CA Inter Taxation MCQ Test 4 (Income-tax + GST): answer key

Question 1 · 2 marks · Chapter 6: Deductions from Gross Total Income · easy

Scenario. Aarohi Menon, a Central Government employee covered by the National Pension System, has opted for its Unified Pension Scheme (UPS). Her salary for section 80CCD purposes is ₹12,00,000 for P.Y. 2025-26. The Central Government contributes ₹2,10,000 to her UPS account. Aarohi also invests ₹1,20,000 in PPF and pays ₹70,000 as premium on a qualifying life-insurance policy. She pays ₹22,000 by bank transfer for health insurance covering herself, her spouse and dependent child, and spends ₹3,000 in cash on their preventive health check-up. Her resident mother, aged 67, is covered by health insurance for which Aarohi pays ₹48,000 by bank transfer. She also spends ₹4,000 in cash on her mother's preventive health check-up. All payments satisfy the other applicable conditions. No other deductions are relevant.

Taking the Central Government's contribution as an employer contribution to Aarohi's UPS account, what is the maximum deduction allowable under section 80CCD(2) for P.Y. 2025-26?

1. ₹2,10,000
2. Nil, since the UPS contribution is not eligible for deduction
3. ₹1,68,000 (correct answer)
4. ₹1,50,000

Answer: C — ₹1,68,000

Working. Salary for section 80CCD purposes = ₹12,00,000 Central Government employer-contribution deduction ceiling = 14% of salary = ₹12,00,000 × 14% = ₹1,68,000 Actual Central Government contribution to UPS = ₹2,10,000 Allowable deduction = Lower of ₹2,10,000 and ₹1,68,000 = ₹1,68,000

Explanation. Section 80CCD(2) allows a deduction for the employer's contribution, restricted to 14% of salary where the employer is the Central Government. The UPS is an option under the NPS for Central Government employees, and the employer-contribution deduction is available under either tax regime. Therefore, the eligible deduction is ₹1,68,000, rather than the entire ₹2,10,000 contributed or the ₹1,50,000 limit applicable to certain other deductions.

Where it goes wrong. Applying the ₹1,50,000 limit under section 80CCE to employer contributions, or assuming that the employer's contribution to the UPS is disallowed.

Authority. Chapter 6, section 80CCD(2), pp. 6.26–6.27; January 2027 Statutory Update, Chapter 6 – Introduction of Unified Pension Scheme, p. 3

Question 2 · 2 marks · Chapter 6: Deductions from Gross Total Income · medium

Assuming Aarohi exercises the option to shift out of the default tax regime, what is the aggregate deduction allowable under sections 80C and 80D on the facts given?

1. ₹1,75,000
2. ₹2,25,000 (correct answer)
3. ₹2,20,000
4. ₹2,32,000

Answer: B — ₹2,25,000

Working. Section 80C: PPF investment = ₹1,20,000 Qualifying life-insurance premium = ₹70,000 Total eligible investment = ₹1,90,000 Maximum deduction under section 80C = ₹1,50,000 Section 80D: Self, spouse and dependent child: Health insurance premium = ₹22,000 Preventive health check-up = ₹3,000 Total = ₹25,000 Allowable deduction = ₹25,000 Resident senior-citizen mother: Health insurance premium = ₹48,000 Eligible balance of aggregate preventive check-up limit = ₹2,000 Allowable deduction = ₹50,000 Aggregate preventive health check-up expenditure = ₹7,000 Maximum deduction for preventive health check-up = ₹5,000 Total section 80D deduction = ₹25,000 + ₹50,000 = ₹75,000 Combined deduction under sections 80C and 80D = ₹1,50,000 + ₹75,000 = ₹2,25,000

Explanation. The qualifying PPF and life-insurance payments total ₹1,90,000, but the section 80C deduction is restricted to ₹1,50,000. Under section 80D, the family-health-insurance category allows ₹25,000 and the resident senior-citizen parent category allows ₹50,000. Preventive health check-up expenditure is subject to an aggregate limit of ₹5,000. Accordingly, the total section 80D deduction is ₹75,000, making the combined deduction ₹2,25,000.

