CA Inter Taxation MCQ Test 5 (Income-tax + GST): answer key

Question 1 · 2 marks · Chapter 3, Unit 1: Salaries · medium

Scenario. Ms. Aditi is employed by a private company and has exercised the option to shift out of the default tax regime for P.Y. 2025-26. Her annual basic salary is ₹2,00,000, dearness allowance forming part of retirement benefits is ₹40,000 and house rent allowance is ₹1,20,000. She paid rent of ₹2,00,000 for accommodation in Bhopal. She is neither a director nor an employee having substantial interest in her employer company. Her employer also paid ₹36,000 to a personal servant for services provided to her. Aditi owns a separate residential flat at Indore, let out throughout the previous year. Its municipal value, fair rent and standard rent are ₹4,80,000, ₹5,40,000 and ₹5,10,000 respectively. Actual rent was ₹48,000 per month. She paid municipal taxes of ₹48,000 and interest on the housing loan of ₹1,20,000 during the year. There was no vacancy or unrealised rent.

What is Aditi's income chargeable under the head Salaries for P.Y. 2025-26 after considering the exemption for HRA and the deduction under section 16? All amounts are in rupees; no rounding is required.

1. ₹2,39,000
2. ₹2,50,000
3. ₹2,14,000 (correct answer)
4. ₹2,64,000

Answer: C — ₹2,14,000

Working. Salary for HRA = Basic salary + DA forming part of retirement benefits = ₹2,00,000 + ₹40,000 = ₹2,40,000. HRA received = ₹1,20,000. Rent paid minus 10% of salary = ₹2,00,000 - 10% of ₹2,40,000 = ₹1,76,000. 40% of salary, since Bhopal is not one of the specified metropolitan cities = 40% × ₹2,40,000 = ₹96,000. HRA exemption = Least of ₹1,20,000, ₹1,76,000 and ₹96,000 = ₹96,000. Gross monetary salary = ₹2,00,000 + ₹40,000 + ₹1,20,000 = ₹3,60,000. Less: HRA exemption = ₹96,000. Salary after HRA exemption = ₹2,64,000. Less: Standard deduction under section 16(ia) = ₹50,000. Income chargeable under Salaries = ₹2,14,000.

Explanation. HRA exemption is the least of ₹1,20,000, rent paid less 10% of salary (₹1,76,000), and 40% of salary (₹96,000). Therefore, exemption is ₹96,000. Gross monetary salary is ₹3,60,000. After HRA exemption and the ₹50,000 standard deduction applicable under the optional tax regime, salary income is ₹2,14,000. Option (a) incorrectly applies the ₹75,000 standard deduction available under the default regime.

Where it goes wrong. Applying the default-regime standard deduction of ₹75,000 instead of ₹50,000 under normal provisions, or including a non-taxable personal-servant benefit.

Authority. Section 10(13A); Section 16(ia); Chapter 3, Unit 1: Salaries

Question 2 · 2 marks · Chapter 3, Unit 1: Salaries · easy

Considering Notification No. 133/2025 dated 18.8.2025 and the prescribed salary limit for specified employees, what amount of the ₹36,000 personal-servant facility is taxable as a perquisite in Aditi's hands under section 17(2)(iii)? All amounts are in rupees; no rounding is required.

1. ₹36,000
2. Nil (correct answer)
3. ₹4,00,000
4. ₹18,000

Answer: B — Nil

Working. Monetary salary excluding non-monetary benefits = ₹2,00,000 + ₹40,000 + ₹1,20,000 = ₹3,60,000. Prescribed salary limit under Rule 3C = ₹4,00,000. Aditi is neither a director nor an employee having substantial interest. Her salary does not exceed ₹4,00,000. Therefore, she is not a specified class employee under section 17(2)(iii) for this purpose. Taxable value of personal-servant facility under section 17(2)(iii) = Nil.

