This practice test covers Goods and Services Tax (GST) for CA Intermediate Group 1 students preparing for the January 2027 attempt. It carries 15 marks in 30 minutes across 8 questions in case scenarios examining Chapter 8 - Input Tax Credit, Chapter 13 - Payment of Tax, Chapter 4 - Place of Supply.
8 questions across 4 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
2026-11-01
Chapters covered
Chapter 8 - Input Tax Credit (4 Q)
Chapter 13 - Payment of Tax (2 Q)
Chapter 4 - Place of Supply (1 Q)
Chapter 5 - Exemptions from GST (1 Q)
Questions, answers and explanations
Question 1 · 2 marks · Chapter 8 - Input Tax Credit · hard
Scenario. Aarohan Industrial Solutions Private Limited, registered under GST in Maharashtra, manufactures specialised industrial equipment at its Pune factory. The company follows the regular scheme of taxation and files monthly returns. During the financial year 2025-26, the following transactions took place:
1. On 15 February 2025, the company placed an order with Vardhan Metals for specialised steel components worth ₹8,00,000 plus GST of ₹1,44,000. The entire consignment was agreed to be delivered in three instalments. The first two instalments were received in October and November 2025, while the final instalment was received on 10 December 2025. The supplier had issued the invoice in February 2025, and the company had paid the entire invoice amount in advance. The company's annual return for FY 2024-25 was not filed until December 2025.
2. On 1 August 2025, the company purchased production machinery accessories from Nivaan Components for ₹5,00,000 plus GST of ₹90,000. The accessories were received immediately, and ITC was availed in the August 2025 return. Due to a commercial dispute, the company paid only ₹3,54,000, including proportionate tax, within 180 days of the invoice date. The remaining amount was settled on 15 March 2026. No credit note or other adjustment was issued by the supplier.
3. In September 2025, the company engaged a registered works contractor to renovate its existing administrative office building. The works contract invoice included GST of ₹1,80,000. The entire renovation expenditure was capitalised in the company's books. The building is used exclusively for business activities. During the same month, the company also purchased a specialised machine foundation system forming part of its production plant, and the related GST was ₹1,20,000.
4. In November 2025, the company purchased an eighteen-seater bus, including the driver's seat, for transporting factory employees. GST charged was ₹2,70,000. It also paid ₹36,000 as GST on general insurance for a five-seater car used by its senior executives exclusively for official business travel. Neither vehicle is used for making taxable outward supplies of passenger transportation or imparting driving training.
5. For October 2026, the company had output tax liabilities of ₹2,00,000 under IGST, ₹1,20,000 under CGST and ₹1,00,000 under SGST. Its electronic credit ledger contained IGST credit of ₹1,50,000, CGST credit of ₹1,00,000 and SGST credit of ₹80,000. There were no reverse charge liabilities included in these figures.
6. During October 2026, the value of its taxable supplies, excluding exempt and zero-rated supplies, exceeded ₹50 lakh. Its output tax liability for the relevant cumulative period of the financial year was ₹11,52,000. The company had already discharged ₹15,000 of its cumulative output tax liability through the electronic cash ledger during that financial year. It satisfies none of the other specified exceptions to the restriction under rule 86B.
The company seeks advice on the admissibility of ITC and the manner of discharging its output tax liabilities.
With reference to the steel components purchased from Vardhan Metals, determine whether Aarohan Industrial Solutions Private Limited can avail ITC of ₹1,44,000 in December 2025.
No, because ITC on goods supplied in instalments becomes available only on receipt of the last instalment, and the time limit under section 16(4) had already expired on 30 November 2025. (correct answer)
Yes, because the company paid the entire invoice value in advance and received the final instalment before filing its annual return.
Yes, because the time limit under section 16(4) begins from the date of receipt of the last instalment of goods rather than the financial year in which the tax invoice was originally issued.