Where it goes wrong. Ignoring the separate parent limit, allowing the entire ₹7,000 preventive check-up expenditure, or overlooking the section 80C ceiling.

Authority. Chapter 6, section 80C, pp. 6.10–6.23; Chapter 6, section 80D, pp. 6.33–6.36; Chapter 6, section 80CCE, p. 6.28

Question 3 · 2 marks · Chapter 6: Deductions from Gross Total Income · easy

If Aarohi instead pays tax under the default tax regime under section 115BAC, what is the total deduction allowable from her Gross Total Income among the three categories discussed in the scenario: sections 80CCD(2), 80C and 80D?

1. ₹2,25,000, being the combined deduction under sections 80C and 80D
2. ₹1,50,000, being the maximum section 80C deduction
3. ₹1,68,000, being the allowable employer contribution under section 80CCD(2) (correct answer)
4. Nil, because all Chapter VI-A deductions are disallowed

Answer: C — ₹1,68,000, being the allowable employer contribution under section 80CCD(2)

Working. Under the default tax regime: Deduction under section 80C = Nil Deduction under section 80D = Nil Deduction under section 80CCD(2) = 14% of ₹12,00,000 = ₹1,68,000 Total allowable deduction among the three specified categories = ₹1,68,000

Explanation. Under the default tax regime, sections 80C and 80D deductions are not available. However, deduction under section 80CCD(2) for an employer's contribution to the pension scheme of the Central Government remains allowable. The applicable ceiling is 14% of Aarohi's ₹12,00,000 salary, giving ₹1,68,000. Therefore, neither complete disallowance nor the optional-regime deductions can be applied.

Where it goes wrong. Assuming that all Chapter VI-A deductions are prohibited under section 115BAC, or carrying the optional-regime deductions into the default regime.

Authority. Chapter 6, General Provisions, pp. 6.2–6.4; Chapter 6, section 80CCD(2), pp. 6.26–6.27; Chapter 6, Chapter Overview, p. 6.2

Question 4 · 2 marks · Chapter 9: Income-tax Liability - Computation and Optimisation · hard

Scenario. Dev Malhotra is a resident individual employed in Delhi. For P.Y. 2025-26, his gross salary is ₹13,00,000 and he has no other income. Under the default regime, his standard deduction is ₹75,000. Under the optional tax regime, his standard deduction is ₹50,000, and he satisfies all conditions for deductions of ₹1,50,000 under section 80C and ₹25,000 under section 80D. He has no HRA exemption, professional tax, entertainment allowance, house-property loss, capital gains, other deductions, TDS or surcharge. Apply the A.Y. 2026-27 tax slabs, section 87A rebate and applicable marginal relief. Health and Education Cess is 4%. Round the final tax liability to the nearest ₹10.

What is Dev's final income-tax liability under the default tax regime, including Health and Education Cess? Apply the rebate and marginal-relief provisions under section 87A wherever applicable.

1. ₹26,000 (correct answer)
2. Nil
3. ₹63,960
4. ₹10,400

Answer: A — ₹26,000

Working. Gross salary = ₹13,00,000 Less: Standard deduction under the default regime = ₹75,000 Total income = ₹12,25,000 Income-tax before rebate: Up to ₹4,00,000 = Nil ₹4,00,000 to ₹8,00,000 @ 5% = ₹20,000 ₹8,00,000 to ₹12,00,000 @ 10% = ₹40,000 ₹12,00,000 to ₹12,25,000 @ 15% = ₹3,750 Total income-tax = ₹63,750 Income exceeding ₹12,00,000 = ₹25,000 Since tax of ₹63,750 exceeds the excess income of ₹25,000: Rebate/marginal relief under section 87A = ₹63,750 − ₹25,000 = ₹38,750 Income-tax after rebate = ₹25,000 Health and Education Cess @ 4% = ₹1,000 Final tax liability = ₹26,000

Explanation. The default-regime taxable income is ₹12,25,000 after the ₹75,000 standard deduction. Tax under the slab rates is ₹63,750. As the income exceeds ₹12,00,000 by ₹25,000, the section 87A marginal-relief calculation reduces the income-tax to ₹25,000. Health and Education Cess at 4% is ₹1,000. The final tax liability is therefore ₹26,000. Merely adding cess without applying marginal relief would overstate the liability.