Explanation. Under section 17(2)(iii), the specified non-monetary perquisites are taxable in the hands of specified class employees. The updated Rule 3C prescribes a salary limit of ₹4,00,000. Aditi is neither a director nor an employee having substantial interest, and her monetary salary of ₹3,60,000 does not exceed this limit. Consequently, the personal-servant facility is not taxable under this provision. Option (a) wrongly taxes the entire benefit without checking specified-employee status.

Where it goes wrong. Applying an earlier specified-employee salary threshold instead of the ₹4,00,000 limit prescribed by the newly inserted Rule 3C.

Authority. Section 17(2)(iii); Notification No. 133/2025 dated 18.8.2025; Rule 3C; Chapter 3, Unit 1: January 2027 Statutory Update

Question 3 · 2 marks · Chapter 3, Unit 2: Income from House Property · hard

What is the income chargeable under the head Income from house property in respect of Aditi's Indore flat for A.Y. 2026-27? All amounts are in rupees; no rounding is required.

1. ₹2,35,200
2. ₹2,03,400
3. ₹3,69,600
4. ₹2,49,600 (correct answer)

Answer: D — ₹2,49,600

Working. Step 1: Expected Rent. Higher of municipal value ₹4,80,000 and fair rent ₹5,40,000 = ₹5,40,000. Restricted to standard rent of ₹5,10,000. Expected Rent = ₹5,10,000. Step 2: Actual rent. ₹48,000 × 12 months = ₹5,76,000. Step 3: Gross Annual Value. Higher of expected rent ₹5,10,000 and actual rent ₹5,76,000 = ₹5,76,000. Step 4: Net Annual Value. GAV ₹5,76,000 - Municipal taxes paid by owner ₹48,000 = ₹5,28,000. Step 5: Deductions under section 24. Standard deduction = 30% × ₹5,28,000 = ₹1,58,400. Interest on borrowed capital = ₹1,20,000. Income from house property = ₹5,28,000 - ₹1,58,400 - ₹1,20,000 = ₹2,49,600.

Explanation. For a property let out throughout the year, GAV is the higher of expected rent and actual rent. Expected rent is ₹5,10,000, being the higher of municipal value and fair rent restricted to standard rent. Actual rent of ₹5,76,000 is higher. After deducting municipal taxes, NAV is ₹5,28,000. Section 24 deductions result in income of ₹2,49,600. Option (b) wrongly uses expected rent instead of the higher actual rent.

Where it goes wrong. Using expected rent as GAV even though actual rent is higher, or calculating the 30% deduction on GAV instead of NAV.

Authority. Section 22; Section 23(1); Section 24; Chapter 3, Unit 2: Income from House Property

Question 4 · 2 marks · Chapter 3, Unit 3: Profits and Gains of Business or Profession · easy

Scenario. Mr. Raghav runs a sole-proprietary trading business and follows the mercantile system of accounting. His statement of profit and loss for P.Y. 2025-26 reports net profit of ₹5,00,000 after debiting cash purchases of ₹27,000 paid to one supplier in three instalments of ₹8,000, ₹9,000 and ₹10,000 on the same day. No circumstance under Rule 6DD applies. The account also debits ₹40,000 as book depreciation on a new general plant-and-machinery item costing ₹4,00,000, acquired and first put to business use on 1 December 2025. No other business adjustments arise. Separately, he acquired listed equity shares on 15 July 2025 for ₹2,40,000, inclusive of acquisition charges, and sold them on 15 February 2026 for ₹3,00,000, paying brokerage of ₹2,000 and STT on sale.

What amount of the cash purchase expenditure is disallowed while computing Raghav's business income under section 40A(3)? All amounts are in rupees; no rounding is required.

1. Nil
2. ₹17,000
3. ₹10,000
4. ₹27,000 (correct answer)

Answer: D — ₹27,000

Working. Cash payment 1 = ₹8,000. Cash payment 2 = ₹9,000. Cash payment 3 = ₹10,000. Aggregate cash payments to the same supplier during the day = ₹8,000 + ₹9,000 + ₹10,000 = ₹27,000. Since aggregate payment exceeds ₹10,000 and no Rule 6DD exception applies, the entire expenditure of ₹27,000 is disallowed under section 40A(3).