No, because ITC on goods supplied in instalments is available only when all instalments are received and the supplier issues a fresh invoice after the final instalment.
Answer: A — No, because ITC on goods supplied in instalments becomes available only on receipt of the last instalment, and the time limit under section 16(4) had already expired on 30 November 2025.
Working. Invoice financial year: 2024-25. Last date under section 16(4): 30 November 2025, subject to the earlier annual return date. Last instalment received: 10 December 2025. Therefore, ITC is time-barred.
Explanation. Under the first proviso to section 16(2), ITC on goods received in lots or instalments becomes available only upon receipt of the last lot. However, section 16(4) independently restricts availment to 30 November following the relevant financial year or the date of filing the relevant annual return, whichever is earlier. The invoice belongs to FY 2024-25, so the deadline was 30 November 2025. The last instalment arrived on 10 December 2025. Option (c) is tempting because receipt of the last lot determines eligibility, but it does not extend the separate statutory deadline.
Where it goes wrong. Confusing the date on which the last instalment is received with the independent time limit for claiming ITC.
Authority. Section 16(2), first proviso; Section 16(4)
Question 2 · 2 marks · Chapter 8 - Input Tax Credit · hard
In relation to the purchase from Nivaan Components, determine the amount of ITC which Aarohan Industrial Solutions Private Limited is required to reverse on account of non-payment within 180 days.
₹90,00,000 is not correct, but ₹90,000 because the entire ITC must be reversed whenever the invoice consideration is not fully discharged within 180 days.
₹36,000, because ITC attributable to the unpaid 40% of the invoice must be reversed along with applicable interest. (correct answer)
₹54,000, because ITC attributable to the amount actually paid within 180 days alone is required to be reversed.
Nil, because the company has ultimately paid the entire invoice amount before the end of the financial year.
Answer: B — ₹36,000, because ITC attributable to the unpaid 40% of the invoice must be reversed along with applicable interest.
Working. Invoice value including GST = ₹5,90,000. Amount paid = ₹3,54,000 = 60%. Amount unpaid = ₹2,36,000 = 40%. ITC reversal = ₹90,000 × 40% = ₹36,000, along with applicable interest. Credit may be re-availed upon subsequent payment.
Explanation. The second proviso to section 16(2), read with rule 37, requires reversal of ITC proportionate to the amount remaining unpaid where the value of supply along with tax is not paid within 180 days. The company paid 60% of the invoice and left 40% unpaid. Accordingly, ₹90,000 × 40% = ₹36,000 must be paid or reversed with applicable interest. Option (d) is tempting because the outstanding amount was subsequently settled, but subsequent payment permits re-availment of the credit; it does not eliminate the initial reversal requirement.
Where it goes wrong. Ignoring proportionate reversal and treating subsequent payment as eliminating the earlier statutory default.
Authority. Section 16(2), second proviso; Rule 37; Section 50
Question 3 · 2 marks · Chapter 8 - Input Tax Credit · hard
Which of the following correctly determines the admissibility of ITC on the renovation of the administrative building and the specialised machine foundation system?
ITC of ₹3,00,000 is available because both expenditures relate exclusively to the company's manufacturing business.
ITC of ₹1,80,000 is available on renovation, but ITC of ₹1,20,000 on the machine foundation system is blocked because both expenditures are capitalised.
ITC of ₹1,20,000 is available on the eligible plant and machinery component, whereas ITC of ₹1,80,000 on the capitalised renovation of the office building is blocked. (correct answer)
Both credits are blocked because any works contract expenditure capitalised in the books of a registered person is ineligible for ITC.
Answer: C — ITC of ₹1,20,000 is available on the eligible plant and machinery component, whereas ITC of ₹1,80,000 on the capitalised renovation of the office building is blocked.
Working. Office renovation: ₹1,80,000 - blocked. Eligible plant and machinery component: ₹1,20,000 - admissible. Total admissible ITC = ₹1,20,000.
