CA Inter Taxation - GST MCQ Test 14: answer key

Question 1 · 2 marks · Input Tax Credit · medium

Scenario. Navrang Traders Pvt. Ltd. is a regular GST registered dealer in Pune, Maharashtra, making wholly taxable intra-State and inter-State supplies. It is a monthly filer and its aggregate turnover in FY 2025-26 was Rs. 3.20 crore. Its records for FY 2026-27 include the following. On 12 April 2026, it purchased raw material from Suryansh Metals; GST charged was Rs. 1,80,000. Suryansh uploaded the invoice in GSTR-1 and the credit appeared in Navrang's GSTR-2B for April 2026. Navrang paid the invoice value and tax on 05 October 2026. On 20 May 2026, Navrang bought a 7-seater car for the official use of its directors; GST was Rs. 2,36,000 and the car was capitalised. It also paid general insurance on that car, GST Rs. 18,000, on 01 June 2026. On 18 July 2026, it availed works contract services for renovation of its office building; GST was Rs. 1,50,000, and the entire expenditure was capitalised. On 15 August 2026, it purchased machinery for its manufacturing line; GST was Rs. 3,00,000. The machinery was delivered in three lots; the first two lots were received by 30 September 2026 and the last lot on 04 November 2026. On 10 February 2026, it received taxable services from Gagan Enterprises; GST was Rs. 90,000. The invoice appeared in GSTR-2B and Navrang availed the credit in February 2026. Gagan did not furnish its GSTR-3B for February 2026 till 30 September 2026; it furnished that return on 15 December 2026. On 22 September 2026, Navrang received raw material from Vardaan Supplies; GST was Rs. 75,000. Vardaan did not upload the invoice in GSTR-1, so it did not appear in Navrang's GSTR-2B. Navrang maintains its books electronically but has not applied a digital signature to the electronic records; it has retained passwords and codes. It filed GSTR-1 for September 2026 on 11 October 2026 and GSTR-3B on 20 October 2026.

For the return for October 2026, what is the correct input tax credit treatment of the machinery purchased on 15 August 2026?

1. Nil for October 2026, since the last lot was received on 04 November 2026, though the credit may be considered in November 2026. (correct answer)
2. Rs. 3,00,000 in October 2026, because the invoice was received and the first two lots were received by 30 September 2026.
3. Rs. 2,00,000 in October 2026, because credit is allowed in proportion to the lots received by 30 September 2026.
4. Nil for October 2026, because input tax credit on machinery is always blocked under section 17(5).

Answer: A — Nil for October 2026, since the last lot was received on 04 November 2026, though the credit may be considered in November 2026.

Working. Invoice 15 Aug 2026: GST Rs. 3,00,000. Lots: first two by 30 Sep 2026; last lot 04 Nov 2026. First proviso defers credit to receipt of last lot. October return: Nil.

Explanation. The first proviso to section 16(2) allows credit for goods received in lots only on receipt of the last lot. The last lot came on 04 November 2026, so no credit is available in the October 2026 return; credit may be considered in November 2026 if other conditions are met. Option b wrongly ignores the lot rule, and option d wrongly treats all machinery as blocked.

Where it goes wrong. Invoice was received early and most lots were received; the last-lot condition still defers credit.

Authority. Section 16(2), first proviso, CGST Act 2017

Question 2 · 2 marks · Input Tax Credit · hard

What is the input tax credit entitlement on the car and the general insurance on it?

1. Rs. 2,54,000, because both were used in the course of business and the car was capitalised in the books.
2. Nil, because a 7-seater car and its general insurance are blocked credits when not used for further supply, passenger transport or driving training. (correct answer)
3. Rs. 2,36,000, because input tax credit on the car is allowed, while only the insurance of Rs. 18,000 is blocked.
4. Rs. 18,000, because insurance is an input service, while the car is a blocked credit due to capitalisation.

Answer: B — Nil, because a 7-seater car and its general insurance are blocked credits when not used for further supply, passenger transport or driving training.

Working. Car GST Rs. 2,36,000; insurance GST Rs. 18,000. Seating 7 (within 13). Not further supply, passenger transport or driving training. 17(5)(a) blocks car; 17(5)(ab) blocks related insurance. Total ITC Nil.

Explanation. A motor vehicle for transporting persons with seating capacity up to 13 persons is blocked under section 17(5)(a) unless used for further supply of such vehicles, passenger transport or driving training. The car is used by directors, so it is blocked. General insurance relating to such a blocked vehicle is also blocked under section 17(5)(ab). Hence the entitlement is nil; capitalisation does not change the result.

Where it goes wrong. Official use by directors and capitalisation look like business use, but do not fit the exceptions.