Where it goes wrong. Computing tax without marginal relief, granting the full rebate available only when total income does not exceed ₹12,00,000, or applying cess before reducing the rebate.

Authority. Chapter 9, Step 8 – Computation of Total Income, p. 9.11; Chapter 9, Step 9 – Default Tax Regime Slab Rates, p. 9.12; Chapter 9, Step 10 – Rebate under section 87A, pp. 9.15–9.16; Chapter 9, Standard Deduction under section 16(ia), p. 9.20

Question 5 · 2 marks · Chapter 9: Income-tax Liability - Computation and Optimisation · medium

What is Dev's final tax liability, including Health and Education Cess, if he exercises the option to shift out of the default tax regime and pays tax under the optional tax regime?

1. ₹1,48,200
2. ₹1,40,400 (correct answer)
3. ₹1,32,600
4. ₹1,35,000

Answer: B — ₹1,40,400

Working. Gross salary = ₹13,00,000 Less: Standard deduction under optional regime = ₹50,000 Gross Total Income = ₹12,50,000 Less: Section 80C deduction = ₹1,50,000 Less: Section 80D deduction = ₹25,000 Total income = ₹10,75,000 Income-tax: Up to ₹2,50,000 = Nil ₹2,50,000 to ₹5,00,000 @ 5% = ₹12,500 ₹5,00,000 to ₹10,00,000 @ 20% = ₹1,00,000 ₹10,00,000 to ₹10,75,000 @ 30% = ₹22,500 Total income-tax = ₹1,35,000 Health and Education Cess @ 4% = ₹5,400 Final tax liability = ₹1,40,400

Explanation. Under the optional regime, Dev receives a standard deduction of ₹50,000. The resulting Gross Total Income of ₹12,50,000 is reduced by section 80C deduction of ₹1,50,000 and section 80D deduction of ₹25,000, leaving total income of ₹10,75,000. Applying the ordinary individual slab rates gives income-tax of ₹1,35,000. Adding Health and Education Cess of ₹5,400 gives a final liability of ₹1,40,400.

Where it goes wrong. Using the ₹75,000 standard deduction applicable under the default regime, omitting Health and Education Cess, or overlooking the section 80D deduction.

Authority. Chapter 9, Step 9 – Optional Tax Regime Slab Rates, p. 9.12; Chapter 9, Standard Deduction under section 16(ia), pp. 9.20–9.21; Chapter 6, sections 80C and 80D, pp. 6.10–6.36; Chapter 9, Step 11 – Health and Education Cess, p. 9.15

Question 6 · 2 marks · Chapter 9: Income-tax Liability - Computation and Optimisation · hard

Considering the final tax liabilities under both tax regimes on Dev's facts, which option correctly identifies the more beneficial regime and the amount of tax saved?

1. Optional tax regime, with a saving of ₹1,14,400
2. Optional tax regime, with a saving of ₹1,09,000
3. Default tax regime, with a saving of ₹1,09,000
4. Default tax regime, with a saving of ₹1,14,400 (correct answer)

Answer: D — Default tax regime, with a saving of ₹1,14,400

Working. Final tax under default regime = ₹26,000 Final tax under optional regime = ₹1,40,400 Tax saving under default regime: ₹1,40,400 − ₹26,000 = ₹1,14,400 Therefore, the default tax regime is more beneficial by ₹1,14,400.

Explanation. The default-regime calculation, after applying section 87A marginal relief and cess, gives a tax liability of ₹26,000. The optional-regime calculation, after the standard deduction, sections 80C and 80D deductions, and cess, gives ₹1,40,400. The difference is ₹1,14,400. Therefore, the default regime results in the lower tax liability on these facts. Comparing only the slab rates or ignoring the marginal-relief provision could lead to an incorrect conclusion.

Where it goes wrong. Choosing a regime based only on the amount of available deductions, without comparing the final tax liabilities after rebate, marginal relief and cess.

