CA Inter Taxation - GST MCQ Test 8: answer key

Question 1 · 2 marks · Chapter 6 - Time of Supply · medium

Scenario. Alok Industrial Solutions Private Limited (AIS), registered under GST in Maharashtra, manufactures and supplies industrial equipment and also provides installation and technical consultancy services. It follows the regular scheme of taxation and maintains its books of account on an accrual basis. During the financial year 2026-27, the following transactions took place:\n\n1. On 12 May 2026, AIS received an advance of ₹2,40,000 from Meridian Components Ltd. against an order for industrial machinery. The machinery was dispatched on 8 June 2026 and the corresponding tax invoice for the entire agreed price of ₹12,00,000 was issued on 7 June 2026. The advance was adjusted against the invoice. The machinery was neither covered by any special notification nor supplied under reverse charge.\n\n2. AIS entered into an installation contract with Zenith Engineering Ltd. The installation service was completed on 30 June 2026. AIS had received ₹1,80,000 on 10 June 2026 as an advance specifically against this contract. The balance consideration was payable after completion. AIS issued the tax invoice for the entire contract value on 20 July 2026, and the remaining payment was received on 5 August 2026. The contract was an ordinary taxable service and the invoice was issued within the prescribed period.\n\n3. AIS provided a separate technical consultancy service to Nova Systems Ltd. on 1 August 2026. Although the service was completed on that date, the invoice was issued only on 10 September 2026. The consideration was credited to AIS's books on 18 August 2026, whereas the amount was credited to its bank account on 16 August 2026. The service was not a continuous supply of services.\n\n4. On 15 September 2026, AIS supplied machinery having a list price of ₹8,00,000 to an unrelated customer. The invoice separately disclosed municipal levies of ₹16,000, packing charges of ₹12,000 and testing charges of ₹7,000 for testing completed before delivery. A non-government industrial development foundation provided a subsidy of ₹40,000 directly linked to the price of this machinery. The Central Government separately provided a general capital assistance grant of ₹25,000, not linked to the price. AIS also allowed a discount of ₹20,000 in the invoice itself. All the above amounts relate to this machinery supply, and the stated list price excludes taxes and discounts.\n\n5. AIS supplied another batch of machinery to an independent dealer on 18 October 2026. On 15 November 2026, it granted the dealer a post-sale commercial discount of ₹60,000 through a financial credit note. There was no prior agreement for this discount, and the dealer had not undertaken any independent activity for AIS in return. Separately, AIS had supplied goods on 25 March 2026 and subsequently discovered an excess amount charged in the original invoice. Its relevant annual return for FY 2025-26 was furnished on 5 November 2026. AIS issued a tax credit note for the earlier supply on 12 November 2026. The incidence of tax on that earlier supply had not been passed on to any other person.\n\nAssume all supplies mentioned above are taxable and all other relevant statutory conditions are satisfied.

Determine the time of supply of the machinery supplied to Meridian Components Ltd. and the amount of advance that is relevant for determining such time of supply.

1. The time of supply is 12 May 2026, because receipt of advance consideration is the earliest event under section 12(2) of the CGST Act, irrespective of the nature or removal of goods being supplied.
2. The time of supply is 7 June 2026, because the invoice was issued before removal and the advance received for an ordinary forward-charge supply of goods does not accelerate payment of GST. (correct answer)
3. The time of supply is 8 June 2026, because the date of removal always determines the time of supply even when the invoice is issued earlier.
4. The time of supply is 7 June 2026, because the date of invoice and date of receipt of advance are treated as simultaneous events for all supplies.

Answer: B — The time of supply is 7 June 2026, because the invoice was issued before removal and the advance received for an ordinary forward-charge supply of goods does not accelerate payment of GST.

Working. Invoice date: 7 June 2026. Advance receipt: 12 May 2026, disregarded for GST payment on ordinary forward-charge goods under Notification No. 66/2017 CT. Removal: 8 June 2026. Time of supply: 7 June 2026.

Explanation. Under section 12(2), the relevant date for ordinary forward-charge goods is the earlier of the invoice date or the last date on which the invoice ought to have been issued, and the date of receipt of payment. However, Notification No. 66/2017 CT provides that registered persons covered by the notification need not pay GST on advances received against outward supplies of goods. Consequently, the advance on 12 May does not determine the payment liability. The invoice was issued on 7 June before removal on 8 June, making 7 June the relevant date. Option (a) incorrectly applies the general statutory rule without considering the special procedure.

Where it goes wrong. Applying the general advance-payment rule for goods without considering the special procedure under Notification No. 66/2017 CT.

Authority. CGST Act, section 12(2); CGST Act, section 31(1); Notification No. 66/2017 CT dated 15.11.2017

Question 2 · 2 marks · Chapter 6 - Time of Supply · hard

Determine the time of supply of the installation service provided to Zenith Engineering Ltd. for the advance portion and the balance portion of the contract consideration, respectively.