Explanation. Section 40A(3) considers the aggregate of payments made to a person in a single day through modes other than the prescribed banking or electronic modes. Raghav paid ₹27,000 in cash to the same supplier on the same day. Since the aggregate exceeds ₹10,000 and no Rule 6DD exception applies, the entire expenditure is disallowed. Option (b) incorrectly disallows only the amount exceeding ₹10,000.

Where it goes wrong. Considering each cash instalment separately or disallowing only the expenditure above the ₹10,000 threshold.

Authority. Section 40A(3); Rule 6DD; Chapter 3, Unit 3: Profits and Gains of Business or Profession

Question 5 · 2 marks · Chapter 3, Unit 3: Profits and Gains of Business or Profession · hard

What is Raghav's taxable income under the head Profits and gains of business or profession after the required adjustments for the cash purchases and depreciation? All amounts are in rupees; no rounding is required.

1. ₹5,07,000
2. ₹5,67,000
3. ₹5,37,000 (correct answer)
4. ₹5,27,000

Answer: C — ₹5,37,000

Working. Net profit as per statement of profit and loss = ₹5,00,000. Add: Cash purchase expenditure disallowed under section 40A(3) = ₹27,000. Add: Book depreciation disallowed = ₹40,000. Less: Depreciation allowable under section 32. General plant and machinery rate = 15%. Since the asset was put to use for less than 180 days, only 50% of the prescribed depreciation is allowable. Allowable depreciation = ₹4,00,000 × 15% × 50% = ₹30,000. Taxable business income = ₹5,00,000 + ₹27,000 + ₹40,000 - ₹30,000 = ₹5,37,000.

Explanation. The cash purchase expenditure of ₹27,000 is disallowed under section 40A(3), while book depreciation of ₹40,000 must be added back. General plant and machinery attracts depreciation at 15%. Since the machine was put to use for less than 180 days, only 50% of the prescribed depreciation is allowable, amounting to ₹30,000. Option (a) incorrectly allows full depreciation of ₹60,000 instead of restricting it to half.

Where it goes wrong. Allowing full-year depreciation of 15% even though the newly acquired machine was put to use for fewer than 180 days.

Authority. Section 32; Section 40A(3); Chapter 3, Unit 3: Depreciation table for general plant and machinery

Question 6 · 2 marks · Chapter 3, Unit 4: Capital Gains · medium

What is the short-term capital gain arising to Raghav from the transfer of the listed equity shares? All amounts are in rupees; no rounding is required.

1. ₹58,000 (correct answer)
2. ₹57,000
3. ₹60,000
4. ₹2,98,000

Answer: A — ₹58,000

Working. Date of acquisition = 15 July 2025. Date of transfer = 15 February 2026. Holding period is not more than 12 months; hence, the shares constitute short-term capital assets. Full value of consideration = ₹3,00,000. Less: Brokerage incurred on transfer = ₹2,000. Net sale consideration = ₹2,98,000. Less: Cost of acquisition = ₹2,40,000. Short-term capital gain = ₹2,98,000 - ₹2,40,000 = ₹58,000. STT paid on sale is not deductible while computing capital gains.

Explanation. The shares were held for less than 12 months immediately preceding their transfer and are therefore short-term capital assets. Under section 48, brokerage incurred wholly and exclusively for the transfer is deductible, but STT paid on sale is not deductible. Accordingly, capital gain is ₹3,00,000 less brokerage of ₹2,000 and acquisition cost of ₹2,40,000, giving ₹58,000. Option (b) wrongly deducts STT as well.

Where it goes wrong. Deducting STT paid on transfer as an allowable transfer expense or forgetting to deduct brokerage.