Authority. Chapter 9, comparison of default and optional tax regimes, pp. 9.12–9.16; Chapter 9, section 87A rebate and marginal relief, p. 9.15; Chapter 9, tax optimisation illustrations, pp. 9.47–9.61

Question 7 · 2 marks · Chapter 2: Residence and Scope of Total Income · medium

Scenario. During P.Y. 2025-26, Arjun, an Indian citizen, stayed in India for 188 days. He was non-resident in 9 of the 10 previous years immediately preceding that year. A consultancy business controlled in India earned ₹6,00,000, which accrued and was received in Singapore. He also received ₹2,00,000 interest from an unrelated Singapore bank account, which accrued and was received outside India.

What amount of Arjun's foreign-source receipts is includible in his total income in India for A.Y. 2026-27?

1. Nil
2. ₹8,00,000
3. ₹2,00,000
4. ₹6,00,000 (correct answer)

Answer: D — ₹6,00,000

Working. Stay in India during P.Y. 2025-26 = 188 days Since stay is 182 days or more, Arjun is resident under section 6(1). Non-resident in 9 out of 10 preceding previous years = qualifies as RNOR under section 6(6). Foreign consultancy income: Derived from a business controlled in India = ₹6,00,000 Included in RNOR's total income under section 5(1). Singapore bank interest: Accrued and received outside India; not derived from a business controlled in India = ₹2,00,000 Not includible in RNOR's total income. Total foreign-source receipts includible in India = ₹6,00,000.

Explanation. Arjun satisfies the 182-day residence condition under section 6(1). Since he was non-resident in 9 out of the 10 preceding previous years, he qualifies as RNOR under section 6(6). An RNOR is taxable on foreign income derived from a business controlled in India, even when it accrues and is received outside India. The unrelated Singapore bank interest is not included because it has no Indian receipt, accrual or business connection of the specified kind.

Where it goes wrong. Treating an RNOR as an ROR and including all foreign income, or treating him as a non-resident and excluding income from a business controlled in India.

Authority. Chapter 2, section 6(1) – Residential Status of Individuals, p. 2.4; Chapter 2, section 6(6) – Resident but Not Ordinarily Resident, pp. 2.8–2.9; Chapter 2, section 5(1) – Scope of Total Income for RNOR, pp. 2.15–2.17

Question 8 · 1 marks · Chapter 7: Advance Tax · easy

Scenario. Naman is an individual resident in India carrying on an eligible profession. For P.Y. 2025-26, he computes his professional profits on the presumptive basis under section 44ADA(1). After adjusting tax deducted at source, his advance-tax liability for the financial year is ₹64,000. He is not entitled to any special exemption from advance-tax payment.

Which statement correctly describes the payment schedule applicable to Naman's advance-tax liability?

1. He must pay the whole ₹64,000 in one instalment on or before 15 March 2026; an amount paid on or before 31 March 2026 is also treated as advance tax for the year. (correct answer)
2. He must pay 15%, 45%, 75% and the balance in the four regular instalments.
3. He must pay at least 75% of the advance-tax liability by 15 December 2025 and the balance by 31 March 2026.
4. He is required to pay the whole amount only by 31 March 2026, as the 15 March due date does not apply to presumptive professions.

Answer: A — He must pay the whole ₹64,000 in one instalment on or before 15 March 2026; an amount paid on or before 31 March 2026 is also treated as advance tax for the year.

Working. Naman computes professional profits under section 44ADA(1). Advance-tax liability after TDS = ₹64,000 Under section 211, an eligible assessee computing professional profits on a presumptive basis under section 44ADA(1) must pay the entire advance-tax liability in one instalment on or before 15 March 2026. Any advance-tax amount paid on or before 31 March 2026 is also treated as advance tax paid during P.Y. 2025-26. Applicable requirement: Full amount of ₹64,000 on or before 15 March 2026.

Explanation. Section 211 prescribes a special payment schedule for an eligible assessee computing professional profits under section 44ADA(1). The entire advance-tax liability is payable in one instalment on or before 15 March of the financial year. The chapter also provides that an amount paid by way of advance tax on or before 31 March is treated as advance tax paid during that financial year. The ordinary four-instalment schedule does not apply.

