CA Inter Taxation MCQ Test 14 (Income-tax + GST): answer key

Question 1 · 2 marks · Deductions from Gross Total Income · medium

Scenario. Mr. Rohan Malhotra, aged 47, is a resident individual. For A.Y. 2026-27 he has salary and interest income aggregating Rs. 18,60,000 before any Chapter VI-A deduction. He has exercised the option of shifting out of the default tax regime under section 115BAC(1A). During P.Y. 2025-26 he paid Rs. 90,000 to PPF; Rs. 72,000 as premium on his own life policy issued on 1.4.2023 with sum assured Rs. 6,00,000; Rs. 35,000 as premium on his spouse's policy issued on 15.3.2012 with sum assured Rs. 2,00,000; and Rs. 1,40,000 as principal repayment of a housing loan. He paid tuition fees of Rs. 25,000 each for two children studying full time in a school in India. He paid Rs. 27,000 by cheque for health insurance of self, spouse and dependent children, and Rs. 48,000 by cheque for health insurance of his mother, aged 66, who is not dependent. His father, aged 69, had no health insurance; he spent Rs. 15,000 on his father's medical treatment and Rs. 6,000 in cash on preventive health check-up of self. He contributed Rs. 1,80,000 to NPS Tier-I. His employer, a private company, contributed Rs. 1,30,000 to the same NPS account. Salary for section 80CCD, being basic pay plus dearness allowance forming part of pay, is Rs. 12,00,000. He also gave Rs. 30,000 in cash to a charitable trust approved under section 80G.

What is the maximum deduction Mr. Rohan can claim under section 80C for A.Y. 2026-27?

1. Rs. 1,50,000, because the eligible payments exceed the statutory ceiling. (correct answer)
2. Rs. 2,10,000, because the entire life insurance premium and tuition fees qualify.
3. Rs. 1,50,000, because the eligible payments are first reduced by the NPS contribution.
4. Rs. 1,22,000, because only PPF and housing loan principal qualify.

Answer: A — Rs. 1,50,000, because the eligible payments exceed the statutory ceiling.

Working. PPF 90,000 + own premium restricted to 10 per cent of 6,00,000 = 60,000 + spouse premium 35,000 + principal 1,40,000 + tuition 50,000 = 3,75,000; ceiling 1,50,000.

Explanation. Section 80C allows a ceiling of Rs. 1,50,000. PPF, eligible life insurance premium, housing loan principal and tuition fees for two children are eligible. The own policy premium is restricted to ten per cent of sum assured, giving Rs. 60,000, and the spouse policy premium is within the twenty per cent limit. The aggregate exceeds the ceiling, so Rs. 1,50,000 is allowable. The NPS contribution does not reduce the section 80C ceiling.

Where it goes wrong. The option with Rs. 1,50,000 for the wrong NPS reason tempts those who mix section 80C and section 80CCD.

Authority. Section 80C; Section 80CCE

Question 2 · 2 marks · Deductions from Gross Total Income · hard

What is the deduction allowable to Mr. Rohan under section 80D for A.Y. 2026-27?

1. Rs. 3,80,000, because qualifying unrealised rent is deducted from the gross annual value before municipal taxes are subtracted under section 23(1) of the Act.
2. Rs. 90,000, because actual health payments are allowed without the senior-citizen cap.
3. Rs. 75,000, because the self-family limit is Rs. 25,000 and the parents' senior-citizen limit is Rs. 50,000. (correct answer)
4. Rs. 63,000, because only the mother's premium and father's treatment are considered.

Answer: C — Rs. 75,000, because the self-family limit is Rs. 25,000 and the parents' senior-citizen limit is Rs. 50,000.

Working. Self-family: premium 27,000 restricted to 25,000; preventive 6,000 within same limit, no extra. Parents: 48,000 + 15,000 = 63,000 restricted to 50,000. Total 25,000 + 50,000 = 75,000.

Explanation. For self, spouse and children the limit is Rs. 25,000; the premium itself is Rs. 27,000, so preventive check-up cannot enlarge it. For parents, both are senior citizens; mother's premium Rs. 48,000 and father's uninsured medical expenditure Rs. 15,000 are together capped at Rs. 50,000. Total is Rs. 75,000. The tempting Rs. 69,000 wrongly adds the preventive check-up to the self-family limit.

Where it goes wrong. Preventive check-up is within the overall limit, not an extra deduction.

Authority. Section 80D

Question 3 · 2 marks · Deductions from Gross Total Income · medium

What is the deduction allowable under section 80CCD(2) for the employer's contribution to Mr. Rohan's NPS account?

1. Rs. 1,30,000, because the entire employer contribution is included in salary.
2. Rs. 1,20,000, because the employer contribution is restricted to ten per cent of salary. (correct answer)
3. Rs. 1,68,000, because the employer contribution is restricted to fourteen per cent of salary.
4. Rs. 50,000, because only the additional NPS deduction is available.

Answer: B — Rs. 1,20,000, because the employer contribution is restricted to ten per cent of salary.

Working. Salary 12,00,000 x 10 per cent = 1,20,000; actual employer contribution 1,30,000; deduction 1,20,000.