Authority. Section 2(42A); Section 48; Section 111A; Chapter 3, Unit 4: Capital Gains

Question 7 · 2 marks · Chapter 5: Aggregation of Income, Set-off and Carry Forward of Losses · medium

Scenario. Mr. Yash, an individual, has exercised the option to shift out of the default tax regime for A.Y. 2026-27. His current-year loss under the head Income from house property is ₹2,65,000. He also has salary income of ₹6,50,000 and interest income from bank deposits of ₹75,000. He has no other income or losses and furnishes his return within the due date.

What amount of Yash's current-year house-property loss will remain available for carry forward after the permissible inter-head set-off for A.Y. 2026-27? All amounts are in rupees; no rounding is required.

1. Nil
2. ₹65,000 (correct answer)
3. ₹2,00,000
4. ₹2,65,000

Answer: B — ₹65,000

Working. Current-year loss from house property = ₹2,65,000. Maximum permissible inter-head set-off under the normal provisions = ₹2,00,000. Unabsorbed house-property loss = ₹2,65,000 - ₹2,00,000 = ₹65,000. Amount available for carry forward under section 71B = ₹65,000. Such loss may be carried forward for a maximum of 8 assessment years for set-off against income from house property.

Explanation. Under the normal provisions of the Act, current-year loss from house property can be set off against income under other heads only up to ₹2,00,000 in the same assessment year. Yash's loss is ₹2,65,000, so ₹65,000 remains unabsorbed and can be carried forward under section 71B for set-off against house-property income in subsequent assessment years. Option (c) confuses the permissible inter-head set-off with the remaining carry-forward loss.

Where it goes wrong. Treating the ₹2,00,000 inter-head set-off ceiling as the balance loss to be carried forward.

Authority. Section 71(3A); Section 71B; Chapter 5: Aggregation of Income, Set-off and Carry Forward of Losses

Question 8 · 1 marks · Chapter 9: Income Tax Liability - Computation and Optimisation · easy

Scenario. Ms. Ria, a resident individual aged 28, has total income of ₹11,80,000 for A.Y. 2026-27 under the default tax regime prescribed under section 115BAC. Her income consists entirely of items chargeable at normal slab rates. She has no special-rate income.

What is Ria's income-tax liability after allowing rebate under section 87A but before adding health and education cess? All amounts are in rupees; no rounding is required.

1. Nil (correct answer)
2. ₹2,320
3. ₹58,000
4. ₹60,000

Answer: A — Nil

Working. Total income = ₹11,80,000. Tax under section 115BAC: Upto ₹4,00,000 = Nil. ₹4,00,000 at 5% = ₹20,000. Remaining ₹3,80,000 at 10% = ₹38,000. Income-tax before rebate = ₹58,000. Rebate under section 87A = Lower of: (a) Income-tax payable = ₹58,000. (c) Prescribed maximum rebate = ₹60,000. Rebate allowable = ₹58,000. Income-tax after rebate and before cess = ₹58,000 - ₹58,000 = Nil.

Explanation. Under section 115BAC, tax on income of ₹11,80,000 is ₹58,000: ₹20,000 on the ₹4,00,000 slab from ₹4,00,000 to ₹8,00,000 and ₹38,000 on the remaining ₹3,80,000 at 10%. Since Ria is a resident individual with total income not exceeding ₹12,00,000, rebate under section 87A equals the lower of ₹58,000 and ₹60,000. The resulting tax liability is Nil. Option (c) ignores the rebate.

Where it goes wrong. Calculating slab tax without reducing the rebate under section 87A, or treating the maximum rebate of ₹60,000 as a fixed rebate.

