CA Inter Taxation MCQ Test 9 (Income-tax + GST): answer key

Question 1 · 2 marks · Chapter 3, Unit 4: Capital Gains · medium

Scenario. Ms. Kavya Mehra, a resident individual, owns a residential house in Jaipur, which she acquired on 12 April 2016 for Rs. 42 lakh. On 15 May 2025, she entered into an agreement to sell the property to Mr. Arjun for Rs. 1.50 crore. The stamp duty value on that date was Rs. 1.62 crore. She received Rs. 10 lakh through NEFT on the agreement date. The sale deed was registered on 20 August 2025, when the stamp duty value had increased to Rs. 1.80 crore. Brokerage of Rs. 3 lakh was incurred wholly in connection with the transfer. On 1 October 2024, Kavya had purchased another residential house in Ahmedabad for Rs. 70 lakh. She has not transferred this newly acquired house. During November 2025, Kavya also transferred 2,000 unquoted equity shares of Zenith Private Limited to her cousin for Rs. 18 lakh. The fair market value of these shares, determined in the prescribed manner, was Rs. 25 lakh on the date of transfer. Her cost of acquisition of these shares was Rs. 8 lakh. The company is neither undergoing liquidation nor covered by any prescribed exception to the provisions governing transfer of unquoted shares. Kavya has not incurred any expenditure in connection with the transfer of these shares. She intends to understand the tax implications of all three transactions before finalising her return for A.Y. 2026-27. She has also retained copies of the purchase agreements and payment records for both properties.

Determine the full value of consideration to be adopted for computing capital gains on the transfer of Kavya's residential house under section 50C.

1. Rs. 4,20,000, because municipal valuation must be adopted as the Gross Annual Value under section 23(1) whenever it is higher than the standard rent determined for the let-out residential property.
2. Rs. 1.50 crore, because the stamp duty value on the agreement date does not exceed 110% of the actual consideration and part of the consideration was received through NEFT on or before that date. (correct answer)
3. Rs. 1.80 crore, because the stamp duty value on the registration date is invariably considered for section 50C.
4. Rs. 1.62 crore, because the difference between the agreement-date stamp duty value and actual consideration is taxable irrespective of the prescribed tolerance.

Answer: B — Rs. 1.50 crore, because the stamp duty value on the agreement date does not exceed 110% of the actual consideration and part of the consideration was received through NEFT on or before that date.

Working. Actual consideration = Rs. 1,50,00,000. Agreement-date stamp duty value = Rs. 1,62,00,000. Tolerance limit = Rs. 1,50,00,000 × 110% = Rs. 1,65,00,000. Since Rs. 1,62,00,000 is within the tolerance and NEFT payment was received on the agreement date, deemed full value of consideration = Rs. 1,50,00,000.

Explanation. Where the agreement date differs from the registration date, the stamp duty value on the agreement date may be considered if the whole or part of the consideration is received through a prescribed banking or electronic mode on or before the agreement date. Here, Rs. 10 lakh was received through NEFT on that date. Further, Rs. 1.62 crore is only 108% of Rs. 1.50 crore and does not exceed the 110% tolerance. Hence, actual consideration of Rs. 1.50 crore applies. Option a incorrectly ignores the tolerance.

Where it goes wrong. Applying the agreement-date stamp duty value without checking the 110% tolerance condition.

Authority. Study Material, Chapter 3, Unit 4, section 50C, computation of capital gains on transfer of land or building, page 3.467.

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

Considering the transfer of the residential house and Kavya's earlier acquisition of another residential house, determine the long-term capital gain chargeable to tax after considering the exemption under section 54.

1. Rs. 35 lakh, because the capital gain is Rs. 1.05 crore and the cost of the residential house purchased within one year before transfer, amounting to Rs. 70 lakh, qualifies for exemption. (correct answer)
2. Rs. 1.05 crore, because section 54 permits exemption only where the new residential house is purchased after the transfer of the original asset.
3. Rs. 35 lakh, because the entire capital gain is exempt under section 54 and the remaining amount is taxable only as income from other sources.
4. Rs. 75 lakh, because only Rs. 30 lakh of the new residential house cost qualifies for exemption after deducting brokerage from the investment.