Explanation. Under the optional regime, employer contribution to NPS by a private employer is allowed under section 80CCD(2) up to ten per cent of salary. Salary is Rs. 12,00,000, so the cap is Rs. 1,20,000. The actual contribution of Rs. 1,30,000 is included in salary, but the deduction is limited to Rs. 1,20,000. Fourteen per cent applies to a Central or State Government employer, not here.

Where it goes wrong. The actual contribution and the fourteen per cent rate are both distractors.

Authority. Section 80CCD(2)

Question 4 · 2 marks · Income from House Property; Income from Other Sources · hard

Scenario. Mr. Kabir Sethi, a resident individual, owns Unit A and Unit B in Pune. Unit A was let out throughout P.Y. 2025-26 at Rs. 40,000 per month. The tenant did not pay rent for January 2026; Mr. Sethi took reasonable legal steps and all Rule 4 conditions are satisfied. Municipal value of Unit A is Rs. 5,00,000; fair rent Rs. 4,80,000; standard rent Rs. 5,10,000. Municipal taxes paid during the year were Rs. 50,000 and interest on the housing loan for Unit A was Rs. 2,10,000. Unit B is self-occupied; interest on the loan taken to construct it was Rs. 1,80,000. Mr. Sethi has exercised the option of shifting out of the default tax regime under section 115BAC(1A). Separately, he received a cash gift of Rs. 75,000 from a friend on his wedding anniversary, and Rs. 1,20,000 as forfeited advance in September 2025 when negotiations to sell a plot did not result in transfer. In December 2025 he received Rs. 3,00,000 as interest on enhanced compensation for land acquired by the State Government; legal fees for that claim were Rs. 20,000. He also earned Rs. 12,000 interest on a savings bank account and paid Rs. 8,000 for a health check-up of his spouse.

What is the income from house property of Mr. Kabir for Unit A for A.Y. 2026-27?

1. Rs. 63,000, because actual rent after unrealised rent is the gross annual value when it is lower than expected rent.
2. Rs. 1,45,000, because municipal taxes are deducted after the thirty per cent standard deduction.
3. Rs. 2,15,000, because only the standard deduction of thirty per cent is allowed against the gross annual value.
4. Rs. 1,05,000, because expected rent of Rs. 5,00,000 is the gross annual value and interest is fully allowed. (correct answer)

Answer: D — Rs. 1,05,000, because expected rent of Rs. 5,00,000 is the gross annual value and interest is fully allowed.

Working. ER = 5,00,000; Actual = 4,40,000; GAV = 5,00,000; NAV = 4,50,000; 30% = 1,35,000; Income = 4,50,000 - 1,35,000 - 2,10,000 = 1,05,000.

Explanation. Expected rent is higher of municipal value Rs. 5,00,000 and fair rent Rs. 4,80,000, restricted to standard rent Rs. 5,10,000, so Rs. 5,00,000. Actual rent after excluding unrealised rent is Rs. 4,40,000. GAV is the higher, Rs. 5,00,000. After municipal taxes NAV is Rs. 4,50,000; thirty per cent is Rs. 1,35,000; interest Rs. 2,10,000 is fully allowed. Income is Rs. 1,05,000.

Where it goes wrong. Unrealised rent reduces actual rent but GAV remains expected rent here; municipal taxes precede the thirty per cent deduction.

Authority. Section 23(1); Section 24(a); Section 24(b)

Question 5 · 2 marks · Income from House Property; Income from Other Sources · hard

What amount is taxable as income from other sources in respect of the cash gift and the forfeited advance?

1. Rs. 1,20,000, because only the forfeited advance is taxable under section 56(2)(ix).
2. Rs. 1,95,000, because the cash gift exceeds Rs. 50,000 and the forfeited advance is taxable in the year of receipt. (correct answer)
3. Rs. 75,000, because the forfeited advance reduces the cost of the plot.
4. Rs. 1,95,000, because both receipts are exempt capital receipts.

Answer: B — Rs. 1,95,000, because the cash gift exceeds Rs. 50,000 and the forfeited advance is taxable in the year of receipt.

Working. 75,000 + 1,20,000 = 1,95,000.

Explanation. Cash gift of Rs. 75,000 from a non-relative exceeds Rs. 50,000 and is taxable under section 56(2)(x). Forfeited advance of Rs. 1,20,000 on failed transfer negotiations is taxable under section 56(2)(ix) in the year of forfeiture. Both are income from other sources, so the aggregate is Rs. 1,95,000. The option saying the advance reduces cost is wrong because forfeiture after 1.4.2014 is taxed separately.

Where it goes wrong. The forfeited advance is not reduced from cost after 1.4.2014.

Authority. Section 56(2)(x); Section 56(2)(ix)

Question 6 · 2 marks · Income from House Property; Income from Other Sources · hard

What is the total income chargeable under Income from Other Sources before Chapter VI-A deductions?

