Assessment and Returns Short Answer Type Questions

Assessment and Returns Short Answer Type Questions

Question 1.
What are the main features of GST payment process?
Answer:
The payment processes under proposed GST regime will have the following features:

  • Electronically generated challan from GSTN Common Portal in all modes of payment and no use of manually prepared challan.
  • Facilitation for the taxpayer by providing hassle free, anytime, anywhere mode of payment of tax.
  • Convenience of making payment online.
  • Logical tax collection data in electronic format.
  • Faster remittance of tax revenue to the Government Account.
  • Paperless transactions.
  • Speedy Accounting and reporting.
  • Electronic reconciliation of all receipts.
  • Simplified procedure for banks.
  • Warehousing of Digital Challan.

Question 2.
Write short notes on first return in GST.
Answer:
The following extract from GST Law (model) explains about 1st filing of GST return – Every registered taxable person paying tax under the provisions of section 7 shall furnish the first return containing the details of:
(a) outward supplies under section 25 from the date on which he became liable to registration till the end of the month in which the registration has been granted;

(b) inward supplies under section 26 from the effective date of registration till the end of the month in which the registration has been granted: Provided that a registered taxable person paying tax under the provisions of section 8 shall furnish the first return for the period starting from the date on which he becomes a registered taxable person till the end of the quarter in which the registration has been granted.

(2) Provisions of section 25, 26 and 27, other than the provision pertaining to tax period, shall apply mutatis mutandis to the said person furnishing return under subsection (1).

Question 3.
What is Input Credit? And how to claim it?
Answer:
Input credit means at the time of paying tax on output, you can reduce the tax you have already paid on inputs. Which means if a are person is manufacturer, supplier, agent, e-commerce operator, aggregator or any of the persons mentioned here, registered under GST, he is eligible to claim INPUT CREDIT for tax paid by the PURCHASES.

To claim input credit under GST:

  • A person must have a tax invoice(of purchase) or debit note issued by registered dealer.
  • Should have received the goods/services.
  • The tax charged on purchases has been deposited/paid to the government by the supplier in cash or via claiming input credit.
  • Supplier has filed GST returns.

Therefore, to allow you to claim input credit on Purchases all your suppliers must be GST compliant as well.
It is possible to have unclaimed input credit. Due to tax on purchases being higher than tax on sale. In such a case, you are allowed to carry forward or claim a refund.
If tax on inputs > tax on output → carry forward input tax or claim refund
If tax on output > tax on inputs → pay balance

No interest is paid on input tax balance by the government:

  • Input, tax credit cannot be taken on purchase invoices which are more than one year old. Period is calculated from the date of the tax invoice.
  • Since GST is charged on both goods and services, input credit can be availed on both goods and services (except those which are on the exempted/ negative list).
  • Input tax credit is allowed on capital goods.
  • Input tax is not allowed for goods and services for personal use.
  • No input tax credit shall be allowed after GST return has been filed for September following the end of the financial year to which such invoice pertains or filing of relevant annual return, whichever is earlier.

Question 4.
Explain the Types of GST Returns and their Due Dates.
Answer:
A return is a document that a taxpayer is required to file as per the law with the tax administrative authorities. Under the GST law, a normal taxpayer will be required to furnish three returns monthly and one annual return. Similarly, there are separate returns for a taxpayer registered under the composition scheme, taxpayer registered as an Input Service Distributor, a person liable to deduct or collect the tax (TDS/TCS).
The various types of returns are:

Return Form What to file? By Whom? By When?
GSTR-1 Details of outward supplies of taxable goods and/or services effected Registered Taxable Supplier 10th of the next month
GSTR-2 Details of inward supplies of taxable goods and/or services effected claiming input tax credit. Registered Taxable Recipient 15th of the next month
GSTR-3 Monthly return on the basis of finalization of details of outward supplies and inward supplies along with the payment of amount of tax. Registered Taxable Person 20th of the next month
GSTR-4 Quarterly return for compounding taxable person. Composition Supplier 18th of the month succeeding quarter
GSTR-5 Return for Non-Resident foreign taxable person Non-Resident Taxable Person 20th of the next month
GSTR-6 Return for Input Service Distributor Input Service Distributor 13th of the next month
GSTR-7 Return for authorities deducting tax at source. Tax Deductor 10th of the nerxt month
GSTR-8 Details of supplies effected through E-commerce Operator/ 10th of the next month
GSTR-9 e-commerce operator and the amount of tax collected Tax Collector 31st December of next financial year
GSTR-10 Annual Return Registered Taxable Person Within three months of the date of cancellation or date of cancellation order, whichever is later.
GSTR-11 Final Return Taxable person whose registration has been surrendered or cancelled. 28th of the month following the month for which statement is filed

All these returns are required to be filed digitally online through a common portal to be provided by GSTIM, non-government, private limited company promoted by the central and state governments with the specific mandate to build the IT infrastructure and the services required for implementing Goods and Services Tax (GST).

Question 5.
Write short notes on matching, reversal and reclaim of input tax credit, Sec 42 of CGST Act, 2017.
Answer:
(1) The details of every inward supply furnished by a registered person (hereafter in this section referred to as the “recipient”) for a tax period shall, in such manner and within such time as may be prescribed, be matched:
(a) with the corresponding details of outward supply furnished by the corresponding registered person (hereafter in this section referred to as the “supplier”) in his valid return for the same tax period or any preceding tax period.

(b) with the integrated goods and services tax paid under section 3 of the Customs Tariff*Act, 1975 in respect of goods imported by him; and

(c) for duplication of claims of input tax credit.

(2) The claim of input tax credit in respect of invoices or debit notes relating to inward supply that match with the details of corresponding outward supply or with the integrated goods and services tax paid under section 3 of the Customs Tariff Act, 1975 in respect of goods imported by him shall be finally accepted and such acceptance shall be communicated, in such manner as may be prescribed, to the recipient.

(3) Where the input tax credit claimed by a recipient in respect of an inward supply is in excess of the tax declared by the supplier for the same supply or the outward supply is not declared by the supplier in his valid returns, the discrepancy shall be communicated to both such persons in such manner as may be prescribed.

(4) The duplication of claims of input tax credit shall be communicated to the recipient in such manner as may be prescribed.

(5) The amount in respect of which any discrepancy is communicated under subsection (3) and which is not rectified by the supplier in his valid return for the month in which discrepancy is communicated shall be added to the output tax liability of the recipient, in such manner as may be prescribed, in his return for the month succeeding the month in which the discrepancy is communicated.

(6) The amount claimed as input tax credit that is found to be in excess on account of duplication of claims shall be added to the output tax liability of the recipient in his return for the month in which the duplication is communicated.

Question 6.
What is annual return? Explain.
Answer:
Every registered taxable person is required to furnish an annual return under GST law, electronically in FORM GSTR-9 through the Common GST Portal. Likewise, a taxable person registered as a composition dealer shall furnish the annual return in FORM GSTR-9A.

GST law also states that every registered taxable- person whose aggregate turnover during a financial year exceeds one crore rupees shall get his accounts audited. Such businesses shall furnish a copy of audited annual accounts and a reconciliation statement, duly certified, in FORM GSTR-9B, electronically through the Common Portal. GSTR-9 needs to be furnished by 31st December of next financial year.

The various heads under which information needs to be furnished:
GSTIN – Each taxpayer will be allotted a state-wise PAN-based 15-digit Goods and Services Taxpayer Identification Number (GSTIN). A format of proposed GSTIN has been shown in the image below. GSTIN of the taxpayer will be auto- populated at the time of return filing.
(i) Name of Taxable Person- Name of the taxpayer, will also be auto- populated at the time of logging into the common GST Portal.

(ii) Whether Liable to Statutory Audit – This head needs to be marked as applicable if the turnover exceeds Rs. 1 crore in the financial year for which annual return is being filed.

(iii) Auditors – In case the turnover of the registered business exceeds the threshold limit for audit, the taxpayer needs to provide the details of the appointed auditor who has audited the records furnished by the taxpayer.

(iv) Details of Expenditure Under the following heads, the taxpayer needs to furnish information of purchase of goods and services. Information needs to be bifurcated between goods and services along with HSN and SAC code respectively and the taxable value.
Total value of purchases on which ITC availed (inter-State)
Total value of purchases on which ITC availed (intra-State)
Total value of purchases on which ITC availed (Imports)

(v) Details of Income: All the supplies made in a tax year needs to be reported under the following heads, differentiating between goods and services.
Total value of supplies on which GST paid (inter-State Supplies)
Total value of supplies on which GST Paid (intra-State Supplies)
Total value of supplies on which GST Paid (Exports)
Total value of supplies on which no GST Paid (Exports)
Value of Other Supplies on which no GST paid
Purchase Returns
Other Income (Income other than from supplies)

(vi) Return Reconciliation Statement – Once all the information is furnished, the system will auto-reconcile the transactions and will determine tax liability payable against the tax actually paid. The system will also populate the amount of tax difference, interest and/or penalty if any.

(vii) Other – Any other amount payable will get auto-populated here. This may include arrears or any liability as a result of the assessment.

(viii) Profit as per the Profit and Loss Statement – Every registered taxpayer needs to report a breakup of gross profit, profit after tax and net profit under this head for the tax year for which return is filed.

Question 7.
What is final return? Explain.
Answer:
Every registered taxable person is required to furnish a finai return under section 31, and they shall furnish such returns electronically in FORM GSTR- 10 through the Common Portal within three months of the date of cancellation or date of cancellation order, whichever is later.
A taxable person who ceases to do business voluntarily or by way of an order by the authorities is required to furnish this return.
Following are the sections which will be auto-populated at the time of system login:

  • GSTIN
  • Legal Name
  • Business Name
  • Address

The sections under which information needs to be furnished:
(i) Application Reference Number – ARN needs to be furnished in case the application for cancellation has been approved by the authorities. In such cases, ARN will be communicated to the taxpayer at the time of passing the cancellation order.

(ii) Effective Date of Surrender/Cancellation – This will require the date of cancellation of GST registration as contained in the order.

(iii) Whether cancellation order has been passed – Taxpayer needs to specify whether the return is being filed on the basis of cancellation order or on a voluntary basis.

(iv) If Yes, Unique ID of Cancellation order – Unique ID will be provided by the authorities at the time of passing cancellation order.

(v) Date of Cancellation Order – This will be the date on which the GST registration cancellation order is passed by the authorities.

(vi) Particulars of Closing Stock – Taxpayer needs to furnish details of closing stock held at the time of ceasing the business. Any amount of credit lying in such stock needs to be paid along with this return.

(vii) Amount of Tax Payable on Closing Stock – As mentioned above, credit lying in input and/or capital goods needs to be paid to the administration. This amount is auto-computed under this head on the basis of the declaration of closing stock of goods.

(ix) Verification – Once ail the particulars are furnished correctly, the taxpayer is required to sign digitally either through a digital signature certificate (DSC) or Aadhar based signature verification to authenticate the return.

Practical Problems

Problem 1.
Mr. Balachandra of Karnataka purchased goods from Mr. Somu of Karnataka for ₹ 8, 55,000 including CGST @6% & SGST @ 6% in the month of July, 2017. He incurred ₹ 250000 as manufacturing expenses and added 30% profit on cost. Mr. Balachandra sold 80% of the goods to Mr. Rama of Karnataka on 2.8. 2017. Remaining 20% of the goods were transferred to his branch in AP on 2.8.2017. Compute net GST payable.

Problem 2.
Shankara enterprises, a registered dealer provides the following details for the year ended 31.3.2018
1. Purchase of raw material within state (1500 units), inclusive of CGST@6% &SGST @6%. = 4,05,000
2. Interstate purchases of raw material, inclusive of IGST@12% = 3,06,000
3. Import of raw material from other state = ₹ 4,50,000
4. Sale of goods within the state ₹ 10,92,000
5. Sale of exempted goods within the state ₹ 2,25,000
6. Closing stock of 200 units of raw material purchased within the state as on 31.3.2018. Compute net GST payable.