1. 10 June 2026 for the entire contract, because receipt of any advance determines the time of supply of the complete service.
2. 20 July 2026 for the entire contract, because an invoice issued within 30 days of completion of the taxable service overrides every earlier receipt of payment under section 13(2) of the CGST Act, 2017.
3. 10 June 2026 for the advance portion and 20 July 2026 for the balance portion, because the timely invoice and advance receipt operate to the extent they cover the respective portions of the service. (correct answer)
4. 30 June 2026 for the advance portion and 5 August 2026 for the balance portion, because completion and subsequent payment determine the time of supply.

Answer: C — 10 June 2026 for the advance portion and 20 July 2026 for the balance portion, because the timely invoice and advance receipt operate to the extent they cover the respective portions of the service.

Working. Advance portion: earlier of 10 June 2026 and 20 July 2026 = 10 June 2026. Balance portion: earlier of invoice date 20 July 2026 and payment date 5 August 2026 = 20 July 2026.

Explanation. Section 13(2)(a) applies because the invoice was issued within the prescribed 30-day period under section 31(2) read with rule 47. The earlier of the invoice date and payment receipt determines the time of supply, but only to the extent the payment or invoice covers the service. The advance received on 10 June fixes the time of supply for the advance portion. For the remaining consideration, the invoice dated 20 July precedes payment on 5 August. Option (a) incorrectly extends the advance-related time of supply to the entire contract.

Where it goes wrong. Ignoring the words 'to the extent the invoice or payment covers the supply' and treating an advance as determining the time of supply for the entire contract.

Authority. CGST Act, section 13(2)(a); CGST Act, section 31(2); CGST Rules, rule 47

Question 3 · 2 marks · Chapter 6 - Time of Supply · hard

What is the time of supply of the technical consultancy service provided to Nova Systems Ltd.?

1. 16 August 2026, because the amount was credited to the supplier's bank account before it was recorded in the books of account.
2. 18 August 2026, because the supplier's books of account always determine the date of receipt of payment.
3. 10 September 2026, because the invoice date is relevant even if the invoice is issued beyond the prescribed time limit.
4. 1 August 2026, because the invoice was not issued within the prescribed period and the date of provision of service precedes the date of receipt of payment. (correct answer)

Answer: D — 1 August 2026, because the invoice was not issued within the prescribed period and the date of provision of service precedes the date of receipt of payment.

Working. Invoice deadline: 31 August 2026. Actual invoice: 10 September 2026, hence late. Payment receipt date: earlier of 18 August and 16 August = 16 August. Earlier of service provision (1 August) and payment receipt (16 August) = 1 August 2026.

Explanation. The invoice dated 10 September was issued beyond 30 days from the date of provision of service, namely 1 August. Therefore, section 13(2)(b) applies. The time of supply is the earlier of the date of provision of service and the date of receipt of payment. For this purpose, payment is received on the earlier of the date of recording in the supplier's books and the date of credit to the bank account, i.e. 16 August. Since 1 August precedes 16 August, option (d) is correct. Option (a) identifies the payment date correctly but applies the wrong comparison.

Where it goes wrong. Confusing the date of receipt of payment with the ultimate time of supply when the invoice is issued late.

Authority. CGST Act, section 13(2)(b); CGST Act, section 31(2); CGST Rules, rule 47

Question 4 · 2 marks · Chapter 7 - Value of Supply · medium

Compute the value of taxable supply of machinery made by AIS on 15 September 2026 under section 15 of the CGST Act.

1. ₹8,60,000, because municipal levies, packing charges, testing charges and the non-government subsidy are included, while the Central Government grant and invoice discount are excluded. (correct answer)
2. ₹8,85,000, because all subsidies and incidental charges are includible, while only the invoice discount is deductible.
3. ₹8,45,000, because municipal levies and packing charges are included, but testing charges and subsidies are excluded.
4. ₹8,40,000, because the value includes the municipal levy, packing charges and non-government subsidy but excludes both testing charges and the invoice discount.

Answer: A — ₹8,60,000, because municipal levies, packing charges, testing charges and the non-government subsidy are included, while the Central Government grant and invoice discount are excluded.

Working. List price ₹8,00,000 + municipal levy ₹16,000 + packing ₹12,000 + testing ₹7,000 + non-government price-linked subsidy ₹40,000 - invoice discount ₹20,000 = ₹8,55,000. Central Government grant ₹25,000 is excluded.

Explanation. Under section 15(2), separately charged municipal levies, packing charges and pre-delivery testing charges are includible. A subsidy directly linked to price is also included unless provided by the Central or State Government. Therefore, the ₹40,000 foundation subsidy is included, whereas the ₹25,000 Central Government grant is excluded. The ₹20,000 discount is deductible because it is allowed before or at the time of supply and recorded in the invoice. Option (d) wrongly excludes testing charges, although they relate to an activity performed before delivery.