Answer: A — Rs. 35 lakh, because the capital gain is Rs. 1.05 crore and the cost of the residential house purchased within one year before transfer, amounting to Rs. 70 lakh, qualifies for exemption.

Working. Full value of consideration = Rs. 1,50,00,000. Less: Brokerage = Rs. 3,00,000. Net sale consideration = Rs. 1,47,00,000. Less: Cost of acquisition = Rs. 42,00,000. LTCG = Rs. 1,05,00,000. Less: Section 54 exemption = Rs. 70,00,000. LTCG chargeable to tax = Rs. 35,00,000.

Explanation. The house is a long-term capital asset. Its full value of consideration is Rs. 1.50 crore under section 50C. After deducting brokerage of Rs. 3 lakh and acquisition cost of Rs. 42 lakh, LTCG is Rs. 1.05 crore. Section 54 permits purchase of a residential house in India within one year before or two years after transfer. Kavya purchased the Ahmedabad house within the permitted preceding period. The exemption is Rs. 70 lakh, leaving Rs. 35 lakh chargeable. Option c incorrectly treats the entire gain as exempt.

Where it goes wrong. Confusing the permissible purchase period under section 54 with a requirement that the new house must be acquired only after the original asset is transferred.

Authority. Study Material, Chapter 3, Unit 4, computation of long-term capital gains and section 54, pages 3.370 and 3.474-3.476.

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

Determine the full value of consideration and capital gain arising from the transfer of Kavya's unquoted equity shares under section 50CA.

1. The full value of consideration is Rs. 18 lakh and the capital gain is Rs. 10 lakh, because the actual consideration received must be adopted for every transfer of shares.
2. The full value of consideration is Rs. 25 lakh and the capital gain is Rs. 17 lakh, because the prescribed fair market value is deemed to be the full value of consideration where actual consideration is lower. (correct answer)
3. The full value of consideration is Rs. 25 lakh and the capital gain is Rs. 10 lakh, because section 50CA applies only for determining the value of consideration and not for computing the resulting capital gain.
4. The full value of consideration is Rs. 18 lakh and the capital gain is Rs. 17 lakh, because the fair market value is substituted only for determining the cost of acquisition.

Answer: B — The full value of consideration is Rs. 25 lakh and the capital gain is Rs. 17 lakh, because the prescribed fair market value is deemed to be the full value of consideration where actual consideration is lower.

Working. Actual consideration = Rs. 18,00,000. Prescribed FMV = Rs. 25,00,000. Since actual consideration is lower, section 50CA substitutes FMV. Full value of consideration = Rs. 25,00,000. Less: Cost of acquisition = Rs. 8,00,000. Capital gain = Rs. 17,00,000.

Explanation. Section 50CA applies where consideration received or accruing on transfer of an unquoted share is lower than its fair market value determined in the prescribed manner. The prescribed FMV of Rs. 25 lakh is therefore deemed to be the full value of consideration. Deducting the acquisition cost of Rs. 8 lakh gives a capital gain of Rs. 17 lakh. Option c correctly identifies the deemed consideration but incorrectly retains the actual consideration while computing the gain.

Where it goes wrong. Applying the deemed consideration provision but subsequently calculating capital gains using the actual transfer price.

Authority. Study Material, Chapter 3, Unit 4, section 50CA, page 3.433 and related discussion.

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

Scenario. Mr. Raghav Bansal, a resident individual, operates a retail trading business in electrical goods in Pune. His turnover for the P.Y. 2025-26 was Rs. 2.85 crore, of which Rs. 12 lakh was received in cash and the balance through account payee instruments and prescribed electronic modes. All non-cash receipts were received during the previous year or before the due date of filing the return under section 139(1). Cash receipts constitute less than 5% of his total turnover. His books show an actual business profit of Rs. 14 lakh. Raghav had opted for presumptive taxation in the immediately preceding assessment year. During the same year, his wife, Ms. Tanvi Bansal, independently carried on the profession of architecture. Her gross professional receipts amounted to Rs. 72 lakh, including cash receipts of Rs. 3.20 lakh. The remaining receipts were received through banking channels. She is a resident individual and has no income from any agency business or commission. Her books indicate professional income of Rs. 31 lakh. Separately, Raghav's brother, Mr. Dev Bansal, is engaged in the business of plying goods carriages. During the entire P.Y. 2025-26, Dev owned two heavy goods vehicles having gross vehicle weights of 16,000 kg and 14,000 kg respectively, and one other goods carriage weighing 8,000 kg. All three vehicles remained owned by him throughout the year. His books indicate business income of Rs. 4.20 lakh from this activity. However, he has neither maintained the prescribed books of account nor obtained an audit report. The brothers have approached their tax adviser to determine the presumptive income applicable to their respective activities and the conditions governing their claims.