Explanation. Section 17(5)(c) blocks ITC on works contract services used for construction of immovable property other than plant and machinery, except where such services are used for further supply of works contract services. The definition of construction includes repairs and renovation to the extent capitalised. Thus, the office renovation credit of ₹1,80,000 is blocked. The machine foundation system qualifies as part of eligible plant and machinery, for which the statutory exclusion applies. Option (a) is tempting because both expenditures serve business purposes, but business use alone does not override blocked-credit provisions.
Where it goes wrong. Assuming exclusive business use overrides the restrictions applicable to capitalised construction and renovation expenditure.
Authority. Section 17(5)(c); Section 17(5)(d); Explanation to section 17(5)
Question 4 · 2 marks · Chapter 8 - Input Tax Credit · medium
Determine the total ITC admissible to Aarohan Industrial Solutions Private Limited in respect of the bus and the car insurance premium.
₹2,70,000, because the bus has a seating capacity exceeding 13 persons, including the driver, whereas insurance relating to the ineligible five-seater car is blocked. (correct answer)
₹3,06,000, because both employee transportation and official business travel qualify as eligible business purposes for claiming input tax credit on motor vehicles under section 16(1).
Nil, because motor vehicles used for employee transportation are blocked irrespective of their seating capacity.
₹36,000, because general insurance is eligible for ITC when the insured vehicle is used exclusively for business.
Answer: A — ₹2,70,000, because the bus has a seating capacity exceeding 13 persons, including the driver, whereas insurance relating to the ineligible five-seater car is blocked.
Working. Eighteen-seater bus: ₹2,70,000 admissible. Five-seater car insurance: ₹36,000 blocked. Total admissible ITC = ₹2,70,000.
Explanation. Section 17(5)(a) blocks ITC on motor vehicles for transportation of persons having an approved seating capacity of not more than 13 persons, including the driver, subject to specified exceptions. The restriction does not cover the eighteen-seater bus, so ITC of ₹2,70,000 is admissible. Insurance relating to the five-seater car is also blocked under section 17(5)(ab), since the underlying vehicle is ineligible and no exception applies. Option (b) incorrectly assumes that business use alone makes both credits admissible.
Where it goes wrong. Applying the motor vehicle restriction without considering seating capacity and the consequential restriction on insurance services.
Authority. Section 17(5)(a); Section 17(5)(ab)
Question 5 · 2 marks · Chapter 13 - Payment of Tax · hard
Considering the electronic credit ledger balances and the output tax liabilities for October 2026, what is the minimum amount required to be discharged through the electronic cash ledger, assuming the company utilises ITC in accordance with the prescribed order?
₹1,00,000, because CGST credit cannot be used against IGST liability and IGST credit must first be utilised against CGST and SGST liabilities.
₹90,000, because IGST credit must first be exhausted against IGST, after which CGST credit can be used against the remaining IGST liability and then CGST, while SGST credit is used against SGST. (correct answer)
₹70,000, because the remaining IGST liability can be discharged using SGST credit before utilising CGST credit.
₹1,70,000, because CGST and SGST credits cannot be used against IGST liability under any circumstances.
Answer: B — ₹90,000, because IGST credit must first be exhausted against IGST, after which CGST credit can be used against the remaining IGST liability and then CGST, while SGST credit is used against SGST.
Explanation. Section 49(5), read with sections 49A and 49B and rule 88A, prescribes the order of ITC utilisation. IGST credit of ₹1,50,000 is first used against IGST liability of ₹2,00,000, leaving ₹50,000. CGST credit can then discharge this remaining IGST liability. The remaining CGST credit of ₹50,000 is used against CGST liability, while SGST credit of ₹80,000 is used against SGST liability. Option (a) is tempting because it correctly recognises the restriction on cross-utilisation of CGST and SGST but incorrectly prohibits CGST credit from being used against IGST.