Problem 3.
Nandi Hills Limited (Registered dealer) situated in Pune has purchased raw material from a local registered dealer for ₹ 50,000, and Paid Consultation fees ₹ 8, 000, spent storage cost ₹ 4, 000, transportation cost ₹ 6, 000, Wages 10,000, and packaging cost ₹ 12,480. Calculate Net GST payable, if he sells goods (locally) at a profit is ₹ 20,50,000. (Assume CGST is 6% & SGST is 6%)

Problem 4.
Mr. Venkataramayan (Registered dealer) purchased goods 780,000 from a local registered dealer. He paid legal fees of ₹ 5,000. Purchased plastic packaging materials 75,000, transportation cost ₹ 5,000, wages ₹ 5,000, other manufacturing expenses ₹ 5000, consultation fees ₹ 12,000. If CGST is 9% and SGST is 9%, calculate net GST payable. He sold goods within the state at a profit of ₹ 20,33,000.

Problem 5.
Mr. Kanthi purchased goods for 710, 50,000 from a registered dealer outside the State.
He sold goods locally for ₹ 10, 50,000.
Again he sold goods outside the State for ₹ 10, 00,000.
If CGST is 9%, SGST is 9% and IGST 18%.
calculate net GST payable.

Problem 6.
Shri Vijendra Prasad (Registered dealer) imported goods for ₹ 90,000/- and incurred expenses to produce final saleable goods of ₹ 10,000. BCD @ 10 % was chargeable on imported goods. These manufactured goods were sold in the custom warehouse for ₹ 45, 00000. Rate IGST is 12%.Landing charges @1%. Compute value
of imported goods, aggregate Sale value and net GST payable for the transaction.

Problem 7.
The taxable supplies made by Mr. Akash (Registered Dealer) in Karnataka is as follows:
1. Intra state supplies ₹ 7,00,000
2. Interstate supplies ₹ 7,00,000
3. He purchases ten vacuum cleaners worth ₹ 2, 00,000 for business purposes but uses them for his domestic purpose.
Calculate net GST payable, if Mr. Akash has IGST credit of ₹ 1, 50,000. (CGST is 6%, SGST is 6% and IGST is 12%)

Problem 8.
Mr. X manufactures 10,000 units of goods. He sold 5,000 units of goods within the state, 3,000 units outside the state and the balance 2,000 units is stock transfer outside the state. Goods were sold to wholesaler @ ₹ 250 per unit. (Consider ITC is ₹ 300000 and ₹ 150000 for CGST and SGST respectively. Compute net GST liability.
Note: Assume CGST is 9%, SGST IS 9% & IGST is 18%.

Problem 9.
Shakir Ahamed, a registered dealer, based in Kerala submits the following information. Compute net IGST payable.
Import of raw material from Karnataka ₹ 2, 10,000
Raw material purchased from Kerala ₹ 2, 24,000
Raw material purchased from Karnataka ₹ 95, 000
Transportation and manufacturing ₹ 67,000
Z sold entire stock to A based in Karnataka at a profit o f 10% on the cost of production. IGST rate on such sale is 18%.

Problem 10.
From the following details, compute the value of taxable services and services tax liability for the Month of September, 2017.

Particulars Amount in ₹
Services provided to foreign diplomatic mission 6,00,000
Aerial advertising 5,00,000
Service by way of private tuitions 80,000
Speed post services 70,000
House given on rent for residential purpose 50,000
Value of free services rendered to friends 2,00,000
Services rendered to UNO 5,00,000
Certification for exchange control purpose 1,00,000
Secretarial auditing 25,000
Fees to act as a liquidator 3,00,000
Vacant land used for horticulture 10,00,000
Sale of time slot by broadcasting organisation 2,00,000
Services rendered within Indian territorial water 4,00,000
Services relating to supply of farm labour 2,50,000
Nov 2017

Solution:
Computation of taxable services and GST Payable

Particulars Amount (in ₹)
Services provided by Foreign diplomatic mission Exempted
Aerial advertising 5,00,000
Service by way of private tuitions 80,000
Speed post services 70,000
House given on rent for residential purpose Exempted
Value of free services rendered to friends 2,00,000
Services rendered to UNO Exempted
Certification for exchange control purpose 1,00,000
Secretarial auditing 25,000
Fees to act as a liquidator 3,00,000
Vacant land used for horticulture Exempted
Sale of time slot by broadcasting organisation 2,00,000
Services rendered within Indian Territorial water 4,00,000
Services relating to supply of farm labour Exempted
Transaction value 18,75,000
CGST Payable (18,75,000 x 9%) 1,68,750
SGST Payable (18,75,000 x 9%) 1,68,750
Total GST Payable 3,37,500

Assessment and Returns Very Short Answer Type Questions

Assessment and Returns Very Short Answer Type Questions

Question 1.
Give the meaning of Assessment.
Answer:
Assessment means determination of tax liability under this act and includes self-assessment, re-assessment, provisional assessment, summary assessment and best judgment assessment

Question 2.
When the first returns needs to be filed by taxable person in respect of outward suppliers?
Answer:
First returns of outwards supplies needs to be filed from the date on which he became liable to registration till the end of the month in which the registration has been granted.

Question 3.
When the-first returns needs to be filed by taxable person in respect of inward suppliers?
Answer:
First returns of inwards supplies needs to be filed from the date of registration till the end of the month in which the registration has been granted.

Question 4.
Who is required to furnish the details of outward taxable supply?
Answer:
All registered taxable persons are required to furnish the details of outward supplies of goods and services made during the tax period.

Question 5.
When is GST payment to be done by the taxable person?
Answer:
At the time of supply of Goods as explained in Section 12 and at the time of supply of services as explained in Section 13. The time is generally the earliest of one of the three events, namely receiving payment, issuance of invoice or completion of supply. Different situations envisaged and different tax points have been explained in the aforesaid sections.

Question 6.
What is a tax liability register?
Answer:
Tax Liability Register will reflect the total tax liability of a taxpayer (after netting) for the particular month.

Question 7.
What is a Cash Ledger?
Answer:
The information will be reflected on real time basis. This ledger can be used for making any payment on account of GST.

Question 8.
What is input tax?
Answer:
“Input tax” has been defined in section 2 (57) of the MGL and section 2 (1) (d) of the IGST. Act. Input tax in relation to a taxable person, means the {IGST and CGST} in respect of CGST Act and {IGST and SGST} in respect of SGST Act, charged on any supply of goods and/or services to him which are used, or are intended to be used, in. the course or furtherance of his business and includes the tax payable under sub-section (3) of section 7. Under the IGST Act, input tax is defined as IGST, CGST or SGST charged on any supply of goods and / or services.

Question 9.
What is an E-FPB?
Answer:
E-FPB stands for Electronic Focal Point Branch. These are branches of authorized banks which are authorized to collect payment of GS.T. Each authorized bank will nominate only one branch as its E-FPB for pan India Transactions. The E-FPB will have to open accounts under each major head for all governments. Total 38 accounts (one each for CGST, IGST and one each for SGST for each State/UT Govt.) will have to be opened. Any amount received by such E-FPB towards GST will be credited to the appropriate account held by such E-FPB.

Question 10.
How will the Supplier account for this TPS while filing his return?
Answer:
Any amount shown as TDS will be reflected in the electronic cash ledger of the concerned supplier. He can utilize this amount towards discharging his liability towards tax, interest fees and any other amount.

Question 11.
What is the implication of different definition of “input tax” in three acts viz CGST, SGST and IGST Acts?
Answer:
It implies that input tax consists of IGST & CGST in CGST Act and IGST & SGST in SGST Act. In the IGST Act, input tax consists of all three taxes namely, IGST, CGST and SGST.

It further implies that credit of all three can be used for discharging IGST liability, whereas only credit of IGST & CGST can be^taken in CGST Act and that of IGST & SGST can be taken under SGST Act. Further the credit of CGST & SGST cannot be cross-utilized.

Question 12.
Does Input tax includes tax (CGST/ IGST/SGST) paid on input goods, input services and/ or capital goods?
Answer:
Yes, in terms .of section 2(54), 2(55) & 2(20) of the MGL respectively. It may be noted that credit of tax paid on capital goods also is permitted to be availed in one installment.

Question 13.
What are the details to be submitted while furnishing the details of outward supply?
Answer:
The supplier has to furnish the details of invoices, debit notes, credit notes and revised invoices issued in relation to outward supplies made during the tax period. •

Question 14.
What is first Ireturn?
Answer:
Every registered person who has made outward supplies in the period between the date on which he became liable to registration till the date on which registration has been granted shall declare the same in the first return furnished by him after grant of registration.

Question 15.
Who is required to file an annual return?
Answer:
All registered taxable persons are required to furnish an annual return for every financial year in form GSTR-9. A registered taxable person opting to pay tax under the composition scheme is required to file the annual return in form GSTR-9A.

Question 16.
Who is required to furnish final return?
Answer:
Any registered taxable person whose registration whose registration has been cancelled is required to file final return in form GSTR-10. The return has to be filed within 3 months from the date of cancellation or date of order of cancellation, whichever is earlier.

Question 17.
What do you mean by Zero rated transactions?
Answer:
Certain supplies of goods and services are Zero rated i.e GST is not payable on supply of goods and services but still input tax credit is available.

Question 18.
Distinguish between Zero rated transaction and exempt transaction.
Answer:
In case of Zero rated transactions, input tax credit is available, while in case of exempt transactions, input tax credit is not available.

Procedure and Levy Under GST Short Answer Type Questions

Procedure and Levy Under GST Short Answer Type Questions

Question 1.
What is the registration process for GST in India?
Answer:
GST registration process will be online through a portal maintained by Central Government of India. Govt, will also appoint GSPs (GST Suvidha Providers) to help businesses with the registration process.

Based on the information provided by GSTN, registration process looks like this:
The applicant, will need to submit his PAN, mobile number and email address in Part A of Form GST REG-01 on the GSTN portal or through Facilitation center (notified by board or commissioner).

The PAN is verified on the GST Portal. Mobile number and E-mail address are verified with a one-time password (OTP). Once the verification is complete, applicant will receive an application reference number on the registered mobile number and via E-mail. An acknowledgement should be issued to the applicant in FORM GST REG-02 electronically.

Applicant needs to fill Part- B of Form GST REG-01 and specify the application reference number. Then the form can be submitted after attaching required documents. If additional information is required, Form GST REG-03 will be issued. Applicant needs to respond in Form GST REG-04 with required information within 7 working days from the date of receipt of Form GST REG-03.

If you have provided all required information via Form GST REG-01 or Form GST REG-04, the registration certificate in Form GST REG -06 for the principal place of business as well as for every additional place of business will be issued to the applicant. If the person has multiple business verticals within a state he can file a separate application for the registration in Form GST REG- 01 for each business verticals.

If the details submitted are not satisfactory, the registration application is rejected using Form GST REG-05.The applicant who is required to deduct TDS or collect TCS shall submit an application in Form GST REG – 07 for registration. If he is no longer liable to deduct or collect tax at source then the officer may cancel and communicate the cancel of registration.

Question 2.
What are the Documents required for GST registration?
Answer:
The various documents includes:

  • PAN card of the Company
  • Proof of constitution like partnership deed, Memorandum of Association (MOA) /Articles of Association (AOA), certificate of incorporation.
  • Details and proof of place of business like rent agreement or electricity bill
  • Cancelled cheque of your bank account showing name of account holder, MICR code, IFSC code and bank branch details.
  • Authorized signatory like List of partners with their identity and address proof in case of partnership firm or List of directors with their identity and address proof in case of company.

Question 3.
Which are the cases in which registration is compulsory?
Answer:
As per paragraph 5 in Schedule III, the following categories of persons shall be required to be registered compulsorily irrespective of the threshold limit:

  • persons making any inter-State taxable supply
  • casual taxable persons
  • persons who are required to pay tax under reverse charge
  • non-resident taxable persons
  • persons who are required to deduct tax under section 37
  • persons who supply goods and/or services on behalf of other registered taxable persons whether as an agent or otherwise
  • input service distributor
  • persons who supply goods and/or services other than branded services, through electronic commerce operator
  • every electronic commerce operator
  • an aggregator who supplies services under his brand name or his trade name
  • such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

Question 4.
Explain the procedure related to levy and collection in GST.
Answer:
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the integrated goods and services tax on all inter-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 of the Central Goods and Services Tax Act and at such rates, not exceeding forty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person:

Provided that the integrated tax on goods imported into India shall be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975 on the value as determined under the said Act at the point i when duties of customs are levied on the said goods under section 12 of the Customs Act, 1962.

(2) The integrated tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the Council.

(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

(4) The integrated tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be . paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.

