CA Inter Taxation - GST MCQ Test 9: answer key

Question 1 · 2 marks · Chapter 3 - Charge of GST · medium

Scenario. Abhinav Industrial Systems Private Limited, registered under GST in Maharashtra, manufactures specialised packaging machinery at its Pune factory. During FY 2025-26, the company undertook the following transactions in the course of its business.\n\nOn 15 July 2025, the company engaged an individual advocate practising in Mumbai to represent it in a commercial dispute before a tribunal. The advocate charged professional fees of ₹3,00,000. The company was the litigant and the legal services were received for its business operations. During the same month, the company also engaged a registered Goods Transport Agency (GTA) to transport raw materials from Gujarat to its Pune factory. The GTA issued consignment notes for the consignments but had not exercised the option to pay GST under forward charge.\n\nOn 10 September 2025, the company purchased a specialised cutting machine from a supplier registered in Delhi for ₹24,00,000. The company instructed the supplier to deliver the machine directly to its independent customer in Bengaluru, Karnataka, as the machine was being sold onward to that customer. The supplier issued the invoice to Abhinav Industrial Systems, and the instruction to deliver the goods was communicated before commencement of their movement. The company's principal place of business is Pune.\n\nOn 15 November 2025, the company appointed a Delhi-based event management firm to organise its annual industrial exhibition. The exhibition was conducted at venues situated in Gujarat and Rajasthan. Abhinav Industrial Systems was the recipient of the event management services and was registered in Maharashtra. The contract separately mentioned the venues and the dates of the exhibition.\n\nOn 1 October 2025, the company purchased taxable raw materials from a domestic supplier for ₹10,00,000 plus GST of ₹1,80,000. The goods were received, the invoice was reflected in FORM GSTR-2B, and the supplier furnished the relevant outward supply details. The company availed the entire eligible ITC. Within 180 days of the invoice, it paid only 40% of the invoice amount, including the corresponding tax. The balance remained unpaid even after 180 days.\n\nFinally, on 1 February 2026, the company purchased a five-seater passenger car, including the driver's seat, for ₹12,00,000 plus GST. The car was capitalised in its books and was intended exclusively for business-related travel by its sales executives to visit customers. The company neither operates a passenger transportation business nor uses the vehicle for imparting driving training.

Determine the person liable to pay GST on the legal services supplied by the individual advocate to Abhinav Industrial Systems Private Limited.

1. Abhinav Industrial Systems is liable to pay GST under reverse charge because legal services supplied by an individual advocate to a business entity located in the taxable territory are covered under the notified reverse charge category. (correct answer)
2. Gujarat, because the structural steel goods were handed over to the common carrier in Gujarat for transportation and final delivery to the recipient's designated construction site in Maharashtra under section 10(1)(a) of the IGST Act, 2017.
3. Maharashtra, because the place of supply of goods where movement terminates for delivery to the recipient is the location of the goods at that time under section 10(1)(a) of the IGST Act, 2017.
4. The individual advocate and Abhinav Industrial Systems are jointly liable to pay GST because the legal representation takes place before a tribunal.

Answer: A — Abhinav Industrial Systems is liable to pay GST under reverse charge because legal services supplied by an individual advocate to a business entity located in the taxable territory are covered under the notified reverse charge category.

Working. Supplier: Individual advocate. Recipient: Business entity located in taxable territory. Notified legal service: Yes. Person liable: Recipient under RCM.

Explanation. Under section 9(3), read with the applicable reverse charge notification, legal services supplied by an individual advocate, including a senior advocate, or a firm of advocates to a business entity located in the taxable territory attract reverse charge. The business entity receiving the services is liable to pay GST. Option (b) is tempting because the advocate may be registered, but registration of the supplier does not override the notified reverse charge mechanism.

Where it goes wrong. Confusing the registration status of an individual advocate with the person liable to discharge tax under reverse charge.

Authority. CGST Act, 2017 - Section 9(3); Notification No. 13/2017 CT (R) dated 28.06.2017, as amended; Study Material Chapter 3, section on Reverse Charge Mechanism

Question 2 · 2 marks · Chapter 3 - Charge of GST · medium

Examine the GST liability on the GTA services received by Abhinav Industrial Systems for transportation of raw materials.