Where it goes wrong. Incorrectly applying the restrictions on cross-utilisation between CGST and SGST to the utilisation of CGST credit against IGST.
Question 6 · 2 marks · Chapter 13 - Payment of Tax · hard
With reference to the restriction under rule 86B, determine whether Aarohan Industrial Solutions Private Limited can discharge its entire October 2026 output tax liability through the electronic credit ledger, assuming the stated cumulative cash payment relates to discharge of its output tax liability.
No, because taxable supplies exceeding ₹50 lakh in a month invariably require at least 1% of the output tax liability to be paid in cash in that month.
No, because rule 86B restricts ITC utilisation to 99% of output tax liability, and the restriction cannot be relaxed on account of cash payments made during earlier months.
Yes, because cumulative cash payment of ₹15,000 exceeds 1% of the cumulative output tax liability of ₹11,52,000, attracting the specified exception to rule 86B. (correct answer)
Yes, because rule 86B applies only where the monthly taxable supply exceeds ₹1 crore and not where it exceeds ₹50 lakh.
Answer: C — Yes, because cumulative cash payment of ₹15,000 exceeds 1% of the cumulative output tax liability of ₹11,52,000, attracting the specified exception to rule 86B.
Working. Monthly taxable supplies exceed ₹50 lakh. Cumulative output tax liability = ₹11,52,000. One per cent = ₹11,520. Cumulative cash payment = ₹15,000. Since ₹15,000 exceeds ₹11,520, the specified exception applies and full ITC utilisation is permitted, subject to other applicable provisions.
Explanation. Rule 86B ordinarily restricts utilisation of electronic credit ledger balances to 99% of output tax liability where the value of taxable supplies, excluding exempt and zero-rated supplies, exceeds ₹50 lakh in a month. However, the amended exception permits full ITC utilisation where cumulative cash payment towards output tax exceeds 1% of the total cumulative output tax liability up to that month in the current financial year. Here, 1% of ₹11,52,000 is ₹11,520, whereas cumulative cash payment is ₹15,000. Therefore, the exception applies. Option (a) incorrectly treats the ordinary restriction as unconditional.
Where it goes wrong. Applying the monthly 99% ITC restriction without examining the amended cumulative cash-payment exception.
Question 7 · 2 marks · Chapter 4 - Place of Supply · medium
Scenario. M/s Eventique Planners, registered in Rajasthan, enters into an agreement with Mr. Raghav, an unregistered individual whose residential address is recorded as Lucknow, Uttar Pradesh. Eventique is engaged to organise a three-day wedding celebration, including venue coordination, stage arrangements, catering coordination and guest management. The entire wedding celebration is scheduled to take place in Dubai, UAE. The agreement is executed and the advance payment is received at Jaipur. Eventique also engages an Indian decorator for certain preparatory activities, but the contract with Mr. Raghav covers the complete event organisation service. Both parties are located in India, and the service is supplied in the ordinary course of Eventique's business.
Determine the place of supply of the event organisation service supplied by Eventique Planners to Mr. Raghav.
Jaipur, Rajasthan, because the agreement was executed and the advance consideration was received there.
Dubai, UAE, because the place where an event is actually held is always the place of supply, irrespective of whether the recipient is registered or unregistered.
Rajasthan, because the location of the supplier determines the place of supply whenever the event takes place outside India.
Lucknow, Uttar Pradesh, because where event organisation services are supplied to an unregistered person for an event held outside India, the place of supply is the location of the recipient. (correct answer)
Answer: D — Lucknow, Uttar Pradesh, because where event organisation services are supplied to an unregistered person for an event held outside India, the place of supply is the location of the recipient.
Working. Recipient: Unregistered. Event location: Dubai, outside India. Applicable rule: Section 12(7). Place of supply = location of recipient = Lucknow, Uttar Pradesh.