Determine Raghav's presumptive business income from retail trading under section 44AD for P.Y. 2025-26.

1. Rs. 17.34 lakh, because 8% applies to cash receipts and 6% applies to receipts through prescribed electronic modes, and the turnover and cash-receipt conditions are satisfied. (correct answer)
2. Rs. 2,10,000, because interest on capital borrowed for acquisition of self-occupied property is deductible up to Rs. 2,00,000 plus an additional allowable deduction of Rs. 10,000 for repair loans.
3. Rs. 22.80 lakh, because 8% of the entire turnover is taxable irrespective of the mode of receipt.
4. Rs. 17.10 lakh, because 6% applies to the entire turnover where cash receipts are within the 5% threshold.

Answer: A — Rs. 17.34 lakh, because 8% applies to cash receipts and 6% applies to receipts through prescribed electronic modes, and the turnover and cash-receipt conditions are satisfied.

Working. Total turnover = Rs. 2,85,00,000. Cash receipts = Rs. 12,00,000. Non-cash receipts = Rs. 2,73,00,000. Cash receipt percentage = 12,00,000 / 2,85,00,000 × 100 = 4.21% approximately. Eligible for enhanced Rs. 3 crore threshold. Presumptive income = 8% of Rs. 12,00,000 + 6% of Rs. 2,73,00,000 = Rs. 96,000 + Rs. 16,38,000 = Rs. 17,34,000.

Explanation. Raghav's turnover of Rs. 2.85 crore is within the enhanced Rs. 3 crore threshold applicable where cash receipts do not exceed 5% of turnover. His cash receipts are below that limit. The presumptive rate is 8% for cash receipts and 6% for receipts through prescribed modes received within the stipulated period. Therefore, presumptive income is Rs. 17.34 lakh. Option d incorrectly applies the 6% rate to cash receipts also.

Where it goes wrong. Applying the enhanced turnover limit correctly but incorrectly applying the 6% rate to cash receipts.

Authority. Study Material, Chapter 3, Unit 3, section 44AD, presumptive income and turnover limits, pages 3.308-3.310 and 3.313-3.314.

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

Determine whether Tanvi can opt for presumptive taxation under section 44ADA and, if eligible, the presumptive professional income chargeable to tax.

1. She is eligible and her presumptive income is Rs. 31 lakh, because the actual profit shown in her books is higher than 50% of gross receipts.
2. She is not eligible because the gross receipt ceiling under section 44ADA is Rs. 50 lakh in every case.
3. She is eligible and her presumptive income is Rs. 36 lakh, because her gross receipts are within Rs. 75 lakh and cash receipts do not exceed 5% of total gross receipts. (correct answer)
4. She is not eligible because any receipt in cash disqualifies a professional from applying section 44ADA.

Answer: C — She is eligible and her presumptive income is Rs. 36 lakh, because her gross receipts are within Rs. 75 lakh and cash receipts do not exceed 5% of total gross receipts.

Working. Gross professional receipts = Rs. 72,00,000. Cash receipts = Rs. 3,20,000. Cash receipt percentage = 3,20,000 / 72,00,000 × 100 = 4.44% approximately. Since cash receipts do not exceed 5%, enhanced ceiling = Rs. 75 lakh. Tanvi qualifies. Presumptive income = 50% × Rs. 72,00,000 = Rs. 36,00,000.