Where it goes wrong. Confusing government and non-government subsidies and overlooking charges for activities performed before delivery.

Authority. CGST Act, section 15(1); CGST Act, section 15(2)(a); CGST Act, section 15(2)(c); CGST Act, section 15(2)(e); CGST Act, section 15(3)(a)

Question 5 · 2 marks · Chapter 7 - Value of Supply · hard

What is the GST treatment of the ₹60,000 post-sale commercial discount granted by AIS to the independent dealer through a financial credit note, considering the absence of a prior agreement and any independent activity by the dealer?

1. AIS may reduce its original taxable value and output tax because every commercial credit note issued after supply qualifies as a discount under section 15(3)(b).
2. AIS cannot reduce its original taxable value, but the discount constitutes additional consideration for the dealer's subsequent supply because the manufacturer has financially supported the dealer.
3. AIS cannot reduce its original taxable value on account of the discount, and the amount is not consideration for an independent supply by the dealer merely because it receives the discount. (correct answer)
4. AIS cannot issue a financial credit note after the supply, because section 34 permits credit notes only where the discount was agreed before the original invoice.

Answer: C — AIS cannot reduce its original taxable value on account of the discount, and the amount is not consideration for an independent supply by the dealer merely because it receives the discount.

Working. Prior agreement: absent. Independent dealer activity: absent. Section 15(3)(b) conditions: not satisfied. Financial credit note: permissible for commercial settlement, but no reduction in original taxable value or output tax. No separate consideration arises merely from the discount in the stated principal-to-principal arrangement.

Explanation. Section 15(3)(b) permits deduction of a post-supply discount only where its statutory conditions are satisfied, including a prior agreement and the required recipient-side linkage. Those conditions are absent. The financial credit note therefore does not reduce the original transaction value or the supplier's output tax. Further, Circular No. 251/08/2025 GST clarifies that an ordinary competitive post-sale discount in a principal-to-principal dealer relationship, without an independent activity by the dealer, is not consideration for another supply. Option (b) wrongly treats the discount as consideration merely because it benefits the dealer.

Where it goes wrong. Treating every post-sale discount as consideration for a separate dealer service, or assuming that issuing a financial credit note automatically reduces taxable value.

Authority. CGST Act, section 15(3)(b); CGST Act, section 2(31); Circular No. 92/11/2019-GST dated 07.03.2019; Circular No. 251/08/2025 GST dated 12.09.2025

Question 6 · 2 marks · Chapter 10 - Tax Invoice, Credit and Debit Notes · hard

Considering the earlier supply made on 25 March 2026, determine whether AIS can reduce its output tax liability through the credit note issued on 12 November 2026.

1. Yes, because the credit note was issued within 30 November 2026 and the incidence of tax was not passed on to another person.
2. No, because the relevant annual return was furnished on 5 November 2026, which is earlier than 30 November 2026, and the credit note was issued after that date. (correct answer)
3. Rs. 24,000, because the entire turnover of Rs. 4,00,000 is liable to tax at 6% without any threshold deduction when opting for the section 10(2A) composition scheme.
4. No, because a credit note relating to a supply made in the preceding financial year cannot be issued after 31 March 2026.

Answer: B — No, because the relevant annual return was furnished on 5 November 2026, which is earlier than 30 November 2026, and the credit note was issued after that date.

Working. Supply financial year: FY 2025-26. Normal outer date: 30 November 2026. Annual return filing date: 5 November 2026. Applicable earlier date: 5 November 2026. Credit note issuance: 12 November 2026. Result: reduction in output tax liability is not permissible under section 34(2).

Explanation. Section 34(2) requires the details of a credit note to be declared no later than 30 November following the end of the financial year in which the supply was made, or the date of furnishing the relevant annual return, whichever is earlier. For the March 2026 supply, the relevant financial year ended on 31 March 2026. The annual return was furnished on 5 November 2026, earlier than 30 November 2026. Since the credit note was issued on 12 November, the statutory cut-off had already passed. The fact that tax incidence was not passed on does not extend this time limit.

Where it goes wrong. Selecting 30 November automatically without applying the alternative annual-return filing date and the earlier-of test.

Authority. CGST Act, section 34(1); CGST Act, section 34(2)

Question 7 · 2 marks · Chapter 12 - E-Way Bill · hard

Scenario. Prisha Manufacturing Ltd., a registered supplier in Karnataka, dispatched a consignment to a registered buyer in the same State. A single invoice contained taxable machinery valued at ₹47,500 before GST and exempt accessories valued at ₹7,000. GST on the machinery was separately charged at the applicable rate of 18%. The goods were initially transported 42 km by road from the supplier's registered place of business to the transporter’s place of business for onward transportation. The transporter would subsequently carry the goods another 310 km to the buyer. The supplier had not generated an e-way bill before the first movement. No exemption other than the distance-related relaxation concerning Part B is applicable.