1. Rs. 25,00,000, because freight and transit insurance paid directly by the recipient cannot be added to the transaction value under the provisions of section 15(2).
2. Abhinav Industrial Systems is liable under reverse charge because it is a registered person receiving GTA services and the GTA has not exercised the option to pay GST under forward charge. (correct answer)
3. Rs. 25,60,000, because testing charges of Rs. 40,000 incurred prior to delivery are includible in transaction value under section 15(2)(c), while freight paid directly by the buyer is excluded.
4. Abhinav Industrial Systems is liable under reverse charge only when the GTA does not issue a consignment note and the goods are transported in a goods carriage.

Answer: B — Abhinav Industrial Systems is liable under reverse charge because it is a registered person receiving GTA services and the GTA has not exercised the option to pay GST under forward charge.

Working. GTA issued consignment notes. Recipient is registered under GST. GTA has not exercised the forward charge option. Therefore, recipient pays GST under RCM.

Explanation. A GTA is distinguished by providing services in relation to transportation of goods by road and issuing a consignment note. Services supplied by a GTA to specified recipients, including a registered person under the CGST Act, are covered under reverse charge when the GTA has not exercised the prescribed forward charge option. Option (c) incorrectly extends the general road transportation exemption to GTA services, which are specifically excluded from that exemption.

Where it goes wrong. Treating all transportation of goods by road as exempt and overlooking the specific GTA exception and forward charge option.

Authority. CGST Act, 2017 - Section 9(3); Notification No. 13/2017 CT (R) dated 28.06.2017, as amended; Notification No. 12/2017 CT (R) dated 28.06.2017, as amended; Study Material Chapter 3 - GTA services and reverse charge

Question 3 · 2 marks · Chapter 4 - Place of Supply · hard

Determine the place of supply and nature of supply in respect of the machine supplied by the Delhi supplier to Abhinav Industrial Systems under the stated delivery arrangement.

1. The place of supply is Bengaluru because the machine physically terminates its movement there, and the supply is inter-State since the supplier is located in Delhi.
2. The place of supply is Maharashtra because Abhinav Industrial Systems is deemed to have received the goods at its principal place of business, making the supply inter-State since the supplier is located in Delhi. (correct answer)
3. Rs. 90,000, because input tax credit on goods used for construction of an immovable property is blocked only when the resulting property is intended for commercial sale.
4. Rs. 1,60,000, because input tax credit on goods used in the construction of immovable property on own account is blocked under section 17(5)(d), but factory plant and machinery additions remain fully eligible for credit.

Answer: B — The place of supply is Maharashtra because Abhinav Industrial Systems is deemed to have received the goods at its principal place of business, making the supply inter-State since the supplier is located in Delhi.

Working. Supplier location: Delhi. Third person: Abhinav Industrial Systems, Maharashtra. Delivery instruction: Before movement. Deemed recipient: Abhinav. POS: Maharashtra. Nature: Inter-State supply attracting IGST.

Explanation. Section 10(1)(b) of the IGST Act applies to a bill-to-ship-to arrangement where goods are delivered to a recipient or another person on the instruction of a third person before or during movement. The third person is deemed to have received the goods, and the place of supply is its principal place of business. Therefore, Maharashtra is the place of supply. Since the supplier is located in Delhi, the supply is inter-State. Option (a) incorrectly applies the ordinary movement rule instead of the specific deemed receipt provision.

Where it goes wrong. Applying section 10(1)(a) based on the physical destination instead of the specific third-person instruction provision under section 10(1)(b).

Authority. IGST Act, 2017 - Section 10(1)(b); CGST Act, 2017 - Section 2(86); Study Material Chapter 4, section on Bill-to-Ship-to Supply

Question 4 · 2 marks · Chapter 4 - Place of Supply · hard

What is the place of supply of the event management services provided by the Delhi-based firm to Abhinav Industrial Systems?

1. Rs. 2,00,000, because the statutory due date for payment of GST on the tax invoice under section 39 was 20 November 2025, and tax was discharged through cash ledger after a significant delay.
2. Rajasthan, because the place where the final part of the exhibition was conducted determines the place of supply.
3. Maharashtra, because where services relating to organisation of an event are supplied to a registered person, the place of supply is the location of such registered recipient. (correct answer)
4. Delhi, because the service provider is located there and the event was organised in more than one State.