Where it goes wrong. Applying the normal four-instalment schedule to a presumptive professional, or confusing the 31 March payment treatment with the prescribed 15 March due date.

Authority. Chapter 7, sections 207 and 208 – Liability for Payment of Advance Tax, pp. 7.75–7.76; Chapter 7, section 211 – Instalments of Advance Tax and Due Dates, p. 7.78

Question 9 · 2 marks · Input Tax Credit · medium

Scenario. Meridian Components Pvt. Ltd., a manufacturer of industrial fittings, is registered in Madhya Pradesh with an Indore office (principal place) and Dewas factory (additional place). An invoice dated 5 December 2025 covers 1,000 kg of alloy compound for ₹5,00,000 plus GST ₹90,000; 400 kg arrives on 5 December, 350 kg on 19 December and the final 250 kg on 8 January 2026. A machine-maintenance invoice dated 1 September 2025 is ₹2,00,000 plus GST ₹36,000. By expiry of 180 days, Meridian has paid ₹1,00,000 of value and ₹18,000 tax; the balance remains unpaid, and reverse charge does not apply. It also buys a five-seat SUV for executives’ business travel, not for resale, passenger transport or driving instruction. February 2026 taxable supplies (excluding exempt and zero-rated supplies) are ₹60,00,000 at 18%; output tax is ₹10,80,000 and its credit ledger balance is ₹12,00,000. No Rule 86B exception applies. For FY 2024-25, the annual-return due date is 31 December 2025; no proceedings extend retention. Its paper records for Dewas are kept only at Indore. An affiliate, Nivaan Tools LLP (separate PAN), applies under Rule 8, completes Aadhaar authentication, has monthly B2B output-tax liability of ₹2,40,000 and seeks two registrations in Madhya Pradesh.

When can Meridian first avail the ITC of ₹90,000 on the alloy compound, assuming the other conditions under section 16 are satisfied?

1. December 2025, because the supplier issued the invoice in that month.
2. December 2025, when the first lot is received.
3. February 2026, after filing the annual return.
4. January 2026, when the final lot is received. (correct answer)

Answer: D — January 2026, when the final lot is received.

Explanation. The first proviso to section 16(2) postpones ITC where goods covered by one invoice are received in lots or instalments: credit becomes available only on receipt of the last lot. Meridian receives the final 250 kg on 8 January 2026, so January 2026 is the first eligible month, assuming the other conditions are met. Claiming on the December invoice or on the first two deliveries overlooks the specific last-lot rule.

Where it goes wrong. Claiming ITC on invoice issuance or receipt of the first lot instead of waiting for the final lot.

Authority. Section 16(2), first proviso

Question 10 · 2 marks · Input Tax Credit · easy

What is the eligibility of ITC on the SUV purchased by Meridian?

1. ITC is blocked because the vehicle has seating capacity of not more than 13 persons and none of the specified exceptions applies. (correct answer)
2. ITC is available in proportion to the kilometres travelled for business purposes.
3. ITC is available because the vehicle is owned by a registered company.
4. Full ITC is available because the vehicle is used in the course of business.

Answer: A — ITC is blocked because the vehicle has seating capacity of not more than 13 persons and none of the specified exceptions applies.

Explanation. Section 17(5)(a) blocks ITC on a motor vehicle for transportation of persons where approved seating capacity is not more than 13, including the driver. Business use by executives does not, by itself, create an exception. Meridian does not use the SUV for further taxable supply of such vehicles, passenger transportation or driving instruction; therefore its ITC is blocked. The tempting business-use argument overlooks the specific restriction.

Where it goes wrong. Assuming that use for business purposes automatically overrides the blocked-credit provisions.

Authority. Section 17(5)(a)

Question 11 · 2 marks · Input Tax Credit · hard

What amount of ITC on the machine-maintenance service invoice must Meridian reverse after expiry of 180 days? Ignore interest.