(5) The Government may, on the recommendations of the Council, by notification, specify categories of-services, the tax on inter-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:

Question 5.
Write short notes on scope of supply.
Answer:
Supply Includes:
(a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, [Section 7(1)(a)].

(b) import of services, for a consideration whether or not in the course or furtherance of business, and [Section 7(1)(b)]c) activities specified in Schedule I, made or agreed to be made without a consideration. Section 7(1).

(c) d) activities to be treated as supply of goods or supply of services as specified in ScheduleII. [Section 7(1)(d)].

Question 6.
Explain the fax liability on Composite Supply and Mixed Supply.
Answer:
(a) A composite supply means supply made by taxable person to a recipient comprising two or more supplies, of goods or services or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business one of which is a principal supply (supplies naturally bundled).

(b) A mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax. (Supplies not naturally bundled).

Example on Composite Supply and Mixed Supply:
Composite Supply:
Example 1:
Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is the principal supply.
The entire supply will be treated as supply of principal and the rate of tax of principal will apply for other items.

Example 2:
In case of purchase of ticket in Rajdhani Train where the cost of ticket includes the services for Transportation of passengers, cost of foods and supply of bed rolls. All these services are bundled together and here the principal supply will be transportation of passengers.

Example 3:
A luxury Hotel In Delhi provides a 3 Nights package with the breakfast and one day Delhi sightseeing. The inclusion of Delhi sightseeing in this package is not a natural requisite to accommodation in the hotel. Hence, this does not amount to composite supply. This is a mixed supply

Mixed Supply:
Example 4:
Let us suppose a supply of package consisting of canned foods, sweets, chocolates, cakes, dry fruits, and fruit juice when supplied for a single price. Here it is further assumed that canned food is taxable @ 12%, sweets at zero rate, chocolates @ 18%, cakes 12%, dry fruits 18%, and fruit juice @ 12%. Here the Highest rate will be charged @ 18 % on entire value of supply. If these items are supplied separately then it will not be a mixed supply.

Example-5:
Let us take another example:
A combo pack for ₹ 10,000 is supplied which consist of a Tie, Pen, Calculator, Wallet, Watch.
Assume the Tie is taxable say @ 18%, Pen @ 5%, Caculator 5%, Wallet 18% and Watch @ 18%.
Here the combo pack will be considered as Mixed supply and will be taxable at highest rate which is 18%.

Question 7.
Discuss the eligibility and conditions for taking input tax credit.
Answer:
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed and in the manner specified in section 49, be entitled to take credit of input tax charged on any supply of goods or services or both to him which are used or intended to be used in the course or furtherance of his business and the said amount shall be credited to the electronic credit ledger of such person

(2) Notwithstanding anything contained in this section, no registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless – (a) Possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed.

(b) The goods or services or both Explanation- For the purposes of this clause, it shall be deemed that the registered person has received the goods where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise.

(c) Subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply.

(d) he has furnished the return under section 39: PROVIDED that where the goods against an invoice are received in lots or installments, the registered person shall be entitled to take credit upon receipt of the last lot or installment:

Provided further that where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed

Provided also that the recipient shall be entitled to avail of the credit of input tax on payment made by him of the amount towards the value of supply of goods or services or both along with tax payable thereon.

(3) Where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income Tax Act, 1961, the input tax credit on the said tax component shall not be allowed.

A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier.

Question 8.
Explain the ITC Rules for Capital Goods under GST.
Answer:
The high level rules for determination of Input Tax Credit (ITC) w.r.t. Capital Goods and reversal if any:
1. Credit of Input Tax will not be available on the following:

  • Capital Goods used exclusively for effecting exempt supplies.
  • Capital Goods used exclusively far non-business (personal) activity

2. Credit of Input Tax will be available in totality where Capital Goods have been used for effecting taxable supplies and business activity without any restrictions.

3. Amount of input tax referred in above points A and B must be indicated in Form GSTR-2 and however only point B will be credited to electronic credit ledger.

4. Where Capital Goods is used commonly for exempt and taxable supplies and/or business and non-business activity the credit of input tax shall be calculated in the following manner:

  • Such amount shall be credited to Electronic Credit Ledger
  • Useful life of such capital good shall be taken to be 5 years from the date of purchase
  • Now the total amount of input tax credited to Electronic Credit Ledger, whole useful life such common capital good shall be distributed over the useful life to determine the amount of credit eligible for the month out of input tax.

Question 9.
Write short note on time limit to avail the input tax credit.
Answer:
A registered person is not entitled to take input tax credit on invoice/ debit notes after due date of furnishing of the return under section 39 for the month of September of the subsequent financial year or furnishing of the relevant annual return, whichever is earlier.

Therefore, input tax credit shall be available to a registered person only if invoice/challan is in his possession for the goods or services or both are received and the payment of such tax has been made by the supplier and a return u/ s 39 has been filed. Receipt of goods shall include delivery to any other person as directed by the registered person.

Question 10.
Explain the provision of Distribution of Credit by Input Service Distributor.
Answer:
(1) The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central, by way of issue of a document containing, the amount of input tax credit being distributed in such manner as may be prescribed.

(2) The Input Service Distributor may distribute the credit subject to the following conditions, namely:
→ The credit can be distributed to recipients of credit against a document containing such details as may be prescribed;

→ The amount of the credit distributed shall not exceed the amount of credit available for distribution;

→ The credit of tax paid on input services attributable to recipient of credit shall be distributed only to that recipient;

→ The credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipient(s) to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union Territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period.

→ The credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union Territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.

Practical Problems

Problems on GST:

Problem 1.
XYZ Limited has the following details for the year 2017-18:
1. Intra-state supplies – ₹ 2,00,000
2. Inter-state supplies – ₹ 3,00,000
3. Non-taxable supplies – ₹ 15000
(included in exempt supplies)
4. Value of exports – ₹ 50000
5. Exempt supplies – ₹ 40000
6. IGST/CGST/SGST paid – ₹ 12000
Solution:
Calculation of aggregate turnover

₹
1. Intra-state supplies 2,00,000
2. Inter-state supplies 3,00,000
3. Value of exports 50,000
4. Exempt supplies 40,000
Aggregate turnover 5,90,000

Note: As per GST law, IGST/CGST/SGST paid shall not be considered while calculating aggregate turnover as it is not provided in definition of aggregate turnover.

Problem 2.
Mr. Amit supplies goods worth ₹ 24, 300 to Mr. Rahul and issues invoice dated 25.7.2017 for ₹ 24,300 and Mr. Rahul pays ₹ 25,000 on 30.7.2017 against such supply of goods. The excess ₹ 700 is adjusted in the next invoice for supply of goods issued on 5.8.2017. Identify the time of supply and value of supply.
Solution:
If excess amount received is less than ₹ 1,000 the time of supply shall the date of issue of first invoice i.e 25.7.2017 and value of supply shall be ₹ 25,000.

Problem: 3
Mr. Ganesha supplies goods worth ₹ 24, 300 to Mr. Bipul and issues invoice dated 22.7.2017 for ₹ 24,300 and Mr. Bipul pays ₹ 26,000 on 27.7.2017 against such supply of goods. The excess ₹ 1,700 is adjusted in the next invoice for supply of goods issued on 5.8.2017. Date on which payment is entered in the books of accounts of supplier is 30.8.2017 and date on which payment is credited to the bank account is 28.8.2017. Identify the time of supply.
Solution:
If excess amount received is more than ₹ 1,000, the time of supply shall the date on which payment is entered in books of accounts of the supplier or date on which payment is credited to the bank, whichever is earlier. Therefore, the date of supply in this case shall be 28.8.2017 i.e (30.8.2017 or 28.8.2017, whichever is earlier)

Problem 4.
Ganesh purchased goods and made payment of ₹ 50,000 (inclusive of GST) to Veeresh. Rate of SGST @ 9%, CGST @ 9%, then what will be assessable value.

Problem 5.
Calculate sale value under GST from the following particulars: Purchase of raw materials within the state ₹ 2,10,000 (inclusive of GST @ 5%), profit margin ₹ 20,000, manufacturing expenses ₹ 5,000, wages, 2500, storage cost 3,500, consultation fees 1500.

Problem 6.
Determine the time of supply in each of following independent cases in accordance with provisions of section 12 of the CGST Act , 2017 in case supply involves movement of goods.

Problem 7.
Determine the time of supply in each of following independent cases in accordance with provisions of section 12 of the CGST Act 2017 in case supply does not involve movement of goods.

Problem 8.
Determination of time of supply: determine the time of supply in each of following independent cases in accordance with provisions of CGST Act, 2017:

Problem 9.
Mr. Raman supplies goods within the state and its value is ₹ 600000. The value of goods exported ₹ 600000. The value of receipt of goods from other state is 710,00,000. If IGST rate is 18%, SGST & CGST rate is 9% each, calculate net GST payable.

Problem 10.
Mr. Amar Gupta supplies goods from Bihar to Nagpur and its value is ₹ 10,000. The value of goods supplied by him within the state is ₹ 1,10,000. The value of receipt of goods within the state is ₹ 10000 and the value of goods received from Nagpur is ₹ 90,000. If IGST rate is 18%, SGST & CGST rate is 9% each, calculate net GST payable.

Problem 11.
A manufacture has prepared the invoice as under:
Price of goods – ₹
(excluding CGST at 14% and SGST at 14%) – 5,00,000
The following items not included in the above price Advertising charges – 60,000
Publicity charges – 30,000
Selling expenses – 20,000
Loading & handling charges – 5,000
Servicing charges – 5,000
Outward freight & insurance on buyer request – 32,000
Allowed discount at 10% on the price of the goods and shown in invoice. Compute the amount of GST payable.

Problem 12.
Compute the Transaction value of goods from the following information and GST payable by a dealer registered in Karnataka.
₹
Selling price (including IGST of ₹ 2,000) – 43,000
Following transactions are not included in the above price:
Freight charges paid by supplier charged separately – 1,000
Normal secondary packing cost – 1,500
Cost of durable and returnable packing – 1,500
Insurance on freight paid-by supplier charged separately – 500
Trade discount (normal practice) – 1,000
Rate of GST – 18%
Nov 2017

Problem 13.
Determine the total amount of GST payable on a machine using the details given bellow:
₹
Selling price of the machine (inclusive of CGST at 9% and SGST at 9%) – 2,95,000
Cost of durable & returnable packing included in the sale price given above – 10,000
Design & development charges paid by buyer on behalf of seller to a third party – 12,000
Warranty charges charged separately by the seller Rate of GST 18% – 4,000
Calculations should be supported by notes where ever required.

Problem 14.
From The Following particulars determine net GST payable:
1. FOB cot of equipment 2,00,000 Yens
2. Freight charges 20,000 Yens
3. Insurance charges paid in India for transportation from Japan ₹ 15,000
4. Commission payable to agent in India ₹ 25,000
5. Exchange rate is 1 yen = 60
6. Landing charges = 1% of CIF cost
7. These goods are sold for ₹ 3,00,000 in India
8. Basic custom duty = 10%
9. IGST rate = 12%

Problem 15.
The Ashoka hotel group of companies provided the following services within the State of Kerala from its various establishments. Compute the amount of GST payable for the month November 2017.
₹
1) Supply of good or drink in restaurant not having facilities in air conditioning at 12% GST – 30,000
2) Supply of food or drink in restaurant having licence to serve liquor at 18% GST – 90,000
3) Supply of good or drink in outdoor catering at 18% GST – 1,50,000
4) Renting of hotels rooms at 18% GST – 2,25,000
5) Supply of food or drink in air condition restaurant in 5 star or above rated hotel at 28% GST – 1,50,000
Nov 2017

Problem 16.
Miss Sanjana (Registered Dealer) is a trader in Mumbai and she has purchased certain goods from Karnataka for ₹ 2,00,000 and has paid IGST at 12%. After manufacturing she has sold half of the goods in the state of Maharastra for ₹ 4,00,000 plus GST at 12% and the rest of the products to a unit situated in SEZ in Mumbai for ₹ 3,00,000. Compute the net output tax payable.
Nov 2017

Problem 17.
From the following information compute the amount of output tax to be uploaded by the dealer who has registered in Karnataka for the month of October and which is the last date to upload it in credit ledger.
₹
1) Product P sold to a dealer in Bangalore, rate of GST notified to this product is 18% – 20,00,000
2) Product Q sold to a dealer in Mysore, rate of GST applicable at 12% – 70,000
3) Product R at Nil rate of GSt sold to a dealer in Pondicherry – 2,50,000
4) Product S at 5% GSt sold to a dealer in Jammu an Kashmir – 2,80,000
5) Product T at 28% GSt sold to a unregistered dealer within the state – 1,20,000
6) Product U rate of GSt notified is 12% sold to a SEZ developer in Bangalore – 4,00,000
7) Product V sold to a dealer in union territory, rate of GST notified is 18% – 3,00,000
8) Product W which is exempted from GSt is sold to a register dealer of Pune – 5,00,000
9) Product X exported to China, the GST rate notified by GSt Council for this product is 28% if it is sold in India – 2,00,000
10) Product Y sold to a unit of SEZ in Mysore the rate of GST notified to this product is 12% – 6,00,000
11) Product Z sold to a registered dealer with in the State, the rate of GST notified is 18% – 4,50,000
12) Product A sold to a dealer in Belagavi who has registered under composition scheme at 28% GST – 1,00,000

Problem 18.
Miss. Swagatha a registered dealer submits the following information for the month of October 2017.