Answer: C — Maharashtra, because where services relating to organisation of an event are supplied to a registered person, the place of supply is the location of such registered recipient.

Working. Service: Organisation of exhibition. Recipient: Registered person. Recipient location: Maharashtra. POS under section 12(7): Maharashtra.

Explanation. Section 12(7) of the IGST Act specifically deals with services by way of organisation of an event, including exhibition-related services. Where the recipient is registered, the place of supply is the location of such recipient. Abhinav Industrial Systems is registered in Maharashtra. Consequently, Maharashtra is the place of supply despite the exhibition being conducted in Gujarat and Rajasthan. Option (a) is tempting because it relies on the actual event venue, but the registered-recipient rule overrides that approach.

Where it goes wrong. Applying the event location rule applicable to an unregistered recipient instead of the location-of-registered-recipient rule.

Authority. IGST Act, 2017 - Section 12(7); Study Material Chapter 4 - Place of Supply of Services

Question 5 · 2 marks · Chapter 8 - Input Tax Credit · hard

What amount of ITC is required to be reversed by Abhinav Industrial Systems on account of non-payment to its raw material supplier within 180 days from the invoice date?

1. ₹1,08,000, because ITC attributable to the unpaid 60% of the supply must be reversed proportionately, along with applicable interest. (correct answer)
2. Rs. 1,80,000, because input tax credit on corporate group health insurance is fully eligible when provided pursuant to standard company HR policy for all regular employees.
3. ₹72,000, because ITC attributable to the 40% paid portion must be reversed proportionately, along with applicable interest.
4. Nil, because the invoice has been reflected in FORM GSTR-2B and the supplier has furnished the outward supply details.

Answer: A — ₹1,08,000, because ITC attributable to the unpaid 60% of the supply must be reversed proportionately, along with applicable interest.

Working. Total ITC = ₹1,80,000. Amount unpaid = 60%. ITC reversal = ₹1,80,000 × 60% = ₹1,08,000, plus applicable interest. Credit can 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 recipient fails to pay the value of supply along with tax within 180 days. Since 40% has been paid, 60% remains unpaid. The reversal is ₹1,80,000 × 60% = ₹1,08,000, along with applicable interest. Option (b) is incorrect because the reversal is proportionate, not necessarily the entire credit.

Where it goes wrong. Confusing the requirement of payment within 180 days with complete reversal of ITC, rather than proportionate reversal for the unpaid portion.

Authority. CGST Act, 2017 - Section 16(2), second proviso; CGST Rules, 2017 - Rule 37(1) and Rule 37(2); CGST Act, 2017 - Section 50

Question 6 · 2 marks · Chapter 8 - Input Tax Credit · hard

Determine the eligibility of ITC on the passenger car purchased by Abhinav Industrial Systems for business-related travel by its sales executives.

1. ITC of the entire GST charged is available because the vehicle is capitalised in the books and is used exclusively for business purposes.
2. ITC is available to the extent of business use because section 17(5) restricts credit only for personal use of passenger motor vehicles.
3. ITC is blocked because the motor vehicle is designed for transportation of persons and does not fall within any of the specified exceptions to the restriction. (correct answer)
4. Rs. 8,000, because interest for delayed payment of tax under section 50(1) is calculated at the rate of 18% per annum on the net tax liability paid through electronic cash ledger from the due date.

Answer: C — ITC is blocked because the motor vehicle is designed for transportation of persons and does not fall within any of the specified exceptions to the restriction.

Working. Passenger vehicle seating capacity: 5 including driver. Business travel: Yes. Further supply, passenger transportation or driving training: No. ITC: Blocked under section 17(5)(a).

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. These include further supply of such vehicles, transportation of passengers and imparting training on driving such vehicles. Merely using a passenger car for business travel does not satisfy these exceptions. Option (a) incorrectly assumes that capitalisation and exclusive business use automatically make the credit eligible.

Where it goes wrong. Confusing the general business-use eligibility under section 16(1) with the specific statutory restriction under section 17(5).