1. Rs. 3,57,000, because savings interest is included and only half of the compensation interest is taxable. (correct answer)
2. Rs. 2,00,000, because house property loss is restricted to Rs. 2,00,000 for inter-head set-off against salary income under the express provisions of section 71(3A) of the Act.
3. Rs. 4,32,000, because the whole compensation interest and savings interest are taxable.
4. Rs. 3,45,000, because savings interest is excluded before Chapter VI-A deductions.

Answer: A — Rs. 3,57,000, because savings interest is included and only half of the compensation interest is taxable.

Working. 75,000 + 1,20,000 + (3,00,000 - 50 per cent) + 12,000 = 75,000 + 1,20,000 + 1,50,000 + 12,000 = 3,57,000.

Explanation. Cash gift Rs. 75,000 and forfeited advance Rs. 1,20,000 are taxable. Interest on enhanced compensation is taxed in the year of receipt with a fifty per cent deduction under section 57(iv), so Rs. 1,50,000 is taxable; legal fees are not separately allowed. Savings interest Rs. 12,000 is also included. Total is Rs. 3,57,000 before any Chapter VI-A deduction. Deducting legal fees or excluding savings interest gives the tempting wrong figures.

Where it goes wrong. Legal fees are not deductible from compensation interest; only the statutory fifty per cent deduction applies.

Authority. Section 56(2)(viii); Section 57(iv); Section 56(2)(x)

Question 7 · 2 marks · Capital Gains · hard

Scenario. Ms. Ananya sold a plot of land on 20.1.2026 for Rs. 80,00,000. The sale agreement was made on 5.8.2025, when she received Rs. 10,00,000 by an account payee cheque. The stamp duty value of the plot was Rs. 92,00,000 on 5.8.2025 and Rs. 98,00,000 on 20.1.2026. She had acquired the plot in May 2005 for Rs. 18,00,000. She paid brokerage at one per cent of the actual sale consideration. The plot is a capital asset and she has not invested in any residential house. What is the full value of consideration deemed under section 50C for computing her capital gains for A.Y. 2026-27?

What is the full value of consideration deemed under section 50C for computing capital gains for A.Y. 2026-27?

1. Rs. 80,00,000, because actual consideration is the full value when part payment is by cheque.
2. Rs. 1,50,000, because deduction under section 80C is allowable up to Rs. 1,50,000 for life insurance premium paid for an independent married daughter of the assessee.
3. Rs. 92,00,000, because part consideration was paid by account payee cheque before the agreement date and the agreement-date stamp value exceeds 110 per cent of actual consideration. (correct answer)
4. Rs. 88,00,000, because the tolerance margin of ten per cent is added to actual consideration.

Answer: C — Rs. 92,00,000, because part consideration was paid by account payee cheque before the agreement date and the agreement-date stamp value exceeds 110 per cent of actual consideration.

Working. Actual 80,00,000; 110 per cent = 88,00,000; agreement-date stamp value 92,00,000 > 88,00,000; deemed full value = 92,00,000.

Explanation. Under section 50C, if the agreement date differs from the transfer date and part consideration is paid by account payee cheque on or before the agreement date, the stamp duty value on the agreement date is used when it exceeds 110 per cent of actual consideration. Here Rs. 92,00,000 exceeds 110 per cent of Rs. 80,00,000, so Rs. 92,00,000 is the deemed full value. Transfer-date value and the tolerance figure are traps.

Where it goes wrong. The transfer-date stamp value is not used when the agreement-date condition is satisfied.

Authority. Section 50C

Question 8 · 1 marks · Provisions for Filing Return of Income and Self Assessment · medium

Scenario. Mr. Naman, a resident individual aged 58, has total income of Rs. 3,80,000 for A.Y. 2026-27 under the default tax regime. He spent Rs. 2,60,000 on foreign travel for himself and his spouse during P.Y. 2025-26. He has no other transaction requiring a return and no income above the basic exemption limit. Is he required to furnish a return of income under section 139(1) for A.Y. 2026-27?

Is Mr. Naman required to furnish a return of income under section 139(1) for A.Y. 2026-27?

1. No, because only current account deposits above Rs. 1 crore require a return of income.
2. No, because total income is below Rs. 4,00,000 and foreign travel is not a filing trigger.
3. Yes, because foreign travel expenditure incurred exceeds Rs. 1,00,000 and total income exceeds the basic exemption limit under the seventh proviso to section 139(1) of the Act.
4. Yes, because foreign travel expenditure exceeds Rs. 2,00,000 even though total income is below the basic exemption limit. (correct answer)

Answer: D — Yes, because foreign travel expenditure exceeds Rs. 2,00,000 even though total income is below the basic exemption limit.

Working. Foreign travel 2,60,000 > 2,00,000; return required under section 139(1).

Explanation. Under section 139(1), a person other than a company or firm must file a return if foreign travel expenditure exceeds Rs. 2,00,000, even when total income is below the basic exemption limit. Mr. Naman spent Rs. 2,60,000, so filing is required. The income limit and current account deposit threshold are not the governing tests here.

Where it goes wrong. The basic exemption limit is irrelevant when a specified filing trigger is crossed.

Authority. Section 139(1)

Question 9 · 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 10 · 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 11 · 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 12 · 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 13 · 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 14 · 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 15 · 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 16 · 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