Explanation. Architecture is a specified profession covered by section 44AA(1). The enhanced gross receipt ceiling of Rs. 75 lakh applies where aggregate cash receipts do not exceed 5% of total gross receipts. Tanvi's cash receipts are approximately 4.44% of total receipts, and her gross receipts are Rs. 72 lakh. She is eligible. Presumptive income is 50% of Rs. 72 lakh, i.e. Rs. 36 lakh. Option a incorrectly substitutes the book profit for the presumptive amount.

Where it goes wrong. Ignoring the enhanced gross receipt threshold and treating the standard Rs. 50 lakh threshold as applicable in every case.

Authority. Study Material, Chapter 3, Unit 3, section 44ADA, eligibility and presumptive income, pages 3.308-3.310 and 3.339.

Question 6 · 2 marks · Chapter 3, Unit 3: Profits and Gains of Business or Profession · hard

Considering Dev's ownership of goods carriages and the actual profit disclosed in his books, determine the amount of business income chargeable under section 44AE.

1. Rs. 2,00,000, because current year house property loss can be set off against salary income up to Rs. 2,00,000 under section 71(3A), while the remaining loss must be carried forward.
2. Rs. 3.60 lakh, because only heavy goods vehicles qualify for presumptive taxation under section 44AE.
3. Rs. 4.50 lakh, because Dev owns not more than ten goods carriages and cannot claim lower profits without maintaining the prescribed books and obtaining an audit report. (correct answer)
4. Rs. 4.50 lakh, because section 44AE permits a lower profit only when the assessee maintains books, but an audit report is not required in such circumstances.

Answer: C — Rs. 4.50 lakh, because Dev owns not more than ten goods carriages and cannot claim lower profits without maintaining the prescribed books and obtaining an audit report.

Working. Heavy goods vehicle 1: 16 tons × Rs. 1,000 × 12 = Rs. 1,92,000. Heavy goods vehicle 2: 14 tons × Rs. 1,000 × 12 = Rs. 1,68,000. Other goods carriage: Rs. 7,500 × 12 = Rs. 90,000. Total presumptive income = Rs. 1,92,000 + Rs. 1,68,000 + Rs. 90,000 = Rs. 4,50,000. Since Dev has not maintained prescribed books or obtained an audit report, the lower actual profit of Rs. 4.20 lakh cannot be substituted.

Explanation. Dev owns only three goods carriages, satisfying the ownership condition under section 44AE. For each heavy goods vehicle, presumptive income is Rs. 1,000 per ton of gross vehicle weight per month or part of a month. For the other vehicle, the prescribed amount is Rs. 7,500 per month. The resulting amount is Rs. 4.50 lakh. Claiming lower profits requires prescribed books under section 44AA and audit under section 44AB. Option d overlooks the audit requirement.

Where it goes wrong. Recognising that lower profits may be declared under section 44AE but overlooking the combined books-of-account and tax-audit requirements.

Authority. Study Material, Chapter 3, Unit 3, sections 44AE(7), 44AA and 44AB, pages 3.304 and 3.310-3.311; illustration relating to goods carriages.

Question 7 · 2 marks · Chapter 3, Unit 1: Salaries · medium

Scenario. Ms. Niharika Rao is employed in Delhi and exercises the option of shifting out of the default tax regime for P.Y. 2025-26. Her monthly basic salary was Rs. 60,000 throughout the year. She received dearness allowance of Rs. 10,000 per month, which forms part of salary for retirement benefits, and house rent allowance of Rs. 32,000 per month. She paid monthly rent of Rs. 30,000 for residential accommodation in Delhi throughout the year. Her employer deducted professional tax of Rs. 2,400 from her salary during the year. She received no other allowances, bonus or perquisites. She is not entitled to any entertainment allowance deduction.

Compute Niharika's income chargeable under the head Salaries for P.Y. 2025-26 under the optional tax regime.