Procedure and Levy Under GST Very Short Answer Type Questions

Procedure and Levy Under GST Very Short Answer Type Questions

Question 1.
Where is the power to levy GST derived from?
Answer:
Article 246A of the Constitution, which was introduced by the Constitution (101st Amendment) Act, 2016 confers concurrent powers to both parliament and state legislatures to make laws with respect to GST. However, clause 2 of Article 246A read with Article 269A provides exclusive power to the Parliament to legislate with respect to inter-state trade or commerce.

Question 2.
What Is deemed registration?
Answer:
The grant of registration or the Unique Identity Number under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act shall be deemed to be a grant of registration or the Unique Identity Number under this Act subject to the condition that the application for registration or the Unique Identity Number has not been rejected under this Act within the time specified in sub-section (10) of section 25.

Question 3.
When the registration granted under GST can be cancelled?
Answer:
Registration may be cancelled, if the person, who has voluntarily registered doesn’t commence business within 6 months from the registration. Further, the registered person himself may apply for cancellation of registration only after the expiry of 1 year from the date of registration.

Question 4.
When will a nonresident become liable for registration?
Answer:
A nonresident taxable person shall become liable for registration, when he makes any taxable supply.

Question 5.
Whether registered person required display his certificate of registration?
Answer:
Every registered person shall display his registration certificate in a prominent location at his principal place and at every additional place or place of business.

Question 6.
What do you mean by Compulsory registration?
Answer:
A business whose aggregate turnover in a financial year exceeds Rs 20 lakhs has to mandatorily register under Goods and Services Tax. This limit is set at Rs 10 lakhs for North Eastern and hilly states flagged as special category states.

Question 7.
What is a bill of supply?
Answer:
A bill of supply should be issued instead of a tax invoice in case of the following supplies:

  1. Supply of exempted goods or services.
  2. Supplies made by a composition supplier.

Question 8.
Whether supplier can issue Consolidated bill of supply to the recipient of goods or services?
Answer:
Consolidated bill of supply can be issued by the supplier to the recipient of goods or services, if the value of goods or services supplied is less than Rs.1200.

Question 9.
How many copies of invoices are required in case of supply of goods?
Answer:
The invoice should be prepared in triplicate. The original is for the recipient, the duplicate for the transporter and the triplicate for the supplier.

Question 10.
What is receipt voucher?
Answer:
Receipt voucher is issued when advance is collected/received in relation to supply of goods or services. .

Question 11.
Whether every registered person is required to maintain books of account?
Answer:
Every registered person is required to maintain books of accountancy his principal place of business that is mentioned in the certificate of registration.

Question 12.
Mention the basic accounts to be maintained by every registered person.
Answer:
The following accounts need to be maintained: production or manufacture of goods, inward or outward supply of goods or services, stock of goods, input tax credit availed, output tax payable and paid.

Question 13.
What is meant by provisional input tax credit?
Answer:
The input tax credit availed by the recipient in its return is allowed to the recipient on a provisional basis. Once the input tax credit availed by the recipient is matched with the outward supply details furnished by the supplier, input tax credit will become final.

Question 14.
What is tax deducted at source?
Answer:
Tax deducted at source is a mechanism, wherein the recipient of goods or services will deduct out of the amount payable to the supplier, an amount at a percentage of value of supply and deposit the same to the account of the government within the time prescribed.

Question 15.
Who is authorized to undertake the audit of a taxable person?
Answer:
The commissioner of CGST/SGST or any officer authorized by him may undertake audit of any registered person.

Question 16.
What is the threshold for opting to pay tax under the composition scheme?
Answer:
The threshold for composition scheme is Rs. 50 Lakhs of aggregate turnover in financial year.

Question 17.
How to compute ‘aggregate turnover’ to determine eligibility for composition scheme?
Answer:
The methodology to compute aggregate turnover is given in Section 2(6). Accordingly, ‘aggregate turnover’ means ‘Value of all supplies (taxable and non – taxable supplies + Exempt supplies + Exports) and it excludes Taxes levied under CGST Act, SGST Act and IGST Act, Value of inward supplies + Value of supplies taxable under reverse charge of a person having the same PAN.

Question 18.
What is the minimum rate of tax prescribed for composition scheme?
Answer:
The minimum rate of tax prescribed for composition scheme is 1%.

Question 19.
When exemption from whole of tax collected on goods and/or services has been granted unconditionally, should a taxable person pay tax?
Answer:
No, the taxable person providing such goods or services shall not collect the tax on such goods or services.

Question 20.
What is remission of tax/duty?
Answer:
Remission of tax/duty means relieving the tax payer from the obligation to pay taxon goods when they are lost or destroyed due to any natural causes. Remission is subject to conditions stipulated under the law and rules made there under.

GST Acts: CGST Act, SGST Act, IGST Act Long Answer Type Questions

GST Acts: CGST Act, SGST Act, IGST Act Long Answer Type Questions

Question 1.
Write short notes on place of supply.
Answer:
The term, “supply” has been inclusively defined in the Act. The meaning and scope of supply under GST can be understood in terms of following six parameters, which can be adopted to characterize a transaction as supply:

  • Supply of goods or services. Supply of anything other than goods or services does not attract GST
  • Supply should be made for a consideration
  • Supply should be made in the course or furtherance of business
  • Supply should be made by a taxable person
  • Supply should be a taxable supply
  • Supply should be made within the taxable territory

While these six parameters describe the concept of supply, there are a few exceptions to the requirement of supply being made for a consideration and in the course or furtherance of business. Any transaction involving supply of goods or services without consideration is not a supply, barring few exceptions, in which a transaction is deemed to be a supply even without consideration, Further, import of services for a consideration, whether or not in the course or furtherance of business is treated as supply.

Question 2.
Why are place of supply provisions different in respect of goods and services?
Answer:
Goods being tangible do not pose any significant problems for determination of their place of consumption. Services being intangible pose problems w.r.t determination of place of supply mainly due to following factors:
(i) The manner of delivery of service could be altered easily. For example telecom service could change from mostly post-paid to mostly pre-paid; billing address could be changed, billers address could be changed, repair or maintenance of software could be changed from onsite to online; banking services were earlier required customer to go to the bank, now the customer could avail service from anywhere

(ii) Service provider, service receiver and the service provided may not be ascertainable or may easily be suppressed as nothing tangible moves and there would hardly be a trail

(iii) For supplying a service, a fixed location of service provider is not mandatory and even the service recipient may receive service while on the move. The location of billing could be changed overnight

(iv) Sometime the same element may flow to more than one location, for example, construction or other services in respect of a railway line, a national highway or a bridge on a river which originate in one state and end in the other state. Similarly a copy right for distribution and exhibition of film could be assigned for many states in single transaction or an advertisement or a programme is broadcasted across the country at the same time. An airline may issue seasonal tickets, containing say 10 leafs which could be used for travel between any two location in the country. The card issued by Delhi metro could be used by a person located in Noida, or Delhi or Faridabad, without the Delhi metro being able to distinguish the location or journeys at the time of receipt of payment

(v) Services are continuously evolving and would thus continue to pose newer challenges. For example 15-20 years back no one could have thought of DTH, online information, online banking, online booking of tickets, internet, mobile telecommunication etc.

Question 3.
Write short notes on supply by a taxable person.
Answer:
A supply to attract GST should be made by a taxable person. Hence, a supply between two non-taxable persons does not constitute supply under GST. A “taxable person” is a person who is registered or liable to be registered under section 22 or section 24. Hence, even an unregistered person who is liable to be registered is a taxable person. Similarly, a person not liable to be registered but has taken voluntary registration and got himself registered is also a taxable person.

It should be noted that GST in India is State-centric. Hence, a person making supplies from different States needs to take separate registration in each State. Further, the person may take more than one registration within a State if the person has multiple business verticals. A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of GST. Hence, a supply between these entities constitutes supply under GST.

Question 4.
Write short notes on input tax.
Answer:
In relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him and includes the following:

  • The integrated goods and services tax charged on import of goods.
  • The tax payable under the provisions of sub-sections (3) and (4) of section 9.
  • The tax payable under the provisions of sub-sections (3) and (4) of section 5 of the Integrated Goods and Services Tax Act.
  • The tax payable under the provisions of sub-sections (3) and (4) of section 9 of the respective State Goods and Services Tax Act or
  • The tax payable under the provisions of sub-sections (3) and (4) of section 7 of the Union Territory Goods and Services Tax Act, but does not include the tax paid under the composition levy.

Question 5.
Explain briefly the Inputer Service Distributor^and,its functions.
Answer:
Input service distributor and its function:
Input service distributor (ISD): means an office of the supplier of goods and/or services, which receives tax invoices issued towards receipt of input services or such other document as prescribed for the purposes of distributing the credit of CGST, SGST.

Functions:
If the amount of ITC distributed by an ISD is reduced later on, the procedure for reducing the credit will be the same as for the reduction in case of credit note. The Input service distributor must be on the basis of the ISD credit note, issue an ISD- Invoice to the recipient entitled to such credit and include them in the return in FORM GSTR-6 for the month in which such credit note or invoice was issued.

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Question 6.
Write short note on location of the recipient of services.
Answer:
Location of the recipient of services means:
(a) where a supply is received at a place of business for which the registration has be*en obtained, the location of such place of business.

(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of Such fixed establishment.

(c) where a supply is received at more than one establishment, whether . the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply.

(d) in absence of such places, the location of the usual place of residence of the recipient.

Question 7.
Write short note on location of the supplier of services.
Answer:
“Location of the supplier of services” means:
(a) where a supply is made from a place of business for which the registration has been obtained, the location of such place of business.

(b) where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such
fixed establishment.

(c) where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the provision of the supply.

(d) in absence of such places, the location of the usual place of residence of the supplier.

GST Acts: CGST Act, SGST Act, IGST Act Short Answer Type Questions

GST Acts: CGST Act, SGST Act, IGST Act Short Answer Type Questions

Question 1.
Bring out the differences in appeal (to Tribunal) provisions under CGST & SGST?
Answer:
(i) The provisions under Section 82 of SGST Act for appeal by any person aggrieved by the order or decision passed against him by First Appellate Authority are essentially similar to provisions contained in Section 82 of CGST Act and discussions made therein are equally applicable to section 82 of SGST as well.

(ii) In addition to the above the provision of Section 82 of SGST Act also covers an appeal to be filed to Appellate Tribunal against the revisionary order passed by Commissioner.

(iii) However the provisions relating to appeal by the revenue against the order of first appellate authority as CGST Act is not provided in SGST Act since the revisionary powers (against the orders passed by the FAA, who in the states is likely to be “subordinate” to the Commissioner) is provided to Commissioner to SGST.

(iv) In addition, the person aggrieved under SGST Act has to pre-deposit full deposit of admitted tax, interest, fine, fee and penalty arising from the impugned order.

Question 2.
Explain the main features of Central Goods and Services Tax (CGST)?
Answer:
The main features includes:
(i) A state-wise single registration for a taxpayer forfiling returns, paying taxes, and to fulfill other compliance requirements. Most of the compliance requirements would be fulfilled online, thus leaving very little room for physical interface between the taxpayer and the tax official.