Authority. Section 115BAC; Section 87A; Chapter 9: Income Tax Liability - Computation and Optimisation

Question 9 · 2 marks · Supply under GST · medium

Scenario. Nexora Industrial Systems Ltd., registered under GST in Madhya Pradesh, manufactures and sells industrial equipment. It also holds a separate GST registration in Gujarat under the same PAN. During October 2026, the following transactions occurred: (i) The Madhya Pradesh establishment transferred machinery worth ₹3,00,000 to its Gujarat establishment without consideration for business purposes. (ii) The company gifted electronic accessories worth ₹48,000 to one employee during the financial year. The employee had received no other gifts from the company during that year. (iii) It sold a printing machine with mandatory commissioning services for one consolidated price. The supplies were naturally bundled, with the machine constituting the principal supply. (iv) It sold industrial equipment to an unrelated customer for ₹6,00,000. A discount of ₹20,000 was recorded in the invoice. It additionally charged packing of ₹12,000, freight of ₹18,000 and a statutory environmental fee of ₹5,000. The customer separately paid ₹10,000 towards an expense which the supplier was contractually liable to incur. A non-government organisation also provided a subsidy of ₹25,000 directly linked to the price of this equipment. (v) A manufacturer subsequently issued a commercial credit note to a dealer for a post-sale discount, without reducing its original taxable value or tax liability. No separate promotional service was agreed between them. (vi) The company purchased 100 promotional kits for resale, paying GST of ₹18,000 on the purchase. Subsequently, 10 kits were distributed free of cost as samples to prospective customers.

What is the GST treatment of the transfer of machinery from the Madhya Pradesh establishment to the Gujarat establishment?

1. It becomes a supply only when the Gujarat establishment subsequently sells the machinery.
2. It is a supply under Schedule I even without consideration, since the establishments are distinct persons. (correct answer)
3. It is exempt from GST because the transfer takes place between establishments of the same legal entity.
4. It is not a supply because no consideration is charged between establishments having the same PAN.

Answer: B — It is a supply under Schedule I even without consideration, since the establishments are distinct persons.

Explanation. Under section 25(4), establishments having separate GST registrations under the same PAN are distinct persons. Schedule I, paragraph 2, read with section 7(1)(c), treats supplies between distinct persons in the course or furtherance of business as supplies even without consideration. Therefore, the machinery transfer is taxable, subject to the applicable valuation provisions. The tempting option (d) incorrectly assumes that a common PAN prevents distinct-person treatment.

Where it goes wrong. Confusing a common PAN with a single registered person for GST purposes.

Authority. CGST Act, section 7(1)(c); CGST Act, Schedule I, paragraph 2; CGST Act, section 25(4)

Question 10 · 2 marks · Supply under GST · easy

What is the GST treatment of the electronic accessories gifted to the employee?

1. The gift is a taxable supply because every transaction between related persons is taxable irrespective of value.
2. The gift is exempt supply under section 11 of the CGST Act.
3. The gift is not treated as a supply because its value does not exceed ₹50,000 per employee during the financial year. (correct answer)
4. The gift is a taxable supply because the employer and employee are related persons.

Answer: C — The gift is not treated as a supply because its value does not exceed ₹50,000 per employee during the financial year.

Working. Value of gifts during the financial year = ₹48,000. Since ₹48,000 does not exceed ₹50,000, the gift is not treated as a supply.

Explanation. Schedule I, paragraph 2, contains a specific proviso that gifts not exceeding ₹50,000 in value in a financial year by an employer to an employee shall not be treated as supply. Since the employee received gifts worth ₹48,000 during the financial year, the transaction is outside the scope of supply under this provision. Option (d) overlooks the specific employer-employee gift proviso.

Where it goes wrong. Applying the related-person rule without considering the ₹50,000 employee gift proviso.

Authority. CGST Act, section 7(1)(c); CGST Act, Schedule I, paragraph 2

Question 11 · 2 marks · Supply under GST · easy

How should the supply of the printing machine along with its mandatory commissioning services be classified for determining its tax liability?

1. Two independent supplies, each necessarily taxable at its respective rate.
2. Mixed supply, taxable at the highest rate applicable to the constituent supplies.
3. Exempt supply because commissioning is provided along with machinery.
4. Composite supply, taxable at the rate applicable to the principal supply. (correct answer)

Answer: D — Composite supply, taxable at the rate applicable to the principal supply.