1. Rs. 8,98,000, because the standard deduction is Rs. 50,000 but professional tax paid by the employee is not deductible under the optional tax regime.
2. Rs. 8,95,600, because the HRA exemption is Rs. 2,76,000 and the standard deduction is Rs. 50,000, but professional tax is treated as an exemption under section 10.
3. Rs. 8,71,600, because the entire HRA received is exempt to the extent of rent paid less 10% of salary and the standard deduction is Rs. 50,000.
4. Rs. 8,95,600, because taxable HRA is Rs. 1,08,000, standard deduction is Rs. 50,000 and professional tax of Rs. 2,400 is deductible. (correct answer)

Answer: D — Rs. 8,95,600, because taxable HRA is Rs. 1,08,000, standard deduction is Rs. 50,000 and professional tax of Rs. 2,400 is deductible.

Working. Basic salary = Rs. 60,000 × 12 = Rs. 7,20,000. DA = Rs. 10,000 × 12 = Rs. 1,20,000. HRA received = Rs. 32,000 × 12 = Rs. 3,84,000. Salary for HRA = Rs. 8,40,000. Rent paid less 10% of salary = Rs. 3,60,000 - Rs. 84,000 = Rs. 2,76,000. 50% of salary = Rs. 4,20,000. HRA exemption = least of Rs. 3,84,000, Rs. 2,76,000 and Rs. 4,20,000 = Rs. 2,76,000. Taxable HRA = Rs. 1,08,000. Gross salary = Rs. 7,20,000 + Rs. 1,20,000 + Rs. 1,08,000 = Rs. 9,48,000. Less: Standard deduction = Rs. 50,000. Less: Professional tax = Rs. 2,400. Taxable salary = Rs. 8,95,600.

Explanation. Salary for HRA purposes includes basic salary and DA forming part of retirement benefits. The exemption is the least of actual HRA, rent paid less 10% of salary, and 50% of salary for Delhi. These amounts are Rs. 3.84 lakh, Rs. 2.76 lakh and Rs. 4.20 lakh respectively. Taxable HRA is Rs. 1.08 lakh. Standard deduction of Rs. 50,000 and professional tax of Rs. 2,400 are deductible under section 16. Option b gives the correct final figure but incorrectly classifies professional tax as an exemption.

Where it goes wrong. Confusing an exemption under section 10 with a deduction under section 16 while computing taxable salary.

Authority. Study Material, Chapter 3, Unit 1, section 10(13A), Rule 2A and section 16, pages 3.6, 3.21-3.23 and 3.100-3.101.

Question 8 · 1 marks · Chapter 1: Basic Concepts · hard

Scenario. Mr. Aditya commenced a new business on 1 December 2025. He had no other business or professional activity during the financial year 2025-26. His business continued until 31 March 2026 and earned income during this period. He is an individual following the regular financial year accounting period. He is preparing his income-tax computation for the assessment year immediately following P.Y. 2025-26.

What would constitute the previous year for Aditya in respect of his newly commenced business under section 3?

1. Rs. 75,000, because the deduction under section 80DD is admissible at Rs. 75,000 for normal disability and Rs. 1,25,000 for severe disability irrespective of actual expenditure.
2. The period from 1 April 2026 to 31 March 2027, because income from a newly commenced business is assessed in the financial year immediately following its commencement.
3. The period from 1 December 2025 to 31 March 2027, because the previous year continues until the end of the assessment year.
4. The period from 1 December 2025 to 31 March 2026, because where a business is newly set up during a financial year, the previous year begins on the date of setting up and ends on 31 March. (correct answer)

Answer: D — The period from 1 December 2025 to 31 March 2026, because where a business is newly set up during a financial year, the previous year begins on the date of setting up and ends on 31 March.

Working. Date of commencement of business = 1 December 2025. End of financial year = 31 March 2026. Previous year for the newly commenced business = 1 December 2025 to 31 March 2026.

Explanation. Section 3 provides that where a business or profession is newly set up during a financial year, the previous year in respect of that business or profession is the period beginning with the date of setting up and ending with the said financial year. Since Aditya commenced business on 1 December 2025, the relevant period ends on 31 March 2026. Option a incorrectly applies the full financial-year period despite the special provision for a newly commenced business.

Where it goes wrong. Applying the ordinary twelve-month financial-year concept without considering the special rule for a newly set-up business or profession.

Authority. Study Material, Chapter 1, Basic Concepts, definition of Previous Year, section 3.

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