The value of supply, input tax credit, tax invoices, e-way bills and the payment of tax are the subjects you apply in this GST test. It carries 8 questions for 15 marks, with a time limit of 30 minutes, and it is set for CA Intermediate Group 1 students preparing for the January 2027 attempt. The chapters covered are Chapter 7 - Value of Supply, Chapter 8 - Input Tax Credit, Chapter 10 - Tax Invoice, Credit and Debit Notes, Chapter 12 - E-Way Bill and Chapter 13 - Payment of Tax. The questions sit in three case scenarios: a furniture seller whose invoice carries packing, freight, a discount and a subsidy, a road consignment of 450 km, and a taxpayer with a credit ledger balance and reverse-charge tax.
The law basis is the CGST Act 2017, IGST Act 2017 and CGST Rules as amended by Finance Act 2025, notifications and circulars effective up to 28 February 2026. There is no negative marking, so a wrong answer costs nothing. Questions are prepared with AI tools and cross-checked by independent solvers; they are not reviewed by a Chartered Accountant.
8 questions across 6 chapters, 15 marks and 30 minutes in the timed paper. Every answer below is shown with the working behind it and the authority it rests on.
Law and standards used: CGST Act 2017, IGST Act 2017 and CGST Rules as amended by Finance Act 2025, notifications and circulars effective up to 28 February 2026.
Questions
8
Marks
15
Time limit
30 minutes
Attempt
January 2027
Group
Group 1
Law basis
CGST Act 2017, IGST Act 2017 and CGST Rules as amended by Finance Act 2025, notifications and circulars effective up to 28 February 2026
Content as of
2026-10-31
Chapters covered
Ch 7 - Value of Supply (1 Q)
Ch 7 - Value of Supply; Ch 8 - Input Tax Credit; Ch 10 - Tax Invoice, Credit and Debit Notes (1 Q)
Ch 8 - Input Tax Credit (2 Q)
Ch 10 - Tax Invoice, Credit and Debit Notes (2 Q)
Ch 12 - E-Way Bill (1 Q)
Ch 13 - Payment of Tax (1 Q)
Questions, answers and explanations
Question 1 · 2 marks · Ch 7 - Value of Supply · medium
Scenario. Northstar Workspace Ltd., Ahmedabad, manufactures and sells office furniture. In January 2026, it sold a workstation set to an unrelated dealer for ₹5,00,000. It charged ₹12,000 for packing and ₹8,000 for freight, allowed a ₹20,000 invoice discount, and received a ₹25,000 private-association subsidy directly linked to the sale price. No other amount was charged or received.
On 24 February 2026, Northstar removed taxable office tables by truck for delivery to a customer, but generated the tax invoice on 25 February. On 1 March 2026, it bought a passenger car with approved seating capacity of five persons, including the driver, for directors’ business visits.
On 15 April 2026, it received IT support services invoiced at ₹2,00,000 plus GST of ₹36,000. It claimed ITC and paid ₹1,18,000 of the ₹2,36,000 invoice within 180 days; the balance remained unpaid.
Northstar issued a financial credit note to a dealer for a post-sale discount not agreed before supply. There was no agreement with the ultimate customer or separately contracted promotional service. For another FY 2025-26 supply, it furnished its annual return on 20 September 2026 and issued a GST credit note for a price reduction on 5 October 2026; tax incidence had not been passed on.
Calculate the taxable value of the workstation supply made by Northstar under section 15. All amounts are in rupees; no rounding is required.
₹5,25,000 (correct answer)
₹5,45,000
₹5,20,000
₹5,00,000
Answer: A — ₹5,25,000
Working. Basic transaction value = ₹5,00,000
Add packing charges = ₹12,000
Add freight charges = ₹8,000
Less discount recorded in the invoice = ₹20,000
Add subsidy directly linked to price = ₹25,000
Taxable value = ₹5,00,000 + ₹12,000 + ₹8,000 - ₹20,000 + ₹25,000 = ₹5,25,000.