1. ₹36,000
2. ₹9,000
3. Nil
4. ₹18,000 (correct answer)

Answer: D — ₹18,000

Working. Invoice value = ₹2,00,000; GST = ₹36,000; total invoice amount = ₹2,36,000. Amount paid within 180 days = ₹1,00,000 + ₹18,000 = ₹1,18,000. Percentage paid = ₹1,18,000 / ₹2,36,000 × 100 = 50%. Unpaid proportion = 100 per cent − 50% = 50%. ITC reversal = ₹36,000 × 50% = ₹18,000. Therefore, ITC of ₹18,000 is required to be reversed, along with applicable interest.

Explanation. Meridian paid only half of the invoice value and corresponding tax within 180 days. The second proviso to section 16(2), read with rule 37, requires reversal or payment of ITC proportionate to the unpaid amount, with interest. Thus only 50% of the ₹36,000 credit is reversed. Reversing the entire ₹36,000 would incorrectly disregard the partial payment; the remaining credit can be re-availed when the balance is paid.

Where it goes wrong. Reversing the entire ITC instead of restricting the reversal to the unpaid proportion.

Authority. Section 16(2), second proviso; Rule 37 of CGST Rules, 2017

Question 12 · 2 marks · Input Tax Credit · hard

What is the minimum amount of output tax that Meridian must discharge through the electronic cash ledger for February 2026 under Rule 86B?

1. Nil
2. ₹10,800 (correct answer)
3. ₹1,08,000
4. ₹10,69,200

Answer: B — ₹10,800

Working. Value of taxable supplies = ₹60,00,000, exceeding ₹50,00,000. Output tax liability = ₹60,00,000 × 18% = ₹10,80,000. Maximum discharge through electronic credit ledger = ₹10,80,000 × 99% = ₹10,69,200. Minimum amount payable through electronic cash ledger = ₹10,80,000 × 1% = ₹10,800. Therefore, Meridian must discharge at least ₹10,800 through the electronic cash ledger.

Explanation. February taxable supplies exceed ₹50 lakh, so Rule 86B applies on the stated facts. The rule caps electronic-credit-ledger discharge at 99% of output tax liability, requiring at least 1% to be paid through the electronic cash ledger. The September 2026 update amended the exceptions with effect from 1 February 2026; the case states that none applies. The tempting nil option ignores the mandatory cash portion.

Where it goes wrong. Ignoring the monthly taxable-supply threshold or treating the entire output tax as dischargeable through ITC.

Authority. Rule 86B, CGST Rules, 2017; Notification No. 20/2025-Central Tax dated 31.12.2025, effective from 01.02.2026

Question 13 · 2 marks · Registration · medium

Which statement correctly describes Nivaan Tools LLP's eligibility and registration position if it opts for Rule 14A?

1. It satisfies the stated liability and Aadhaar conditions, but under Rule 14A it can have only one registration per State/UT against the same PAN. (correct answer)
2. It is ineligible because Rule 14A applies only to persons having annual turnover below ₹40 lakh.
3. It is eligible and may obtain two registrations in Madhya Pradesh under Rule 14A because it operates from two outlets.
4. It is ineligible because the monthly output tax liability on supplies to registered persons must be below ₹2 lakh.

Answer: A — It satisfies the stated liability and Aadhaar conditions, but under Rule 14A it can have only one registration per State/UT against the same PAN.

Explanation. Rule 14A is available where an applicant has applied under Rule 8, the monthly output-tax liability on supplies to registered persons does not exceed ₹2.5 lakh, and Aadhaar authentication is completed, subject to the stated statutory exception. Nivaan meets the facts given. However, the option permits only one registration per State/UT against the same PAN and overrides Rule 11's multiple-place registration route. It cannot obtain two registrations under this option.

Where it goes wrong. Assuming that multiple places of business permit multiple registrations even after opting for Rule 14A.

Authority. Rule 14A, CGST Rules, 2017; Notification No. 18/2025-Central Tax dated 31.10.2025, effective from 01.11.2025

Question 14 · 2 marks · Accounts and Records · medium

Which statement correctly describes Meridian's obligations regarding its Dewas records and the retention period for FY 2024-25?