Explanation. Section 12(7) of the IGST Act provides specific rules for event organisation services. For a registered recipient, the place of supply is the recipient's location. For an unregistered recipient, it is ordinarily the place where the event is held. However, where the event is held outside India, the place of supply is the location of the recipient. Since Mr. Raghav is unregistered, has his recorded address in Lucknow and the wedding takes place in Dubai, Lucknow is the place of supply. Option (b) overlooks the specific exception for events held outside India.
Where it goes wrong. Applying the ordinary place-of-event rule without considering the specific exception for events organised outside India for unregistered recipients.
Authority. Section 12(7) of the IGST Act
Question 8 · 1 marks · Chapter 5 - Exemptions from GST · medium
Scenario. M/s Pratham Textiles, a registered manufacturer in Gujarat, engaged an independent truck owner, Mr. Kunal, to transport finished textile goods from its Ahmedabad factory to its warehouse in Surat. Mr. Kunal owns and operates the truck himself and charges ₹18,000 for the transportation. He does not issue a consignment note and does not operate as a goods transportation agency or courier agency. The transportation is undertaken entirely by road, and no other service is bundled with it.
Determine the GST treatment of the transportation service supplied by Mr. Kunal.
Taxable, because every transportation service supplied to a registered business is subject to GST.
Exempt only if Mr. Kunal is registered under GST and has opted for the composition scheme.
Taxable under reverse charge, because the recipient is a registered manufacturer and the transportation is undertaken for business purposes.
Exempt, because transportation of goods by road is exempt except where supplied by a goods transportation agency or a courier agency. (correct answer)
Answer: D — Exempt, because transportation of goods by road is exempt except where supplied by a goods transportation agency or a courier agency.
Explanation. The exemption covering transportation of goods by road excludes services supplied by a goods transportation agency and a courier agency. Mr. Kunal is an independent truck owner who transports goods by road without issuing a consignment note and is neither a GTA nor a courier agency. Accordingly, his service falls within the exemption. The amendment effective from 22 September 2025 retains this distinction. Option (c) incorrectly assumes that the recipient's registration and business use automatically attract reverse charge.
Where it goes wrong. Confusing transportation by an independent truck owner with transportation supplied by a goods transportation agency.
This paper carries 15 marks across 8 questions arranged in 3 case scenarios covering Chapter 8 - Input Tax Credit, Chapter 13 - Payment of Tax, Chapter 4 - Place of Supply, Chapter 5 - Exemptions from GST. Seven questions carry 2 marks each and one question carries 1 mark.
What is the time limit and marking scheme?
The time limit is 30 minutes with a maximum score of 15 marks. There is no negative marking for incorrect answers. The entire test is evaluated at the end of the submission.
Which statutory provisions and amendments apply?
The test applies 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, applicable for the January 2027 examination attempt.
Which chapters are tested in this paper?
The questions are drawn from Chapter 8 - Input Tax Credit, Chapter 13 - Payment of Tax, Chapter 4 - Place of Supply, Chapter 5 - Exemptions from GST, focusing on practical application of supply rules, place of supply, value of supply, input tax credit conditions, and compliance provisions.
Is this issued by ICAI?
No. This is a practice test created by HeyArtha to help CA Intermediate students practice timed examination questions. It is not issued by or affiliated with ICAI. Questions are prepared with AI tools and cross-checked by independent solvers; they are not reviewed by a Chartered Accountant.
Do I need to sign up or create an account to take the test?
No sign-up or registration is required. You can start the test immediately, and your answers are evaluated in your browser with no personal data stored on our servers.
Are the scenarios similar to ICAI exam case studies?
Yes, each case scenario provides a realistic business fact pattern with detailed transactions, asking you to determine GST liability, time of supply, eligibility of input tax credit, or registration obligations.
Can I review my answers after submitting?
Yes. Upon submitting the test, you will see a detailed review with the correct answer, comprehensive explanation, statutory citations, and full step-by-step numerical workings for every question.