Authority. CGST Act, 2017 - Section 17(5)(a); CGST Act, 2017 - Section 16(1); Study Material Chapter 8 - Blocked Credits

Question 7 · 2 marks · Chapter 11 - Accounts and Records · hard

Scenario. Pravah Infrastructure, a registered person under GST, executes a works contract involving construction and installation of an immovable industrial facility for a corporate client. During FY 2025-26, it received steel, cement and electrical equipment from several suppliers and utilised these materials along with subcontracted services for the project. The contractor maintains general purchase and sales ledgers and has separately recorded payments received from its client. However, its accounts department proposes to dispense with project-wise details of the materials received and consumed, arguing that the general ledgers already contain the aggregate figures. The management seeks advice on the additional records prescribed under GST law for persons executing works contracts.

Which of the following correctly identifies the additional records that Pravah Infrastructure is required to maintain under GST in respect of its works contracts?

1. Rs. 50,000, because late fee under section 47 of the CGST Act is payable at Rs. 100 per day during which the failure continues, subject to a statutory maximum ceiling of 0.25% of aggregate turnover in the State.
2. It must maintain separate accounts of materials received and utilised but need not record client particulars, payments received or supplier details.
3. It must maintain only the names of clients and the total contract value, because details of goods and services utilised are required exclusively from manufacturers.
4. It must maintain separate works contract accounts containing the names and addresses of clients, descriptions, values and quantities of goods and services received and utilised, payments received for each contract, and names and addresses of suppliers. (correct answer)

Answer: D — It must maintain separate works contract accounts containing the names and addresses of clients, descriptions, values and quantities of goods and services received and utilised, payments received for each contract, and names and addresses of suppliers.

Working. Separate contract-wise accounts are compulsory. Record client details, goods/services received and utilised, payments received for each contract and supplier particulars.

Explanation. Rule 56(14) requires every registered person executing works contracts to maintain separate accounts for such contracts. These include client names and addresses, descriptions, values and quantities of goods or services received and utilised, payments received for each contract, and supplier names and addresses. Option (a) is incorrect because general aggregate ledgers do not replace the specific project-wise records prescribed for works contractors.

Where it goes wrong. Assuming that maintaining general accounting ledgers removes the requirement of separate works contract records.

Authority. CGST Rules, 2017 - Rule 56(14); CGST Act, 2017 - Section 35(1); Study Material Chapter 11, pages 11.10-11.11

Question 8 · 1 marks · Chapter 9 - Registration · medium

Scenario. Nirmit Sales Associates operates in Jaipur, Rajasthan, as an agent of a registered taxable manufacturer. It regularly supplies taxable goods to customers on behalf of the manufacturer, issuing the relevant supply documents in accordance with the agency arrangement. Its aggregate turnover during FY 2025-26 is ₹8,50,000, and it has no other independent taxable business activity. The applicable general registration threshold in the State is considerably higher than its turnover. The agent contends that registration is unnecessary because its turnover has not crossed the threshold.

Examine whether Nirmit Sales Associates is required to obtain GST registration under the given circumstances.

1. No, because its aggregate turnover is below the applicable threshold limit under section 22.
2. No, because an agent is not required to register unless it makes supplies in its own name and receives consideration directly from customers.
3. Yes, but only when its aggregate turnover exceeds the applicable threshold limit or it makes an inter-State taxable supply.
4. Yes, because a person making taxable supplies of goods or services or both on behalf of other taxable persons is required to obtain compulsory registration irrespective of the aggregate turnover threshold. (correct answer)

Answer: D — Yes, because a person making taxable supplies of goods or services or both on behalf of other taxable persons is required to obtain compulsory registration irrespective of the aggregate turnover threshold.

Working. Taxable supplies made on behalf of another taxable person: Yes. Capacity: Agent. Section 24 applies irrespective of turnover. Registration is compulsory.

Explanation. Section 24 provides for compulsory registration in specified cases notwithstanding the threshold provisions of section 22. A person making taxable supplies of goods or services or both on behalf of other taxable persons, whether as an agent or otherwise, falls within compulsory registration. Therefore, Nirmit Sales Associates must obtain registration despite its aggregate turnover being only ₹8,50,000. Option (a) incorrectly applies the ordinary threshold test without considering compulsory registration.

Where it goes wrong. Applying the general turnover threshold under section 22 without considering compulsory registration under section 24.

Authority. CGST Act, 2017 - Section 24; CGST Act, 2017 - Section 22; Study Material Chapter 9 - Compulsory Registration