(ii) A taxpayer has to file one single return state-wise to report all his supplies, whether made within or outside the state or exported out of the country and pay the applicable taxes on them. Such taxes can be Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Union Territory Goods and Services Tax (UTGST) and Integrated Goods and Services Tax (IGST).

(iii) A business entity with an annual turnover of upto Rs 20 lakh would not be required to take registration in the GST regime, unless he voluntarily chooses to do so to be a part of the input tax credit (ITC) chain. The annual turnover threshold in the Special Category States (as enumerated in Article 279A of the Constitution such as Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh, Assam and the other States of the North-East) for not taking registration is ₹ 10 lakh.

(iv) A business entity with turnover upto ₹ 1.5 crores can avail the benefit- of a composition scheme under which it has to pay a much lower rate of tax and has to fulfil very minimal compliance requirements. The Composition Scheme is available for all traders, select manufacturing sectors and for restaurants in the services sector.

(v) In order to prevent cascading of taxes, ITC would be admissible on all goods and services used in the course or furtherance of business, except on a few items listed in the Law.

(vi) In order to ensure that ITC can be used seamlessly for payment of taxes under the Central and the State Law, it has been provided that the ITC entitlement arising out of taxes paid under the Central Law can be cross-utilised for payment of taxes under the laws of the States or Union Territories. For example, a taxpayer can use the ITC accruing to him due to payment of IGST to discharge his tax liability of CGST/SGST/UTGST. Conversely, a taxpayer can use the ITC accruing to him on account of payment of CGST/SGST/UTGST, for payment of IGST. Such payments are to be made in a pre-defined order.

(vii) In the Services sector, the existing mechanism of Input Service Distributor (ISD) under the Service Tax law has been retained to allow the flow of ITC in respect of input services within a legal entity.

(viii) To prevent lock-in of capital of exporters, a provision has been made to refund, within seven days of filing the application for refund by an exporter, 90 per cent of the claimed amount on a provisional basis.

(ix) In order to ensure a single- administrative interface for taxpayers, a provision has been made to authorise officers of the tax administrations of the Centre and the states to exercise the powers conferred under all Acts.

(x) An agriculturist, to the extent of supply of produce out of cultivation of land, would not be liable to take registration in the GST regime.

(xi) To provide certainty in tax matters, a provision has been made for an Advance Ruling Authority.

(xii) Exhaustive provisions for Appellate mechansim have been made.

(xiii) Detailed transitional provisions have been provided to ensure migration of existing taxpayers and seamless transfer of unutilised ITC in the GST regime.

(xiv) An anti-profiteering provision has been incorporated to ensure that the reduction of tax incidence is passed on to the consumers.

(xv) In order to mitigate any financial hardship being suffered by a taxpayer, Commissioner has been empowered to allow payment of taxes in instalments.

Question 3.
State the features of CGST Act. or IGST Act.
Answer:
Features:
(i) A state-wise single registration for a taxpayer forfiling returns, paying taxes, and to fulfill other compliance requirements. Most of the compliance requirements would be fulfilled online, thus leaving very little room for physical interface between the taxpayer and the tax official.

(ii) A taxpayer has to file one single return state-wise to report all his supplies, whether made within or outside the state or exported out of the country and pay the applicable taxes on them. Such taxes can be Central Goods and Services Tax (CGST), State Goods and Services Tax (SGST), Union Territory Goods and Services Tax (UTGST) and Integrated Goods and Services Tax (IGST).

(iii) A business entity with an annual turnover of upto ₹ 20 lakh would not be required to take registration in the GST regime, unless he voluntarily chooses to do so to be a part of the input tax credit (ITC) chain. The annual turnover threshold in the Special Category States (as enumerated in Article 279A of the Constitution such as Arunachal Pradesh, Sikkim, Uttarakhand, Himachal Pradesh, Assam and the other States of the North-East) for not taking registration is ₹ 10 lakh.

(iv) A business entity with turnover upto ₹ 1.5 crores can avail the benefit of a composition scheme under which it has to pay a much lower rate of tax and has to fulfil very minimal compliance requirements. The Composition Scheme is available for all traders, select manufacturing sectors and for restaurants in the services sector.

(v) In order to prevent cascading of taxes, ITC would be admissible on all goods and services used in the course or furtherance of business, except on a few items listed in the Law.

(vi) In order to ensure that ITC can be used seamlessly for payment of taxes under the Central and the State Law, it has been provided that the ITC entitlement arising out of taxes paid under the Central Law can be cross- utilised for payment of taxes under the laws of the States or Union Territories. For example, a taxpayer can use the ITC accruing to him due to payment of IGST to discharge his tax liability of CGST/SGST/UTGST. Conversely, a taxpayer can use the ITC accruing to him on account of payment of CGST/SGST/UTGST, for payment of IGST. Such payments are to be made in a pre-defined order.

(vii) In the Services sector, the existing mechanism of Input Service Distributor (ISD) under the Service Tax law has been retained to allow the flow of ITC in respect Of input services within a legal entity.

(viii) To prevent lock-in of capital of exporters, a provision has been made to refund, within seven days of filing the application for refund by an exporter, 90 per cent of the claimed amount on a provisional basis.

(ix) In order to ensure a single administrative interface for taxpayers, a provision has been made to authorise officers of the tax administrations of the Centre and the states to exercise the powers conferred under all Acts.

(x) An agriculturist, to the extent of supply of produce out of cultivation of land, would not be liable to take registration in the GST regime.

(xi) To provide certainty in tax matters, a provision has been made for an Advance Ruling Authority.

(xii) Exhaustive provisions for Appellate mechansim have been made.

(xiii) Detailed transitional provisions have been provided to ensure migration of existing taxpayers and seamless transfer of unutilised ITC in the GST regime.

(xiv) An anti-profiteering provision has been incorporated to ensure that the reduction of tax incidence is passed on to the consumers.

(xv) In order to mitigate any financial hardship being suffered by a taxpayer, Commissioner has been empowered to allow payment of taxes in instalments.

Question 4.
Write short note on aggregate turnover.
Answer:
The aggregate value of all taxable supplies excluding the value of inward supplies on which tax is payable by a person on reverse charge basis exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess. The phrase “aggregate turnover” is widely used under the GST Jaws. Aggregate Turnover is an all-encompassing term covering all the supplies effected by a person having the same PAN.

It specifically excludes:
(a) Inward supplies effected by a person which are liable to tax under reverse charge mechanism, However, it is not to be understood that the value of such inward supplies is to be reduced from the value of outward supplies to arrive at aggregate turnover and –

(b) Various taxes under the GST law, Compensation cess.

(c) There is a certain amount of ambiguity as to whether the value of inward supplies would form part of ‘aggregate turnover’ since the definition covers all taxable supplies and excludes only inward supplies to the extent liable to tax under reverse charge mechanism.

Question 5.
Write short on adjudicating authority.
Answer:
It means any authority, appointed or authorised to pass any order or decision under this Act. but does not include the Central Board of Excise and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal. The following authorities are not permitted to pass an order/ decision- under the GST laws:

  • The Central Board of Excise and Customs
  • Revisional Authority
  • Authority for Advance Ruling
  • Appellate Authority for Advance Ruling
  • Appellate Authority
  • Appellate Tribunal

Question 6.
Discuss the comparison between composite supply and mixed supply.
Answer:
Composite Supply:
Composite supply refers to a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

Example:

  • Supply of laptop and carry case.
  • Supply of equipment and installation of the same.
  • Supply of repair services on computer along with requisite parts.
  • Supply of health care services along with medicaments.

Mixed Supply: Mixed supply refers to two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Example: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drinks and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

GST Acts: CGST Act, SGST Act, IGST Act Very Short Answer Type Questions

GST Acts: CGST Act, SGST Act, IGST Act Very Short Answer Type Questions

Question 1.
What is CGST?
Answer:
The tax will be imposed by the central government of India. It will replace excise duty, service tax, SAD (Special Additional Duty), CVD (Countervailing Duty), ADE (Additional Duties of Excise) and other indirect taxes levied by the central government. CGST will be applicable on supplies within a state and the tax revenue will go only to the central government.

Question 2.
What is SGST?
Answer:
The tax will be imposed by the state government. It will replace sales tax, VAT, entertainment tax, entry tax, luxury tax, Octroi, purchase tax and taxes on lottery. SGST will be applicable on supplies within a state and the tax revenue will go only to the state government.

Question 3.
Explain UTGST.
Answer:
The tax will be imposed by the Union Territory of Chnadigarh, Lakshadweep, Daman and Diu, Dadra and Nagar Haveli, Andaman and Nicobar Islands, Delhi and Puducherry. It will replace sales tax, VAT, entertainment tax, entry tax, luxury tax, Octroi, purchase tax and taxes on lottery. UTGST will be applicable on supplies within a union territory.

Question 4.
Expand XG
Answer:
IGST: Integrated Goods and service tax.

Question 5.
What is IGST?
Answer:
“Integrated Goods and Services Tax” (IGST) means tax levied under the IGST Act on the supply of any goods and/ or services in the course of inter-state trade or commerce.

Question 6.
What is Aggregate turnover?
Answer:
An Aggregate turnover means the aggregate value of all taxable supplies, exempt supplies and exports of goods and/or services of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be. Aggregate turnover does not include the value of inward supplies on which tax is payable by a person on reverse charge basis under sub-section (3) of Section 8 and the value of inward supplies.

Question 7.
Who is an adjudicating authority?
Answer:
Any authority competent to pass any order or (4) decision under this Act, but does not include the Board, the Revisional Authority, Authority for Advance Ruling, Appellate Authority for Advance Ruling, the First Appellate Authority and the Appellate Tribunal.

Question 8.
Who is an agent?
Answer:
An “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services on behalf of another, whether disclosed or not.

Question 9.
What is a business?
Answer:
Business includes:

  • any trade, commerce, manufacture, profession, vocation or any other similar activity, whether or not it is for a pecuniary benefit
  • any activity or transaction in connection with or incidental or ancillary to (a) above
  • any activity or transaction in the nature of (a) above, whether or not there is volume, frequency, continuity or regularity of such transaction
  • supply or acquisition of goods including capital assets and services in connection with commencement or closure of business
  • provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members, as the case may be
  • admission, for a consideration, of persons to any premises; and services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation.

Any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities shall be deemed to be business.

Question 10.
Define goods.
Answer:
It means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.

Question 11.
What is capital goods?
Answer:
It means goods, the value of which is capitalised in the books of accounts of the in the person claiming the credit and which are used or course or furtherance of business. the books of accounts intended to be used in the course or furtherance of business.

Question 12.
Define person.
Answer:
It includes:

  • an individual
  • a Hindu undivided family
  • a company
  • a firm
  • a Limited Liability Partnership
  • an association of persons or a body of individuals, whether incorporated or not, in India or outside India
  • any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 2(45) of the Companies Act, 2013 (18 of 2013)
  • any body corporate incorporated by or under the laws of a country outside India
  • a co-operative society registered under any law relating to cooperative societies
  • a local authority
  • government
  • society as defined under the Societies Registration Act, 1860 (21 of 1860)
  • trust; and
  • every artificial juridical person, not falling within any of the preceding sub-clauses.

Question 13.
Who is a non-resident person?
Answer:
The Goods and Services Tax Law has defined a ‘non-resident taxable person’ as any person who occasionally undertakes transactions involving the supply of goods or services, or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.

Question 14.
Who is a casual taxable person?
Answer:
A person who occasionally undertakes transactions involving supply of goods and/or services in the course or furtherance of business whether as principal, agent or in any other capacity, in a taxable territory where he has no fixed place of business.

Question 15.
What is place of business?
Answer:
It includes:

  • a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, provides or receives goods and/or services; or
  • a place where a taxable person maintains his books of account; or
  • a place where a taxable person is engaged in business through an agent, by whatever name called.

Question 16.
What is principal supply?
Answer:
Principal supply basically signifies the supply of goods and services that is formed as a substantial element of a composite supply and any other related supply being ancillary.

Question 17.
What is composite supply?
Answer:
It means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

Question 18.
What is mixed supply?
Answer:
Mised supply refers to two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.

Question 19.
What is Exempt’Supply?
Answer:
Exempt Supply of any goods or services is one which attracts nil rate of tax or which may be wholly exempt from tax. It includes non-taxable supply. In case of exempt supply in respect of any goods and/or services, the taxable person shall hot be required to pay tax.

Question 20.
What is Zero-Rated Supply?
Answer:
It means export or supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit.