Explanation. Option a is correct. Section 15 includes packing and other amounts charged by the supplier in respect of the supply before delivery, and a subsidy directly linked to the price is included unless it is provided by the Central or a State Government. The invoice-recorded discount is deductible. Option d is tempting because it omits the private subsidy, although that subsidy is includible in the taxable value.
Where it goes wrong. Omitting the non-government subsidy or adding back a discount already recorded in the tax invoice.
Question 2 · 2 marks · Ch 7 - Value of Supply; Ch 8 - Input Tax Credit; Ch 10 - Tax Invoice, Credit and Debit Notes · easy
What is the correct GST treatment of the financial credit note issued by Northstar for the post-sale commercial discount?
Northstar cannot reduce its output tax liability, and the dealer is not required to reverse ITC. (correct answer)
Northstar can reduce its output tax liability, and the dealer must reverse proportionate ITC.
Northstar can reduce its output tax liability, but the dealer can retain the entire ITC.
The commercial discount is automatically consideration for a separate promotional service supplied by the dealer.
Answer: A — Northstar cannot reduce its output tax liability, and the dealer is not required to reverse ITC.
Explanation. Option a is correct. Because the post-sale discount was not established by an agreement at or before the supply, it does not qualify for deduction under section 15(3)(b). Consequently, Northstar cannot reduce its original transaction value or output tax. Circular No. 251/08/2025 GST clarifies that the recipient need not reverse ITC on such a financial or commercial credit note. Option b incorrectly applies the treatment applicable to qualifying tax credit notes.
Where it goes wrong. Assuming that every financial or commercial credit note automatically reduces the supplier's GST liability and requires ITC reversal by the recipient.
Determine whether Northstar is eligible to claim ITC on the passenger car purchased on 1 March 2026.
ITC is available because the vehicle is used for business purposes.
ITC is blocked because the vehicle has an approved seating capacity of not more than 13 persons, including the driver, and none of the specified exceptions applies. (correct answer)
ITC is available because directors' business visits constitute transportation of passengers.
ITC is available provided the supplier has uploaded the invoice in GSTR-1.
Answer: B — ITC is blocked because the vehicle has an approved seating capacity of not more than 13 persons, including the driver, and none of the specified exceptions applies.
Explanation. Option b is correct. Section 17(5)(a) blocks ITC on a motor vehicle used for transporting persons where its approved seating capacity is not more than 13, including the driver. The specified exceptions include further supply of such vehicles, taxable transportation of passengers and imparting driving training. Directors' business visits do not fall within these exceptions. Option a incorrectly treats business use alone as sufficient for ITC eligibility.
Where it goes wrong. Assuming that ITC is available on every asset purchased and used in the course or furtherance of business.
Authority. CGST Act, 2017, section 17(5)(a)
Question 4 · 2 marks · Ch 10 - Tax Invoice, Credit and Debit Notes · medium
Considering the removal of the office tables on 24 February and the generation of the tax invoice on 25 February, which statement correctly applies section 31(1)?
The tax invoice is required only when the recipient makes payment for the goods.
The tax invoice must be issued only when the goods are delivered to the recipient.
The tax invoice should have been issued before or at the time of removal of the goods; the invoice dated 25 February was issued late. (correct answer)
The tax invoice may be issued within 30 days after delivery in every case involving goods.
Answer: C — The tax invoice should have been issued before or at the time of removal of the goods; the invoice dated 25 February was issued late.
Explanation. Option c is correct. Under section 31(1)(a), a registered person supplying taxable goods involving movement must issue the tax invoice before or at the time of removal of the goods for supply to the recipient. Northstar removed the goods on 24 February but generated the invoice on 25 February. Option b incorrectly substitutes the time of delivery to the recipient for the statutory removal-based requirement.
Where it goes wrong. Confusing the invoice timing for goods involving movement with the invoice timing applicable to other situations or services.
Authority. CGST Act, 2017, section 31(1)(a)
Question 5 · 2 marks · Ch 10 - Tax Invoice, Credit and Debit Notes · hard
Can Northstar reduce its output tax liability by declaring the credit note issued on 5 October 2026 in its return, considering the relevant annual return was already furnished?