Explanation. A composite supply consists of two or more taxable supplies which are naturally bundled and supplied in conjunction with each other, one of which is the principal supply. Here, the machine and mandatory commissioning services are naturally bundled, with the machine being the principal supply. Under section 8(a), the entire composite supply is treated as a supply of the principal supply. Option (b) incorrectly applies the treatment of mixed supplies.

Where it goes wrong. Confusing naturally bundled composite supplies with mixed supplies.

Authority. CGST Act, section 2(30); CGST Act, section 2(90); CGST Act, section 8(a)

Question 12 · 2 marks · Value of Supply · medium

Compute the value of supply of the industrial equipment under section 15. Assume that all amounts are exclusive of GST and that the statutory environmental fee is charged separately. Round the final answer to the nearest rupee.

1. ₹6,15,000
2. ₹6,30,000
3. ₹6,25,000
4. ₹6,50,000 (correct answer)

Answer: D — ₹6,50,000

Working. Basic price of equipment = ₹6,00,000 Less: Discount recorded in invoice = ₹20,000 Net price = ₹5,80,000 Add: Packing charges = ₹12,000 Add: Freight charges = ₹18,000 Add: Environmental fee charged separately = ₹5,000 Add: Supplier's liability paid by recipient = ₹10,000 Add: Non-government subsidy directly linked to price = ₹25,000 Value of supply = ₹5,80,000 + ₹12,000 + ₹18,000 + ₹5,000 + ₹10,000 + ₹25,000 = ₹6,50,000.

Explanation. The transaction value is reduced by the invoice-recorded discount and increased by the includible elements under section 15(2). These include packing, freight, statutory environmental fee, the supplier's liability paid by the recipient and the directly price-linked non-government subsidy. Option (b) is tempting because it omits the third-party payment and subsidy, both of which are includible in the value.

Where it goes wrong. Omitting third-party payments or non-government subsidies directly linked to the price.

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

Question 13 · 2 marks · Value of Supply · hard

In the case of the commercial credit note issued to the dealer, which statement correctly describes the treatment of the recipient's input tax credit?

1. The manufacturer must reduce its original output tax liability even though the commercial credit note does not satisfy the conditions of section 15(3).
2. The dealer is not required to reverse ITC merely because of the commercial credit note, since the original transaction value and corresponding tax liability are not reduced. (correct answer)
3. The dealer must reverse proportionate ITC because every post-sale discount requires reversal.
4. The dealer must reverse the entire ITC originally availed on the purchase.

Answer: B — The dealer is not required to reverse ITC merely because of the commercial credit note, since the original transaction value and corresponding tax liability are not reduced.

Working. Original transaction value and corresponding tax liability remain unchanged. The commercial credit note does not reduce the supplier's output tax liability. Consequently, the dealer is not required to reverse the corresponding ITC merely on account of this discount.

Explanation. Circular No. 251/08/2025-GST clarifies that where a supplier issues a financial or commercial credit note without reducing the original transaction value and tax liability, the recipient is not required to reverse the ITC attributable to that discount. The original tax charged remains unchanged. Option (c) incorrectly applies the ITC reversal condition applicable to qualifying post-supply discounts under section 15(3)(b).

Where it goes wrong. Treating a commercial credit note as a GST credit note and automatically requiring ITC reversal.

Authority. CGST Act, section 15(3)(b); CGST Act, section 16(1); Circular No. 251/08/2025-GST dated 12.09.2025

Question 14 · 2 marks · Input Tax Credit · hard

Calculate the amount of ITC blocked under section 17(5)(h) on the promotional kits distributed free of cost as samples.