Authority. Section 17(5)(a) and 17(5)(ab), CGST Act 2017

Question 3 · 2 marks · Input Tax Credit · hard

What is the input tax credit treatment of the works contract services for the office renovation?

1. Rs. 1,50,000, because renovation is a business purpose and the service is not construction of a new building.
2. Nil, because works contract services are always blocked, even when used for eligible plant and machinery.
3. Nil, because works contract services for renovation of an office building are blocked to the extent capitalised, and this is not further supply of works contract. (correct answer)
4. Rs. 1,50,000, because the entire amount was capitalised and capital goods always qualify for credit.

Answer: C — Nil, because works contract services for renovation of an office building are blocked to the extent capitalised, and this is not further supply of works contract.

Working. Works contract GST Rs. 1,50,000; office renovation capitalised. Construction includes renovation to extent capitalisation. No further supply of works contract; not plant and machinery. ITC Nil.

Explanation. Works contract services for construction of an immovable property are blocked under section 17(5)(c), except when they are an input service for further supply of works contract or relate to eligible plant and machinery. Construction includes renovation to the extent capitalised. The office renovation is capitalised and is not further supply of works contract, so credit is nil.

Where it goes wrong. Business use and capitalisation do not override the specific works contract block.

Authority. Section 17(5)(c) and Explanation to section 17(5)(c) and (d), CGST Act 2017

Question 4 · 2 marks · Input Tax Credit · hard

What should Navrang do about the Rs. 90,000 credit availed on the Gagan Enterprises invoice?

1. Reverse Rs. 90,000 with interest only if Gagan does not file its GSTR-3B by 31 December 2026, since the invoice was already reflected in Navrang's GSTR-2B for February 2026.
2. Reverse Rs. 45,000 without interest in the November 2026 return, because Gagan filed its GSTR-3B before the end of December 2026.
3. Do not reverse anything, because the invoice was reflected in GSTR-2B and Navrang paid the supplier within 180 days from the invoice date.
4. Reverse Rs. 90,000 with interest in the GSTR-3B to be filed by 30 November 2026, and re-avail it after Gagan files its GSTR-3B on 15 December 2026. (correct answer)

Answer: D — Reverse Rs. 90,000 with interest in the GSTR-3B to be filed by 30 November 2026, and re-avail it after Gagan files its GSTR-3B on 15 December 2026.

Working. Gagan invoice Feb 2026 GST Rs. 90,000; GSTR-3B not filed by 30 Sep 2026; filed 15 Dec 2026. Rule 37A: reverse by 30 Nov 2026 with interest; re-avail after supplier files.

Explanation. Under section 41 read with rule 37A, if the supplier does not furnish GSTR-3B for the corresponding period by 30 September following the financial year, the recipient must reverse the credit with interest by 30 November following that financial year. Gagan filed only on 15 December 2026, so Navrang must reverse Rs. 90,000 by 30 November 2026 and may re-avail it after Gagan's filing.

Where it goes wrong. Reflection in GSTR-2B and payment within 180 days do not remove the rule 37A reversal.

Authority. Section 41 read with rule 37A, CGST Rules 2017

Question 5 · 2 marks · Accounts and Records · medium

Which statement is correct about Navrang maintaining its books electronically without a digital signature?

1. Navrang must authenticate electronic records by digital signature and, on demand, provide file details, passwords and code explanations for access. (correct answer)
2. Navrang may keep electronic records without digital signature if it retains passwords, because GST law prescribes no authentication requirement for such records.
3. Navrang must maintain records only manually, since electronic records are not recognised unless digitally signed and printed every month.
4. Navrang's electronic records are valid only if each entry is erased and overwritten after a departmental officer checks the records.

Answer: A — Navrang must authenticate electronic records by digital signature and, on demand, provide file details, passwords and code explanations for access.

Working. Electronic records allowed; digital signature authentication required; on demand provide file details, passwords and code explanations.

Explanation. Section 35 permits electronic records, but the record must be authenticated by digital signature. The registered person must also produce records on demand and provide file details, passwords and explanations of codes where needed. Retaining passwords alone is not enough, and electronic records are recognised if the prescribed authentication is done.

Where it goes wrong. Passwords are required for access, but they do not substitute digital signature authentication.

Authority. Section 35, CGST Act 2017; Chapter VII of CGST Rules 2017

Question 6 · 2 marks · Input Tax Credit · medium

Can Navrang avail input tax credit of Rs. 75,000 on the Vardaan Supplies invoice in the September 2026 return?