Yes, because there is no time limit for declaring a credit note issued under section 34.
Yes, because the credit note was issued before 30 November 2026.
Yes, because the tax incidence was not passed on to another person, irrespective of the time limit.
No, because the relevant annual return was furnished on 20 September 2026, which is earlier than 30 November 2026. (correct answer)
Answer: D — No, because the relevant annual return was furnished on 20 September 2026, which is earlier than 30 November 2026.
Working. Date of furnishing relevant annual return = 20 September 2026.
30 November following the end of FY 2025-26 = 30 November 2026.
Earlier of the two dates = 20 September 2026.
Credit note issued = 5 October 2026.
Since 5 October is after 20 September, Northstar cannot reduce its output tax liability by declaring this credit note.
Explanation. Option d is correct. Section 34(2) requires the details of a credit note to be declared no later than 30 November following the financial year of supply or the date of furnishing the relevant annual return, whichever is earlier. Northstar furnished its annual return on 20 September 2026. Therefore, the adjustment period had already ended before the credit note was issued on 5 October. Option b overlooks the earlier annual-return trigger.
Where it goes wrong. Applying only the 30 November deadline and overlooking the alternative earlier deadline linked to furnishing the annual return.
Question 6 · 2 marks · Ch 8 - Input Tax Credit · hard
Ignoring interest, calculate the amount of ITC that Northstar is required to reverse or pay back because the invoice amount was not fully paid within 180 days.
₹36,000
₹27,000
₹18,000 (correct answer)
₹9,000
Answer: C — ₹18,000
Working. Taxable value of IT support services = ₹2,00,000.
GST charged = ₹36,000.
Total invoice amount = ₹2,36,000.
Amount paid within 180 days = ₹1,18,000.
Unpaid amount = ₹2,36,000 - ₹1,18,000 = ₹1,18,000.
Proportion unpaid = ₹1,18,000 / ₹2,36,000 = 50%.
ITC to be reversed = ₹36,000 × 50% = ₹18,000.
Applicable interest under section 50 is additionally payable; it is excluded from the amount calculated above.
Explanation. Option c is correct. Rule 37 requires reversal or payment of ITC proportionate to the amount remaining unpaid where the value of supply along with tax is not paid within 180 days. Half the invoice total remains unpaid, so half the ₹36,000 credit must be reversed, along with applicable interest under section 50. Option a reverses the entire credit, ignoring the payment already made.
Where it goes wrong. Reversing the entire ITC instead of calculating the proportionate credit attributable to the unpaid amount.
Question 7 · 2 marks · Ch 12 - E-Way Bill · medium
Scenario. On 27 October 2026, Kaveri Industrial Bearings dispatches one consignment of ordinary goods by road from Surat to Nagpur, a distance of 450 km. The consignment value is ₹8,40,000. The e-way bill is generated before movement begins. The goods are neither over-dimensional cargo nor part of a multimodal shipment involving transport by ship.
For how many days is the e-way bill valid from its generation date?
2 days
4 days
5 days
3 days (correct answer)
Answer: D — 3 days
Working. Distance = 450 km.
Validity for the first 200 km = 1 day.
Remaining distance = 450 - 200 = 250 km.
Additional validity = 1 day for every 200 km or part thereof.
250 km constitutes two additional 200-km blocks or parts thereof.
Total validity = 1 + 2 = 3 days.
Explanation. Option d is correct. For ordinary cargo, the first 200 km carries one day's validity. The remaining 250 km is more than 200 km, so the rule prescribing one additional day for every 200 km or part thereof adds two days. Total validity is three days. Option a incorrectly rounds the remaining distance down to one 200-km block and overlooks the additional part thereof.
Where it goes wrong. Ignoring the words 'or part thereof' while calculating additional validity for the remaining distance.
Question 8 · 1 marks · Ch 13 - Payment of Tax · easy
Scenario. Cedar Retail Pvt. Ltd. has an eligible ITC balance of ₹1,00,000 in its electronic credit ledger. For the tax period, it has ₹70,000 of regular output tax and ₹15,000 of GST payable under reverse charge, with ₹15,000 available in its electronic cash ledger.