Question 21.
What is Non-Taxable Supply?
Answer:
Non-taxable supply is sale of any goods or services which attracts nil rate of tax and is similar to exempt supply.

Question 22.
What is Taxable Supply?
Answer:
It means the Supply on which tax shall be paid under GST.

Question 23.
What Is inward supply?
Answer:
It means in relation to a person, shall mean receipt of goods and/or services whether by purchase, acquisition or any other means and whether or not for any consideration.

Question 24.
What is outward supply?
Answer:
It is in relation to a person, shall mean supply of goods or services, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other means made or agreed to be made by such person in the course or furtherance of business.

Question 25.
What is job work?
Answer:
It means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly.

Question 26.
What is input?
Answer:
It means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.

Question 27.
What is input service?
Answer:
Input service means any service used or intended to be used by a supplier in the course or furtherance of business.

Question 28.
What is input service distributor?
Answer:
It means an office of the supplier of goods and / or services which receives tax invoices issued under section 28 towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of CGST (SGST in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and / or services having same PAN as that of the office referred to above.

Question 29.
What is input tax?
Answer:
A input tax in relation to a taxable person, means the IGST, including that on import of goods, CGST and SGST charged on any supply of goods or services to him and includes the tax payable under sub-section (3) of section 8, but does not include the tax paid under section 9.

Question 30.
What is reverse charge?
Answer:
Reverse charge is the liability to pay tax by the recipient of supply of goods or services instead of the supplier of such goods or services in respect of such categories of supplies as notified under sub-section (3) of section 8.

Question 31.
What is works contract?
Answer:
It means a contract wherein transfer of property in goods is involved in the execution of such contract and includes contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property.

Question 32.
Who is a non taxable person?
Answer:
It means a taxable person who occasionally undertakes transactions involving supply of goods and/or services whether as principal or agent or in any other capacity but who has no fixed place of business in India.

Question 33.
What is taxable event under GST?
Answer:
Supply of taxable goods and services by a registered person is called as Taxable Event, which also includes time of supply and place of supply of goods and services.

Question 34.
Who is a supplier?
Answer:
It means in relation to any goods and/or services shall mean the person supplying the said goods and/or services and shall include an agent acting as such on behalf of such supplier in relation to the goods and/or services supplied.

Question 35.
What Is export of services?
Answer:
Export of services means the supply of any service when:

  • The supplier of service is located in India.
  • The recipient of service is located outside India.
  • The place of supply of service is outside India.
  • The payment for such service has been received by the supplier of service in convertible foreign exchange.
  • The supplier of service and the recipient of service are not merely establishments of a distinct person.

Question 36.
What is import Of services?
Answer:
“Import of services” means the supply of any service, where:

  • The supplier of service is located outside India.
  • The recipient of service is located in India.
  • The place of supply of service is in India.

Question 37.
Who is an intermediary?
Answer:
A. “Intermediary” means a broker, an agent or any other person, by whatever name called, who arranges or facilitates the supply of goods or services or both, or securities, between two or more persons, but does not include a person who supplies such goods or services or both or securities on his own account.

Introduction to Goods and Services Tax Long Answer Type Questions

Introduction to Goods and Services Tax Long Answer Type Questions

Question 1.
Explain the difference between GST and VAT.
Answer:
The difference between GST and VAT are:

Basis VAT GST
(a) Structural Difference (a) Central Taxes: Central Excise/Customs Duty, Central Sales Tax on Goods and Service Tax charged on Services, Surcharge & Cess A dual-layered tax system with both Central and State GST levied on same base on all the goods and services except Petroleum ,High,
(b) Basis of Levy destination (b) State Taxes-State VAT, Sales Tax Deducted at Source, WCT, Luxury Tax, Entertainment Tax, Tax on Lottery, Surcharge & Cess Speed Diesel, Motor spirit and Natural Gas to be brought at a later date, subject to recommendation of GST Council.
(c) Registration Taxable at the place of (a) Manufacture/Sale of goods, (b) Rendering of services Taxable at the place of Consumption, a based tax Uniform E-Registration process based on PAN of Entity
(d) Procedures for Collection of Tax and Filing of Returns Decentralised registration under Central and State Authorities. Uniform process and common dates for collection/deposit of tax and filing of returns
(e) Validation and of challan/ Returns, Input Credit and payment of tax Central Excise and Service Tax-Uniform, VAT-Varies from State to State and System based validation and consistency checks on Input Credit availed, utilisation and Tax Payments
(f) Excise Duty Excise Duty charged up to the point of Manufacturing Replaced by CGST (Central Goods and Service Tax, to be charged up to Retail Level
(g) Basic Customs Duty In case of Import, taxed by Centre under separate act No Change
(h) Countervailing Duty/Special Additional Duty In case of Import, taxed by Centre, separately To be subsumed under GST (CGST)
(i) Service Tax Charged by Centre on list of Services under Finance Act on Payment/Provision Basis To be subsumed under SGST (State Goods and Service Tax), based upon Place of Supply Rules
(j) Central Sales Tax (CST) Applicable at concessional rate of 2% on inter-state transfers against C-Forms, otherwise full rate i.e. 5% to 14.5% To be subsumed in IGST (Integrated Goods and Service Tax)
(k) State VAT Except exempt items, all goods are taxed Subsumed in SGST (State Goods and Service Tax)
(l) Entry Tax Currently being charged by selected states for interstate transfers, held as import in local area No entry tax, Additional 1% of Tax to be levied on inter-state supply of selected goods, list yet to be finalised
(m) Tax on Export of Goods and Services Exempt/Zero rated No Change
(n) Tax on Inter State Transfer of Goods to Branch or Agent Exempt against Form F To be taxable but full credit available to dealers
(o) Tax on Inter State Transfer of Goods to Branch or Agent Exempt against Form F To be taxable but full credit available to dealers
(p) Cascading Effect Credit between Excise Duty & Service Tax available, but no set-off against VAT on Excise Duty Credit available on the full amount of taxes up to retailer
(q) Cross Set-Off of Levy Currently set-off of Excise duty and Service tax is allowed No cross Set-off between CGST and SGST
(r) Disallowance of Credit on selected items There are certain non- Creditable goods and services under both VAT & CENVAT Rules No such disallowance, unless specified by GST Council
(s) Disallowance of inputs/input services used in Exempted Goods/Services Not Allowed No such disallowance, unless falling under the Negative List which is yet to be finalised by GST Council
(t) Exemptions -Excise Free Zone, VAT Remissions Some areas enjoy status of Excise/Vat Exemptions i.e. North East, Himachal No such Exemptions, Investment Refund Scheme (IRS) may be introduced for existing zones based upon recommendations of GST Council
(u) Levy of Tax on Government Bodies, NGOs Certain Govt, bodies, PSUs and Non-for-profit bodies covered Not Changed
(v) Threshold Limits for levy of Tax (a) Central Excise – 1.5 Crores
(b) VAT-Varies from Rs.5 to 20 Lacs from state to state
(c) Service Tax- ₹ 10 Lacs		 CGST-Limits to be decidedSGST-Rs.10 Lacs to 20 Lacs as recommended by GST Council

Question 2.
Explain the difference between the present tax structure and GST.
Answer:
The main differences includes:

Issues Present Regime GST Regime
Broad scheme There are separate laws for separate levy. For e.g. Central Excise Act, 1944, respective State VAT laws. There will be only one such law because GST shall subsume various taxes as specified above.
Tax rates There are separate rates. For e.g. Excise 12.36% and Service Tax 14%. There will be one CGST rate and a uniform rate of SGST across all states.
Cascading effect This Problem arises because credit of CST and many other taxes not allowed. This situation will not arise as CST concept is being eliminated, with introduction of IGST.
Tax burden Under present scenario, tax burden on tax payer is high. Under this, tax burden is expected to reduce since all taxes are integrated which make it possible the burden to be split equitably between manufacturing and services
Cost Burden on Consumers Due to presence of cascading effect, certain taxes become part of cost. As GST mechanism removes such effect by providing credit, cost burden is reduced.
Concurrent Power At present, there is no such power to both Centre and State on same subject tax matter Both Centre and State are vested with the power to make law on GST by virtue of proposed Article 246A of the Constitution.
Compliance Tax compliance is complex because of multiplicity of laws and their provisions to be followed. Tax compliance would be easier as only one law subsuming other taxes need to be followed.
Transparent Tax Administration Presently, tax is levied at two stages in broad manner i.e.
1. When product moves out of factory.
2. At retail outlet.		 GST is to be levied only at final destination of consumption and not at various points. This brings more transparency and corruption free tax administration.

Question 3.
Explain the impact on Prices of Goods and Services using GST dual model?
Answer:
The GST is expected to foster increased efficiencies in the economic system thereby lowering the cost of supply of goods and services. Further, in the Indian context, there is an expectation that the aggregate incidence of the dual GST will be lower than the present incidence of the multiple indirect taxes in force.

Consequently, the implementation of the GST is expected to bring about, if not in the near term but in the medium to long term, a reduction in the prices of goods and services. The expectation is that the dealers would start passing on the benefit of the reduced tax incidence to the customers by way of reduced prices. As regards services, it could be that their short term prices would go up given the expectation of an increase in the tax rate from the present 10% to. approximately 14% to 16%.

Question 4.
Explain the benefits of using GST dual model.
Answer:
Benefits of Dual GST include – The Dual GST is expected to be a simple and transparent tax with one or two CGST and SGST rates. The dual GST is expected to result in:

  • Reduction in the number of taxes at the Central and State level.
  • Decrease in effective tax rate for many goods.
  • Removal of the current cascading effect of taxes.
  • Reduction of transaction costs of the taxpayers through simplified tax compliance.
  • Increased tax collections due to wider tax base and better compliance.

Certainty of implementation: The Finance Minister has made a categorical statement in Parliament that GST will be implemented on April 1, 2013. In his subsequent media interactions, he has further indicated that he is keen to implement the GST even if some of the States are not ready or willing to implement GST by this date. Accordingly, based on the present indications, as also on the basis of our subsequent interactions with senior Government Officials, we believe that the April 1, 2013 timeline for introduction of the dual GST will be met.

Question 5.
Write a note on Indian GST Model.
Answer:
GST is introduced in the parliament as The Constitution Amendment Act 2016 and it is regulated by the Union Finance Ministry of India. It is a consumption based tax levied on the supply of goods and services which mean that it will be imposed at each stage of sale or purchase of goods or services based on the input tax credit method. Introduction to GST and its 3 types- CGST, SGST, IGST AND UTGST are effectively supporting such major economic development programs.

1. Central Goods & Service Tax (CGST):
As per the Central Goods & Services Tax Act 2016, CGST is the centralized part of GST that subsumes the present central taxations and levies- Central Sales Tax, Central Excise Duty, Services Tax, Excise Duty under Medical & Toiletries Preparation Act, Additional Excise Duties Countervailing Duty (CVD), Additional Custom Duty and other centralized taxations.

2. State Goods & Services Tax (SGST):
SGST is an important part of GST. It stands for State Goods & Services Tax as per the 2016 GST bill. Various taxations and levies under the state authority are subsumed by SGST as one uniform taxation. It includes the amalgamation of State Sales Tax, Luxury Tax, Entertainment Tax, Levies on Lottery, Entry Tax, Octroi and other taxations related to the movement of commodities and services under state authority through one uniform taxation- SGST.

3. Integrated Goods & Services Tax (IGST):
GST focuses on the concept of one tax, one nation. IGST stands for Integrated Goods and Services Tax which is charged on the supply of commodities and services from one state to another state. For example, if the supply of goods and services occurs between Gujarat and Maharashtra, IGST will be applicable.

4. Union Territory Goods & Services Tax (UTGST):
As we have already learned about CGST and SGST which are intra-state taxations and IGST which is inter-state, the union territories in India are accounted under a specialized taxation called Union Territory Goods and Services Tax as per the GST regime 2016. It will subsume the various taxations, levies and duties with one uniform taxation in Union Territories as well.

Question 6.
What would be the role of GST Council?
Answer:
A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union and the States on –

  • The taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed under GST.
  • The goods and services that may be subjected to or exempted from the GST.
  • The date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit (commonly known as petrol), natural gas and aviation turbine fuel.
  • Model GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply.
  • The threshold limit of turnover below which the goods and services may be exempted from GST.
  • The rates including floor rates with bands of GST.
  • Any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster.
  • Special provision with respect to the North East States, J&K, Himachal Pradesh and Uttarakhand.
  • Any other matter relating to the GST, as the Council may decide.