1. ₹1,800 (correct answer)
2. ₹16,200
3. Nil
4. ₹18,000

Answer: A — ₹1,800

Working. Total kits purchased = 100 Total ITC = ₹18,000 ITC per kit = ₹18,000 ÷ 100 = ₹180 Kits distributed as free samples = 10 Blocked ITC = 10 × ₹180 = ₹1,800 Eligible ITC attributable to remaining 90 kits = ₹18,000 − ₹1,800 = ₹16,200.

Explanation. Section 17(5)(h) blocks ITC on goods disposed of by way of gifts or free samples. The ITC attributable to the 10 kits distributed free of cost is therefore blocked. The remaining 90 kits are not distributed as free samples and their attributable ITC is not blocked on this particular ground. Option (d) incorrectly treats the entire purchase credit as ineligible.

Where it goes wrong. Either retaining ITC on free samples or reversing the entire purchase credit instead of the attributable portion.

Authority. CGST Act, section 16(1); CGST Act, section 17(5)(h)

Question 15 · 2 marks · Returns · medium

Scenario. A registered trading company had an aggregate turnover of ₹1.95 crore during the financial year 2025-26. It is not covered by any special category requiring annual return filing and has no other outstanding compliance issue. The company wants to determine whether it must furnish its annual GST return for that financial year in view of the amendment applicable from financial year 2024-25 onwards.

Is the company required to furnish its annual GST return in Form GSTR-9 for FY 2025-26?

1. No, because registered persons having aggregate turnover up to ₹2 crore in a financial year are exempt from furnishing the annual return for that year. (correct answer)
2. No, because all registered persons having aggregate turnover up to ₹5 crore are automatically exempt from annual return filing.
3. Yes, because exemption from annual return is available only where aggregate turnover does not exceed ₹1 crore.
4. Yes, because every registered person must furnish an annual return irrespective of turnover.

Answer: A — No, because registered persons having aggregate turnover up to ₹2 crore in a financial year are exempt from furnishing the annual return for that year.

Working. Aggregate turnover = ₹1.95 crore Annual return exemption threshold = ₹2 crore ₹1.95 crore is less than ₹2 crore. Therefore, the company is exempt from furnishing GSTR-9 for FY 2025-26.

Explanation. Notification No. 15/2025-Central Tax dated 17.09.2025 exempts registered persons whose aggregate turnover in a financial year is up to ₹2 crore from furnishing the annual return for that financial year, with effect for FY 2024-25 onwards. Since the company's turnover is ₹1.95 crore, it falls within this exemption. Option (b) incorrectly confuses the annual return exemption threshold with the ₹5 crore QRMP eligibility threshold.

Where it goes wrong. Confusing the ₹2 crore annual return exemption threshold with the ₹5 crore QRMP eligibility threshold.

Authority. CGST Act, section 44(1); Notification No. 15/2025-Central Tax dated 17.09.2025

Question 16 · 1 marks · Accounts and Records · easy

Scenario. A registered manufacturer maintains its GST books of account and supporting documents for financial year 2025-26. The manufacturer is not involved in any appeal, revision, other proceedings or investigation relating to those records.

For how long must the manufacturer retain its GST books of account and supporting records under section 36?

1. 36 months from the end of the relevant financial year.
2. 72 months from the date of registration under GST.
3. 72 months from the due date of furnishing the annual return for the relevant financial year. (correct answer)
4. 60 months from the date of filing the annual return.

Answer: C — 72 months from the due date of furnishing the annual return for the relevant financial year.

Working. Prescribed retention period = 72 months (6 years) from the due date of furnishing the annual return for the relevant financial year.

Explanation. Section 36 requires every registered person to retain books of account and other records until expiry of 72 months from the due date of furnishing the annual return for the year pertaining to those records. Since the scenario specifies that no appeal, revision, other proceedings or investigation is pending, the extended retention provision does not apply. Option (d) incorrectly uses the date of actual filing rather than the statutory due date.

Where it goes wrong. Calculating the retention period from the actual filing date or the end of the financial year instead of the annual return due date.

Authority. CGST Act, section 35(1); CGST Act, section 36