Which statement correctly explains how Cedar Retail must discharge its reverse-charge tax liability?
It may use either the electronic credit ledger or electronic cash ledger for reverse-charge tax at its discretion.
It must use the electronic cash ledger for reverse-charge tax; eligible ITC can be used towards regular output tax. (correct answer)
It must use the electronic credit ledger for reverse-charge tax and the electronic cash ledger for regular output tax.
It can use the electronic credit ledger for both regular output tax and reverse-charge tax.
Answer: B — It must use the electronic cash ledger for reverse-charge tax; eligible ITC can be used towards regular output tax.
Explanation. Option b is correct. Reverse-charge tax is excluded from output tax by section 2(82), and the electronic credit ledger may be used only to pay output tax under section 49(4). The electronic cash ledger can be used to pay tax and other amounts under section 49(3). Option d incorrectly treats reverse-charge tax as ordinary output tax that can be discharged using ITC.
Where it goes wrong. Treating reverse-charge liability as output tax eligible for payment through the electronic credit ledger.
The paper asks you to work out the taxable value of a supply, decide whether input tax credit is available or has to be reversed, and place tax invoices, e-way bills and the payment of tax in the right order. The 8 questions sit in three case scenarios: a furniture seller's sale with packing, freight, an invoice discount and a subsidy, a road consignment of 450 km, and a taxpayer with credit ledger balances and reverse-charge tax. Each question offers four alternatives with one correct answer.
How many questions are there and how long do I have?
There are 8 questions and the paper carries 15 marks. Seven questions are worth 2 marks each and the last one is worth 1 mark. The time limit is 30 minutes. In exam mode the paper is timed and marked once at the end, so you can move between questions and return to any of them before the time is up.
Which chapters does the paper cover?
The chapters covered are Chapter 7 - Value of Supply, Chapter 8 - Input Tax Credit, Chapter 10 - Tax Invoice, Credit and Debit Notes, Chapter 12 - E-Way Bill, and Chapter 13 - Payment of Tax. The questions draw on all five, so a gap in any one of them will cost you marks. Read the scenario before you start answering, because the working often depends on a figure given in the passage.
Which law do the questions follow?
The law basis is the CGST Act 2017, IGST Act 2017 and CGST Rules as amended by Finance Act 2025, with notifications and circulars effective up to 28 February 2026. The content is stated as at 31 October 2026. Where a notification or a circular changes a rule, the change as at that date is applied in the questions, so work from your study material and the applicable statutory update.
How are the questions written?
Each question sits inside a short case scenario. You read a passage of facts, which gives the names of the parties, the amounts and the dates, and then apply the law to those facts. One passage is shared by the questions that follow it, so the same scenario usually carries more than one question. Work through the passage once and note the key figures before you look at the options.
Is there negative marking?
No. There is no negative marking, so a wrong answer costs nothing. Each question carries the marks set out above and the paper is marked on that basis. If you are unsure of an option, attempt it rather than leave it blank, because an attempt that turns out wrong does not reduce your score.
Can I take the paper without a timer?
Yes. In practice mode there is no timer, and you can read the explanation for every answer as you go, so you can pause and work through the questions at your own pace. In exam mode the paper is timed and marked once at the end, and you get a certificate carrying your name and score when the paper closes.
Do I need to sign up or pay anything?
No sign-up is needed and there is no payment. Nothing about a student is stored on a server. You can open the paper, attempt it and read the result without creating an account, and the same applies to the timed mode and the untimed mode alike.
Is this paper issued by ICAI?
No. This is a practice test by HeyArtha. It is not issued by or affiliated with ICAI, and it is written for students of CA Intermediate Group 1 preparing for the January 2027 attempt. Use it alongside your study material and the applicable statutory update, and check the position of each rule as at the date stated in the paper.
What if I think a question is wrong?
Every question in the result screen has a Report a mistake button, so you can flag a question that you believe is incorrect. The explanation sets out the provision that applies and the working behind the answer, which you can use to check your own attempt while you are still working through the paper.