Question 7.
Who can be theprimary Authorized SignatoryinGST?
Answer:
A primary Authorized Signatory is the person who is primarily responsible to perform action at the GST Common Portal on behalf of the taxpayer. All communication from the GST Common Portal relating to taxpayer will be sent to the primary Authorized Signatory.

  • Proprietor – The proprietor or any person authorized by the proprietor.
  • Partnership – Any authorized partner or any person authorized by the partners.
  • Company, LLP, Society or Trust – The person authorized by Board or Governing body can act as Primary Authorized Signatory.

In case there is a single Authorized Signatory for a business entity, the single Authorized Signatory will be assumed to be the primary Authorized Signatory.

In case there are multiple Authorized Signatories for a single business entity, one Authorized Signatory need to be designated as primary Authorized Signatory. The e-mail address and mobile number of the Authorized Signatory needs to be provided during enrolment.

Question 8.
Explain the merits and demerits of GST Composition Scheme.
Answer:
Merits:

  • Limited Compliance: Lesser compliance w. r. t. furnishing of returns, maintenance of books of records, issuance of invoices more focus on business.
  • Limited Tax Liability: on comparison with regular taxpayers, person taxed under Composite Scheme will be liable to pay tax at a rate not more than 2.5% instead of a standard rate of 18%.
  • High Liquidity: Unlike normal tax payers, tax payers under Composite Scheme will be liable to pay taxes at a lower rate resulting in lesser chunk on his working capital.

Demerits:

  • Limited Territory for Business: A taxpayer registered under the composition scheme is barred from carrying out inter-state transactions and cannot affect import-export of goods and services.
  • No Credit of Input Tax: Under the scheme, the credit of input tax paid on the purchases of inputs from a normal tax payer will not be allowed. The buyer of goods supplier by scheme holder will also not enjoy input tax credit resulting in price distortion, cascading, loss of business to scheme holders.
  • No Collection of Tax: Though the rate of tax for a scheme holder is lower the burden of such tax is kept on the taxpayer himself, leading to higher cost of sales.
  • Penal Provision: As per the Model GST Law, if the taxpayer who has previously been given registration under composition scheme is found to be not eligible to the composition scheme or if the : permission granted earlier was incorrectly granted, then such taxpayer will be liable to pay the differential tax along with a penalty.
  • Not applicable to the supplier supplying goods through E-commerce.

Question 9.
Write short notes on GST council/structure. Nov 2017
Answer:
The Goods & Services Tax Council {GST Council} has been created in September 2016 under Article 279-A of the Constitution of India. The main objective of GST is to develop a harmonized national market of goods and services. It has its Secretariat office in New Delhi.

Composition of GST Council: GST Council is a federal forum with both centre and states in India on board. It is made, of –

  • The Union Finance Minister (as Chairman).
  • The Union Minister of State in charge of Revenue or Finance.
  • The Minister in charge of Finance or Taxation or any other Minister, nominated by each state government.

The decisions of the GST Council are made by three-fourth majority of the votes cast. The centre has one-third of the votes cast, and the states together have two-third of the votes cast. Each state has one vote, irrespective of its size or population.

  • The Secretary (Revenue) will be appointed as the Ex-officio Secretary to the GST Council.
  • The Chairperson, Central Board of Excise and Customs (CBEC), will be included as a permanent invitee (non-voting) to all proceedings of the GST Council.
  • One post of Additional Secretary to the GST Council in the GST Council Secretariat (at the level of Additional Secretary to the Government of India) will be created.
  • Four posts of Commissioner in the GST Council Secretariat (at the level of Joint Secretary to the Government of India) will also be created.

Question 10.
Explain the Functions of GST Council. Nov 2017
Answer:
As per Article 279A (4), the Council will make recommendations to the Union and the States on important issues related to GST, like –

  • Taxes, cesses and surcharges to be subsumed under the GST.
  • Goods and services which may be subject to, or exempt from GST.
  • The threshold limit of turnover for application of GST.
  • Rates of GST.
  • Model GST laws, principles of levy, apportionment of IGST and principles related to place of supply.
  • Special provisions with respect to the eight north eastern states, Himachal Pradesh, Jammu and Kashmir and Uttarakhand.
  • GST rates will include the floor rates with bands, special rates for raising additional resources during natural disasters / calamities, special provisions for certain States, etc.

Question 11.
Explain the powers of GST Council. Nov 2017
Answer:
Powers of GST Council:

  • The taxes, cesses and surcharges levied by the Union, the States and the local bodies which may be subsumed in the GST
  • The goods and services that may be subjected to, or exempted from the GST
  • Model GST Laws, principles of levy, apportionment of IGST & Principals of that govern the place of supply
  • The threshold limit of turnover below which goods and services may be exempted from GST
  • The rates including floor rates with bands of GST
  • Any special rate or rates for a specified period, to raise additional resources during any natural calamity or disaster
  • Special provision with respect to the States of Arunachal Pradesh, Assam, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Himachal Pradesh and Uttarakhand
  • Any other matter relating to the GST, as the Council may decide.

Statutory Powers:

  • When petroleum products should be brought in the GST net.
  • Distribution of revenue of IGST and CGST among Union and States.
  • Continuation of 1% tax on supply Of goods to inter-state.
  • Compensation to States for loss of revenue for period upto five years.

Introduction to Goods and Services Tax Short Answer Type Questions

Introduction to Goods and Services Tax Short Answer Type Questions

Question 1.
What are the objectives of GST?
Answer:
The main objectives of GST are:

  • There will be uniformity in the country as GST follows the concept of One Country – One Tax.
  • To helps in providing a consumption based tax instead of Manufacturing.
  • Uniform GST Registration, payment and Input tax Credit becomes very easy.
  • To eliminate the cascading effect of Indirect taxes on single transaction.
  • Subsume all indirect taxes at Centre and State Level under.
  • To reduce tax evasion and fraud.
  • Increase productivity in the country to a great extent.
  • It main aim is to Increase Tax to GDP Ratio and revenue surplus.
  • Helps in increasing Compliance.
  • It helps in reducing economic distortions in the country thereby maintaining economic stability.

Question 2.
What are the features of GST?
Answer:
The main features of GST are as follows:
(a) Subsuming of Central Taxes:
It is provided that GST shall subsume various Central indirect taxes and levies such as Central Excise Duty, Additional Excise Duties, Excise Duty levied under the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, Service Tax, Additional Customs Duty commonly as Countervailing Duty, Special Additional Duty of Customs, and Central Surcharges and Cesses so far as they relate to the supply of goods and services.

(b) Subsuming of State and Other Taxes:
It is provided that GST shall also subsume Taxes such as State Value Added Tax/Sales Tax, Entertainment Tax (other than the tax levied by the local bodies), Central Sales Tax (levied by the Centre and collected by the States), Octroi and Entry tax, Purchase Tax, Luxury tax, Taxes on lottery, betting and gambling; and State Cesses and surcharges in so far as they relate to supply of goods and services.

(c) Dispensing with the concept of ‘declared goods of special importance’:
Clause 286(3) of the Bill has been omitted in the Bill in order to dispense with such concept. Earlier, this clause empowered the Parliament to restrict and provide such condition with respect to any state laws which sought to levy tax on sale and purchase of such goods declared as of special importance and/or a tax on sale or purchase concerning transactions of works contract, hire-purchase, and transfer of right to use any goods as specified in Article 366(29A) (b), (c), (d).

(d) Integrated Goods and Services Tax (IGST):
Clause 269A of the Bill provides for levy of Goods and Services Tax on supplies in the course of inter-State trade or commerce. Such Tax shall be levied and collected by Government of India and thereafter shall be apportioned between the Union and the States in the manner as may be provided by Parliament by law on the recommendations of the Goods and Services Tax Council. Import of goods or services would be treated as inter-state supplies and thus it would be subject to IGST in addition to applicable custom duties. Exports would be zero rated.

(e) Distribution of GST:
Clause 270(1A) of the Bill provides that the goods and services tax levied and collected by the Government of India, except the tax apportioned with the States under clause 269A (1) shall also be distributed between the Union and the States in the manner provided in clause 269A(2).

(f) No Surcharge levy on GST:
Clause 271 of the Bill which empowers the Parliament to increase any duties or taxes by surcharge for the purpose of Union has been amended in the bill by providing an exception to Goods and Services tax under Clause 246A.

Question 3.
What is the main purpose of GST?
Answer:
The two important purposes of GST are:
(a) Single Umbrella Tax Rate: GST shall replace a number of indirect taxes being levied by Union and State Governments.

(b) Removing Cascading Effect: GST is intended to remove “Tax on Tax Effect” and provide for common national market for Goods and Services.

Question 4.
Explain the action plan of GST?
Answer:
The action plan which was introduced by GST is as under:

  • List number of Taxes, cesses, and surcharges to be subsumed under GST.
  • Preparation of list of goods and services subject to, or exempt from GST.
  • Determination of threshold limit of turnover for application of GST.
  • Fixation of rates.
  • Preparation of model GST Laws, principles of levy, apportionment of tax benefits.
  • Firming up Place of supply Rules.
  • Recommend on Compensation to states losing on revenue post implementation of GST, subject to maximum time limit of 5 years.
  • Passage of SGST laws by all State legislatures.
  • Recommendation of Model GST Rules by GST Council.
  • Notification of GST Rules.
  • Recommendation of GST Tax rates by GST Council,
  • Establishment and upgradation of IT framework.
  • Meeting implementation challenges.
  • Effective coordination between Centre & State tax administrations.
  • Reorganization of field formations.
  • Training of Officials.
  • Outreach programs for all stakeholders including Trade & Industry.

Question 5.
Explain in detail the benefits of GST.
Answer:
CBEC has released few advantages which would accrue to Citizens, Trade/ Industry and the Central/State Government with the introduction of GST. The advantages to the Citizens are listed as:

  • Simpler tax system.
  • Reduction in prices of goods and services due to elimination of cascading.
  • Uniform prices throughout the country.
  • Transparency in taxation system.
  • Increase in employment opportunities.

The advantages accruing to the industry are:

  • Reduction in multiplicity of taxes.
  • Mitigation of cascading/double taxation.
  • More efficient neutralization of taxes especially for exports.
  • Development of common national market.
  • Simpler tax regime-fewer rates and exemptions.

The advantages accruing to the Central/State Government are:

  • A unified common national market to boost Foreign Investment and “Make in India” campaign.
  • Boost to export/manufacturing activity, generation of more employment,leading to reduced poverty and increased GDP growth.
  • Improving the overall investment climate in the country which will benefit the development of states.
  • Uniform SGST and IGST rates to reduce the incentive for tax evasion.
  • Reduction in compliance costs as no requirement of multiple record keeping.

Question 6.
Which of the existing taxes are proposed to be subsumed under GST?
Answer:
The GST would replace the following taxes:
(i) Taxes currently levied and collected by the Centre:

  • Central Excise duty
  • Duties of Excise (Medicinal and Toilet Preparations)
  • Additional Duties of Excise (Goods of Special Importance)
  • Additional Duties of Excise (Textiles and Textile Products)
  • Additional Duties of Customs (commonly known as CVD)
  • Special Additional Duty of Customs (SAD)
  • Service.Tax h. Central Surcharges and Cesses So far as they relate to supply of goods and services

(ii) State taxes that would be subsumed under the GST are:

  • State VAT
  • Central Sales Tax
  • Luxury Tax
  • Entry Tax (all forms)
  • Entertainment and Amusement Tax (except when levied by the local bodies)
  • Taxes on advertisements
  • Purchase Tax
  • Taxes on lotteries, betting and gambling
  • State Surcharges and Cesses so far as they relate to supply of goods and services

The GST Council shall make recommendations to the Union and States on the taxes, cesses and surcharges levied by the Centre, the States and the local bodies which may be subsumed in the GST.

Question 7.
Why was the Constitution of India amended recently in the context of GST?
Answer:
The fiscal powers between the Centre and the States are clearly demarcated in the Constitution with almost no overlap between the respective domains. The Centre has the powers to levy tax on the manufacture of goods (except alcoholic liquor for human consumption, opium, narcotics etc.) while the States have the powers to levy tax on the sale, of goods. In the case of inter-State sales, the Centre has the power to levy a tax (the Central Sales Tax) but, the tax is collected and retained entirely by the States. As for services, it is the Centre alone that is empowered to levy service tax.