1. Yes, because the raw material was received in September 2026 and Navrang holds the supplier's invoice for the taxable supply.
2. No, because the invoice was not furnished by Vardaan in GSTR-1 and is not reflected in Navrang's GSTR-2B. (correct answer)
3. Yes, because input tax credit can be availed on any business purchase even if the supplier has not uploaded the invoice in GSTR-1.
4. No, because input tax credit on raw material is blocked unless the supplier files its GSTR-3B before the recipient files its return.

Answer: B — No, because the invoice was not furnished by Vardaan in GSTR-1 and is not reflected in Navrang's GSTR-2B.

Working. Vardaan GST Rs. 75,000; not uploaded in GSTR-1; absent from GSTR-2B. ITC cannot be availed until details appear in GSTR-2B and other conditions are met.

Explanation. Section 16(2)(aa) read with rule 36(4) requires that the invoice details be furnished by the supplier in GSTR-1 and communicated to the recipient in GSTR-2B. Since Vardaan did not upload the invoice and it is not in Navrang's GSTR-2B, credit cannot be availed in the September 2026 return. Holding the invoice and receiving goods are not enough for this condition.

Where it goes wrong. Receipt of goods and possession of invoice are necessary but not sufficient without GSTR-2B reflection.

Authority. Section 16(2)(aa) read with rule 36(4), CGST Rules 2017

Question 7 · 2 marks · Supply under GST · hard

Scenario. Aarav, a proprietor registered in Delhi, runs a taxable warehouse business. His brother, Ishaan, is settled in Singapore and is wholly dependent on Aarav for financial support. In August 2026, Ishaan prepared architectural designs for Aarav's new business warehouse in Delhi and sent them free of charge. No consideration was paid or promised. Aarav used the designs only for the warehouse, not for any personal residence. Ishaan is not registered under GST in India and has no establishment in India. The designs were sent electronically. Aarav already holds a valid registration in Delhi.

Which statement correctly applies section 7 read with Schedule I to the free architectural designs?

1. It is not a supply, because no consideration was paid for the designs and the service was received free of cost from a relative.
2. It is a supply, because any import of service is taxable even without consideration, irrespective of whether it is for business.
3. It is a supply, because Aarav imported services without consideration from a related person outside India in the course of business. (correct answer)
4. It is not a supply, because Ishaan has no establishment or registration in India and the design was sent electronically to a registered person for a business warehouse.

Answer: C — It is a supply, because Aarav imported services without consideration from a related person outside India in the course of business.

Working. Import of service; no consideration; supplier outside India; related person because brother wholly dependent; received in course of business. Schedule I para 4 applies: supply.

Explanation. Schedule I, para 4 treats import of services by a person from a related person or from establishments outside India, without consideration, as supply when made in the course or furtherance of business. Ishaan is a brother wholly dependent on Aarav, so they are related under section 2(49). The designs are for Aarav's business warehouse, so the import is a supply even without consideration.

Where it goes wrong. Free service and foreign location look like non-supply, but related-person import for business is deemed supply.

Authority. Section 7(1)(c) read with Schedule I, para 4; section 2(49), CGST Act 2017

Question 8 · 1 marks · Charge of GST · hard

Scenario. Sundara Omnibus Pvt. Ltd., a company, provides passenger transport by omnibus through YatraSetu, an electronic commerce operator. YatraSetu displays the routes, collects fares and passes them to Sundara after commission. The services are supplied through YatraSetu and are notified under section 9(5) of the CGST Act. Sundara is not an omnibus operator exempted from the notification.

Who is liable to pay GST on the omnibus passenger transport supplies made through YatraSetu?

1. YatraSetu, because every notified service supplied through an ECO makes the ECO liable as the supplier under section 9(5).
2. YatraSetu, because it collects fares and deducts commission before passing the balance to Sundara for the transport service.
3. Sundara, because an ECO can never be liable for any passenger transport service under GST, whether by omnibus or otherwise.
4. Sundara, because for company-supplied omnibus passenger transport through an ECO, the company itself is liable. (correct answer)

Answer: D — Sundara, because for company-supplied omnibus passenger transport through an ECO, the company itself is liable.

Working. Supplier is a company; service is omnibus passenger transport through ECO; notified entry amended w.e.f. 22.09.2025. ECO not liable; company liable.

Explanation. Notification No. 17/2025 CT(R) dated 17.09.2025 amended the notified ECO services with effect from 22.09.2025. Tax on passenger transport by omnibus supplied by a company through an ECO is not payable by the ECO; it is payable by the company itself. YatraSetu collects fares and pays commission, but that does not shift the statutory liability in this case.

Where it goes wrong. General ECO collection model suggests ECO liability, but the company-omnibus exception reverses it.

Authority. Section 9(5), CGST Act 2017; Notification No. 17/2025 CT(R) dated 17.09.2025