1. It may keep the Dewas records at any business premises and retain them for 72 months from the actual date of filing the annual return.
2. It must keep the Dewas records at Dewas but may discard them after 72 months from 31 March 2025.
3. It must keep the paper accounts relating to Dewas at Dewas and retain the relevant books and records until expiry of 72 months from the annual-return due date, namely 31 December 2031. (correct answer)
4. It may keep all paper accounts only at Indore and retain them for 60 months from the financial year-end.

Answer: C — It must keep the paper accounts relating to Dewas at Dewas and retain the relevant books and records until expiry of 72 months from the annual-return due date, namely 31 December 2031.

Working. Retention period under section 36 = 72 months. 72 months ÷ 12 = 6 years. Annual-return due date given in the scenario = 31 December 2025. Expiry of 72 months from that date = 31 December 2031. The accounts relating to the Dewas additional place of business must also be kept at Dewas under section 35(1), first proviso.

Explanation. Section 35(1) requires the registered person to maintain records at the principal place of business and, where more than one place is shown in the registration certificate, to keep the accounts relating to each place at that place. Section 36 requires retention until expiry of 72 months from the due date of the annual return. Seventy-two months is six years; from 31 December 2025 that period expires on 31 December 2031. The date is measured from the due date, not the financial year-end or actual filing date.

Where it goes wrong. Using the financial year-end or actual annual-return filing date instead of the statutory due date as the starting point for retention.

Authority. Section 35(1), first proviso; Section 36; Rule 56(7) and Rule 56(10), CGST Rules, 2017

Question 15 · 2 marks · GST in India – An Introduction · easy

Scenario. Prithvi Pumps, registered and operating in Madhya Pradesh, sells a taxable pump to a buyer in Maharashtra. The goods move from Madhya Pradesh to Maharashtra, and the place of supply is Maharashtra. Assume the transaction is neither exempt nor covered by a special rule. The buyer asks which component of GST should appear on the supplier's invoice.

Which levy applies to the transaction under the GST framework introduced in India?

1. CGST and SGST, as the supplier is registered in Madhya Pradesh.
2. Integrated Goods and Services Tax (IGST). (correct answer)
3. SGST and IGST together.
4. CGST only, because the supplier is located in Madhya Pradesh.

Answer: B — Integrated Goods and Services Tax (IGST).

Explanation. Because the supplier is in Madhya Pradesh and the place of supply is Maharashtra, the supply is inter-State under the framework described in Chapter 1. Article 269A provides that GST on inter-State supplies is levied and collected by the Government of India and apportioned between the Union and States. IGST is therefore charged. CGST plus SGST is the intra-State treatment and is the tempting but incorrect alternative.

Where it goes wrong. Confusing the supplier's State with the place of supply and applying the intra-State levy.

Authority. Article 269A of the Constitution; Chapter 1, Framework of GST as introduced in India – Inter-State supplies

Question 16 · 1 marks · Tax Invoice; Credit and Debit Notes · easy

Scenario. On 14 January 2026, Veda Pumps Ltd., a registered supplier, agrees to sell a taxable pump to a customer for delivery by road. The goods are packed and ready at its warehouse on 16 January; movement to the customer's premises begins on 17 January, and delivery is completed on 19 January. The supply involves movement of goods and no special invoicing exception applies.

By when must Veda Pumps Ltd. issue the tax invoice under section 31(1)?

1. Only when delivery is completed on 19 January 2026.
2. On or before 16 January 2026, when the goods are packed and ready.
3. Before or at the time of removal of the goods for supply on 17 January 2026. (correct answer)
4. Within 30 days after delivery, namely by 18 February 2026.

Answer: C — Before or at the time of removal of the goods for supply on 17 January 2026.

Explanation. Section 31(1)(a) requires a registered supplier of taxable goods involving movement to issue the tax invoice before or at the time of removal of goods for supply to the recipient. The goods are removed on 17 January 2026, so the invoice must be issued no later than that time. Waiting until delivery on 19 January applies the wrong event; packing the goods on 16 January is not the specified trigger.

Where it goes wrong. Confusing the time of removal with the date of delivery to the recipient.

Authority. Section 31(1)(a), CGST Act, 2017