Rs. 5 crore must carry a dynamic QR code and an IRP reference.
4. Valid, because e-invoicing applies only when aggregate turnover exceeds Rs. 10 crore and VPT is below that prescribed limit for the time being.

Answer: B — Valid, because e-invoicing presently covers B2B supplies and exports, not the B2C invoice issued to an unregistered customer.

Working. Turnover = Rs. 6.2 crore > Rs. 5 crore, so e-invoicing applies to B2B supplies and exports. Invoice is B2C to unregistered customer; not covered; no IRP reporting required.

Explanation. VPT's turnover exceeds Rs. 5 crore, so it is a notified person for e-invoicing. However, e-invoicing presently covers B2B supplies and supplies for exports; B2C invoices are not required to be reported to the IRP. The invoice is therefore valid. Option d is wrong because the threshold is Rs. 5 crore, not Rs. 10 crore.

Where it goes wrong. Crossing the e-invoice threshold does not make B2C reporting mandatory at present.

Authority. Rule 48(4); Notification No. 13/2020 CT dated 21.03.2020

Question 6 · 2 marks · Input Tax Credit · hard

Can VPT pay only Rs. 6,000 in cash for February 2026 by relying on the rule 31D exception to rule 86B?

1. No; the rule 31D exception applies only to a registered person other than a manufacturer, so at least Rs. 12,240 must be paid in cash. (correct answer)
2. Yes; the whole output tax may be paid through ITC because the traded goods were taxed on retail sale price by their supplier.
3. Yes; only Rs. 6,000 in cash is needed because the 1% limit is computed on taxable supply value and not on output tax.
4. No; the whole Rs. 12,24,000 must be paid in cash because rule 86B denies ITC to every registered manufacturer.

Answer: A — No; the rule 31D exception applies only to a registered person other than a manufacturer, so at least Rs. 12,240 must be paid in cash.

Working. Output tax = Rs. 12,24,000. 1% = Rs. 12,240. Proposed cash = Rs. 6,000 < Rs. 12,240. Rule 31D exception effective 01.02.2026 is for a registered person other than a manufacturer; VPT is a manufacturer; exception unavailable.

Explanation. Rule 86B applies because taxable supply exceeds Rs. 50 lakh in the month. At least 1% of output tax must be paid in cash unless an exception applies. The rule 31D exception is available only to a registered person other than a manufacturer, and VPT is a manufacturer. One per cent of Rs. 12,24,000 is Rs. 12,240, so Rs. 6,000 is short.

Where it goes wrong. Supplier's retail-price tax payment does not make the manufacturer eligible for the non-manufacturer exception.

Authority. Rule 86B; Notification No. 20/2025 CT dated 31.12.2025

Question 7 · 2 marks · Exemptions from GST · hard

Scenario. Sarvodaya Assurance Ltd, an insurer, issued the following policies in October 2025: (i) a health policy to Ms Meera covering her and her family; (ii) a group health policy to employees of Titan Ltd under an employer-employee relationship; (iii) a personal accident cover forming part of a health insurance contract to Mr Arjun, an individual; and (iv) reinsurance of the individual health policies to another insurer. The premiums were received in October 2025. Sarvodaya asks which supplies are exempt from GST under the entries inserted with effect from 22 September 2025.

Which of the following statements is correct for the policies issued by Sarvodaya Assurance Ltd in October 2025?

1. The individual family health policy and the employer-employee group policy are both exempt, while the reinsurance of individual policies is taxable.
2. The individual family health policy is exempt, but the individual personal accident cover and the reinsurance of individual policies are taxable.
3. The individual family policy, the personal accident cover and the reinsurance are exempt; only the employer-employee group policy is taxable. (correct answer)
4. All four supplies are taxable because group health insurance and reinsurance are excluded from the new exemptions inserted by the 2025 notification.

Answer: C — The individual family policy, the personal accident cover and the reinsurance are exempt; only the employer-employee group policy is taxable.

Working. Individual/family not group: Entry 36D exempt. Personal accident cover included in health insurance business: exempt if not group. Reinsurance of 36C/36D policies: Entry 36E exempt. Employer-employee group: group definition includes it; not exempt.

Explanation. Entries 36C and 36D exempt life and health insurance business where the insured is not a group. An individual and family policy is not a group policy. Health insurance business includes personal accident cover. Reinsurance of such exempt policies is exempt under Entry 36E. An employer-employee group policy is a group policy and remains taxable.

Where it goes wrong. Employer-employee group is expressly a group; personal accident cover is within health insurance business.

Authority. Entries 36C, 36D and 36E of Notification No. 12/2017 CT (R); Notification No. 16/2025 CT (R) dated 17.09.2025

Question 8 · 1 marks · Time of Supply · medium

Scenario. On 4 May 2025, a Singapore company issued an invoice to its associated enterprise, Nirvaan Ltd, Pune, for technical services of Rs. 8,00,000. Nirvaan recorded the service in its books on 10 May 2025 and paid the amount on 5 July 2025. The service is taxable under reverse charge. What is the time of supply?

What is the time of supply of the technical services received by Nirvaan Ltd?

1. 4 May 2025, being the date of issue of the invoice by the foreign supplier to its associated enterprise in India.
2. 5 July 2025, being the date on which Nirvaan Ltd made payment to the foreign associated enterprise for the technical services.
3. 4 July 2025, being the sixty-first day from the date of issue of invoice by the foreign supplier for the technical services.
4. 10 May 2025, being the earlier of the date of entry in books and the date of payment to the foreign associated enterprise. (correct answer)

Answer: D — 10 May 2025, being the earlier of the date of entry in books and the date of payment to the foreign associated enterprise.

Working. Associated enterprise outside India. Entry in books = 10 May 2025. Payment = 5 July 2025. Earlier = 10 May 2025.

Explanation. For services from an associated enterprise located outside India, the time of supply is the earlier of the date of entry in the recipient's books and the date of payment. Nirvaan entered the service on 10 May 2025 and paid on 5 July 2025, so 10 May 2025 is the time of supply. The 60-day rule does not apply to this associated-enterprise case.

Where it goes wrong. The 60-day invoice rule is displaced by the associated-enterprise rule.

Authority. Second proviso to section 13(3)