Which of the following correctly describes the e-way bill requirement and the information to be furnished in Part B for the initial movement of the consignment?

1. An e-way bill is required because the consignment value exceeds ₹50,000 after including GST on taxable goods and excluding the exempt accessories; however, Part B details need not be furnished for the initial 42 km movement within Karnataka to the transporter. (correct answer)
2. An e-way bill is not required because the taxable goods are valued below ₹50,000 before GST, and the exempt accessories are not relevant for determining the consignment value.
3. An e-way bill is required and complete Part B vehicle details must be furnished before the initial movement because the 50 km relaxation applies only to movements between two transporters.
4. An e-way bill is not required for the initial movement because the distance is below 50 km, but one must be generated when the goods commence the subsequent 310 km journey.

Answer: A — An e-way bill is required because the consignment value exceeds ₹50,000 after including GST on taxable goods and excluding the exempt accessories; however, Part B details need not be furnished for the initial 42 km movement within Karnataka to the transporter.

Working. Taxable goods value ₹47,500 + GST ₹8,550 = ₹56,050. Exempt accessories ₹7,000 excluded. Consignment value ₹56,050 > ₹50,000. E-way bill required before commencement of movement. Initial movement: 42 km within Karnataka from consignor to transporter. Part B relaxation applies for this leg. Vehicle details must be furnished for further movement.

Explanation. Under rule 138(1), an e-way bill is required where the consignment value exceeds ₹50,000. Rule 138 explains that consignment value includes applicable GST and cess but excludes the value of exempt supplies where the invoice contains both taxable and exempt goods. The relevant value is therefore ₹56,050 (₹47,500 + ₹8,550), exceeding the threshold. However, the third proviso to rule 138(3) relaxes the requirement of furnishing Part B details for movement up to 50 km within the State from the consignor's place of business to the transporter's place of business for further transportation. The relaxation does not remove the e-way bill requirement itself.

Where it goes wrong. Confusing the exemption from furnishing Part B details for a limited movement with exemption from generating the e-way bill itself.

Authority. CGST Act, section 68; CGST Rules, rule 138(1); CGST Rules, rule 138(3), third proviso; CGST Rules, rule 138, Explanation 2

Question 8 · 1 marks · Chapter 14 - Tax Deduction at Source and Collection of Tax at Source · medium

Scenario. A Government department registered in Karnataka entered into a contract with a registered supplier located in Maharashtra for taxable goods. The place of supply is Karnataka, which is also the State of registration of the recipient. The contract specifies a taxable value of ₹3,20,000, exclusive of GST and cess, payable in two equal instalments against separate invoices. The first invoice is for ₹1,60,000, exclusive of GST. The department proposes to deduct GST TDS while releasing the first instalment.

Determine the amount of GST TDS deductible by the Government department from the first instalment of ₹1,60,000, assuming the applicable statutory conditions are satisfied.

1. Nil, because transportation of passengers by a stage carriage in an air-conditioned bus is unconditionally exempt from GST under Notification No. 12/2017-Central Tax (Rate).
2. Nil, because the supplier and recipient are located in different States, irrespective of the place of supply.
3. ₹6,400, because TDS at 2% must be calculated on the entire contract value when the first instalment is released.
4. ₹3,200, because the contract value exceeds ₹2,50,000 and the supply attracts IGST TDS at 2% on the first instalment. (correct answer)

Answer: D — ₹3,200, because the contract value exceeds ₹2,50,000 and the supply attracts IGST TDS at 2% on the first instalment.

Working. Contract value excluding GST and cess = ₹3,20,000 > ₹2,50,000. Supplier location = Maharashtra. Place of supply = Karnataka. Recipient registration = Karnataka. IGST TDS rate = 2%. First instalment = ₹1,60,000. TDS = ₹1,60,000 × 2% = ₹3,200.

Explanation. Section 51 applies because the total taxable value under the contract exceeds ₹2,50,000, even though the individual instalment is only ₹1,60,000. The location of the supplier is Maharashtra and the place of supply is Karnataka, which is also the State of registration of the recipient. Therefore, the exception denying deduction where both supplier location and place of supply differ from the recipient's State of registration does not apply. Under section 20 of the IGST Act, TDS is deducted at 2%. Accordingly, ₹1,60,000 × 2% = ₹3,200.

Where it goes wrong. Testing the threshold against an individual invoice instead of the aggregate taxable value under the contract, and overlooking the cross-State exception's two-part condition.

Authority. CGST Act, section 51(1); CGST Act, section 51(1), first proviso; IGST Act, section 20