Introduction of the GST required amendments in the Constitution so as to simultaneously empower the Centre and the States to levy and collect this tax. The Constitution of India has been amended by the Constitution (one hundred and first amendment) Act, 2016 recently for this purpose. Article 246A of the Constitution empowers the Centre and the States to levy and collect the GST.

Question 8.
What principles were adopted for subsuming the taxes under GST?
Answer:
The various Central, State and Local levies were examined to identify their possibility of being subsumed under GST. While identifying, the following principles were kept in mind:

  • Taxes or levies to be subsumed should be primarily in the nature of indirect taxes, either on the supply of goods or on the supply of services.
  • Taxes or levies to be subsumed should be part of the transaction chain which commences with import/ manufacture/ production of goods or provision of services at one end and the consumption of goods and services at the other.
  • The subsumation should result in free flow of tax credit in intra and inter-State levels. The taxes, levies and fees that are not specifically related to supply of goods & services should not be subsumed under GST.
  • Revenue fairness for both the Union and the States individually would need to be attempted.

Question 9.
Explain the features of GST laid down by the Constitution Amendment Act.
Answer:
The main features laid down by the constitution Amendment Act are:

  • Concurrent jurisdiction for levy & collection of GST by the Centre (CGST) and the States (SGST)
  • Centre to levy and collect IGST on supplies in the course of interstate trade or commerce including imports
  • Compensation for loss of revenue to States for five years
  • GST on petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas & aviation turbine fuel to be levied from a later date on recommendations of Council

Question 10.
Explain the basic challenges In the Implementation of GST.
Answer:
The main challenges in implementation of GST include:

  • Uniformity in operations.
  • Increase in compliance cost for business.
  • Avoidance of cascading effect cornerstone of GST- Seamless Credit- But I ‘See less credit”.
  • RCM pressure
  • legal restrictions
  • Discretionary disallowance
  • Exemption/ threshold may distort RNR & GST.
  • Effectiveness of GST Council and adherence to its recommendations.
  • Efficacy of GSTN.
  • Tax administration no mention in any policy docs.

Question 11.
What are the major challenges which INDIA faces when in adopts GST?
Answer:
GST will be the biggest reform in Indian taxation since 1947, but there are many challenges for its successful implementation. These are as under:
(a) Passing of Bill in Rajya Sabha: Since Central Government is not having sufficient majority in the Rajya Sabha. Thus, it will have to ensure safe passage as it will not be cake-walk for the Union government to pass the Bill in the Upper House of Parliament.

(b) Consent of States: For implementing it is critical that GST bill is passed by the respective state Governments in state assemblies so as to bring majority. This is a herculean task.

(c) Revenue Neutral Rate (RNR): It is one of Prominent Factor for its success. We know that in GST regime, the government revenue would not be the same as compared to the current system. Hence, through RNR Government is to ensure that its revenue remains the same despite of giving tax credits.

(d) Threshold Limit in GST: While achieving broad based tax structure under GST, Both empowered committee and Central Government must ensure that lowering of threshold limit should not be a “taxing” burden on small businessmen in the country.

(e) Robust IT Network: Government has already incorporated Goods and service tax network (GSTN). GSTN has to develop GST portal which ensure technology support for GST Registration, GST return filing, tax payments, IGST settlements etc. Thus there should be a robust IT backbone.

(f) Extensive Training to Tax Administration Staff: GST is absolutely different from existing system. It, therefore, requires that tax administration staff at both Centre and state to be trained properly in terms of concept, legislation and Procedure.

(g) Additional Levy on GST: The Purpose of additional Levy is to compensate states for loss of revenue while moving to GST. We acknowledge that fundamental purpose of GST is to make “INDIA” as one state where interstate movement of goods is common. In this situation, it would defeat the very purpose of GST in the country.

Question 12.
Explain in detail the framework of GST.
Answer:
The frame of GST can be divided into two:
1. Legislative Framework:
There is single legislation – CGST Act, 2017 – for levying CGST. Similarly, Union Territories without State legislatures [Andaman and Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu and Chandigarh] will be governed by UTGST Act, 2017 for levying UTGST. States and Union territories with their own legislatures [Delhi and Puducherry] have to enact their own GST legislation for levying SGST.

Though there would be multiple SGST legislations, the basic features of law, such as chargeability, definition of taxable event and taxable person, classification and valuation of goods and services, procedure for collection and levy of tax and the like would be uniform in all the SGST legislations, as far as feasible. This would be necessary to preserve the essence of dual GST.

2. Regulatory Framework of GST:
A new set up by Government of India named as ‘GST Council’. GST Council constituted w.e.f. 12.09.2016.
The GST Council consists of –

  • the Union Finance Minister (as Chairman),
  • the Union Minister of State in charge of Revenue or Finance, and
  • the Minister in charge of Finance or Taxation or any other Minister, nominated by each state government.

All decisions of the GST Council will be made by three fourth majority of the votes cast; the centre shall have one-third of the votes cast, and the states together shall have two-third of the votes cast.

  • Threshold limit for exemption to be ₹ 20 lakh (₹ 10 lakh for special category States).
  • Compounding threshold limit to be ₹ 50 lakh – not available to interstate suppliers, service providers (except restaurant service) & specified category of manufacturers.
  • Government may convert existing area based exemption schemes into reimbursement based scheme.

Introduction to Goods and Services Tax Very Short Answer Type Questions

Introduction to Goods and Services Tax Very Short Answer Type Questions

Question 1.
Expand GST.
Answer:
GST: Goods and Services Tax.

Question 2.
What is Goods and Service Tax (GST)?
Answer:
A good and service Tax is a destination based tax on consumption of goods and services. It is proposed to be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff. In a nutshell, only value addition will be taxed and burden of tax is to be borne by the final consumer.

Question 3
States the definition of GST.
Answer:
The term GST is defined in Article 366 (12A) to mean “any tax on supply of goods or services or both except taxes on supply of the alcoholic liquor for human consumption. In other words, GST is a destination based tax and levied at a single point at the time of consumption of goods or services by the ultimate consumer.

Question 4.
Expand CGST.
Answer:
CGST: Central Goods and services Tax.

Question 5.
Expand SGST.
Answer:
SGST: State Goods and services Tax.

Question 6.
Expand ITC.
Answer:
ITC: Input Tax Credits

Question 7.
Expand CC.
Answer:
CC: CENVAT Credit.

Question 8.
Give the meaning of goods.
Answer:
Goods means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached or forming part of the land, which are agreed to be served before supply or under a contract of supply.

Question 9.
What does the GST Council constitute of?
Answer:
A GST Council would be constituted comprising the Union Finance Minister (who will be the Chairman of the Council), the Minister of State (Revenue) and the State Finance/Taxation Ministers to make recommendations to the Union.

Question 10.
What is dual GST Model?
Answer:
The Dual GST is assumed to be a simple tax with two models i.e. Central Goods and Service Tax (CGST) and State Goods and Services. Tax (SGST) rates.

Question 11.
Expand HSN.
Answer:
HSN stands for Harmonised System of Nomenclature.

Question 12.
Expand GSTN.
Answer:
GSTN stands for Goods and Service Tax Network (GSTN).

Question 13.
What is GSTN? Explain its role in the GST regime?
Answer:
GSTN stands for Goods and Service Tax Network (GSTN). A Special Purpose Vehicle called the GSTN has been set up to cater to the needs of GST. The GSTN shall provide a shared IT infrastructure and services to Central and State Governments, tax payers and other stakeholders for implementation of GST.

Question 14.
What exactly is the concept of destination based tax on consumption?
Answer:
The main concept of destination based tax an consumption would accrue to the taxing authority which has jurisdiction over the place of consumption which is also termed as place of supply.

Question 15.
Which are the commodities proposed to be kept outside the purview of GST?
Answer:
The main commodities includes:

  • Alcohol for human consumption.
  • Petroleum Products viz. petroleum crude.
  • Motor spirit (petrol).
  • High speed diesel.
  • Natural gas and aviation turbine fuel and Electricity.

Question 16.
What will be the status in respect of taxation of the commodities after introduction of GST?
Answer:
The existing taxation system (VAT & Central Excise) will continue in respect of the above commodities which are proposed to be kept outside the purview of GST.

Question 17.
What will be status of Tobacco and Tobacco products under the GST regime?
Answer:
Tobacco and tobacco products would be subject to GST. In addition, the Centre would have the power to levy Central Excise duty on these products.

Question 18.
What type of GST is proposed to be implemented?
Answer:
It would be a dual GST with the Centre and States simultaneously levying it on a common tax base. The GST to be levied by the Centre on intra-State supply of goods and or services would be called the Central GST (CGST) and that to be levied by the States would be called the State GST (SGST). Similarly Integrated GST (IGST) will be levied and administered by Centre on every inter¬state supply of goods and services.

Question 19.
Why is Dual GST required?
Answer:
India is a federal country where both the Centre and the States have been assigned the powers to levy and collect taxes through appropriate legislation. Both the levels of Government have distinct responsibilities to perform according to the division of powers prescribed in the Constitution for which they need to raise resources. A dual GST will, therefore, be in keeping with the Constitutional requirement of fiscal federalism.

Question 20.
Which authority will levy and administer GST?
Answer:
Centre will levy and administer CGST & IGST while respective states will levy and administer SGST.

Question 21.
How will the goods and services bi ciassified under GST regime?
Answer:
HSN (Harmonised System of Nomenclature) code shall be used for classifying the goods under the GST regime. Taxpayers whose turnover is above ₹ 1.5 crores but below ₹ 5 crores shall use 2 digit code and the taxpayers whose turnover is ₹ 5 crores and above shall use 4 digit code. Taxpayers whose turnover is below ₹ 1.5 crores are not required to mention HSN Code in their invoices. Services will be classified as per the Services Accounting Code (SAC).

Question 22.
How will imports be taxed under GST?
Answer:
Imports of Goods and Services will be treated as inter-state supplies and IGST will be levied on import of goods and services into the country. The incidence of tax will follow the destination principle and the tax revenue in case of SGST will accrue to the State where the imported goods and services are consumed. Full and complete set-off will be available on the GST paid on import on goods and services.

Question 23.
How will Exports be treated under GST?
Answer:
Exports will be treated as zero rated supplies. No tax will be payable on exports of goods or services, however credit of input tax credit will be available and same will be available as refund to the exporters.

Question 24.
Who can opt for Composition Scheme?
Answer:
Businesses dealing only in goods can only opt for composition scheme. Services providers have been kept outside the scope of this scheme. However, restaurant sector taxpayers may also opt for the scheme.
This holds annual turnover is below ₹ 75 Lakhs.

Question 25.
What is the tax rate applicable oft a composition dealer?
Answer:
A registered taxpayer, who is registered under the Composite Scheme will pay tax at a rate not more than 1% for manufacturer, 2.5% for restaurant sector and 0.5% for other suppliers of turnover.

Question 26.
What is the threshold limit to be eligible for Composition Scheme?
Answer:
Any dealer whose aggregate turnover in a financial year does not exceed ₹ 75 Lakh can opt for composition scheme.

Question 27.
What are the transition provisions if a business transits from Composition Scheme under current regime to Regular Taxation – under GST?
Answer:
Taxpayers registered under composition scheme under the current regime will be allowed to take credit of input held in stock or in semi-finished goods or in finished goods on the day immediately preceding the date from which they opt to be taxed as a regular tax payer.

Question 28.
What is IGST?
Answer:
IGST or integrated goods and services tax would mean the tax levied under IGST Act on the supply of any goods and / or services in the course of inter-state trade or commerce.

Operating Costing Questions and Answers

Operating Costing Questions and Answers

SECTION – A

Question 1.
What do you mean by operating costing or What is service costing.
Answer:
Operating costing or Service costing is a form of operation costing which applies to areas where standardized services are provided either by an undertaking or by a service cost centre within an undertaking.

Question 2.
What is transport costing.
Answer:
Method of ascertaining cost in transport undertakings is known as transport costing

Question 3.
What is operating cost.
Answer:
The ICMA terminology defines operating cost as “the cost of providing a service”.

Question 4.
State any two running expenses in operating costing.
Answer:
Running expenses in operating costing are petrol, diesel, oil, gas, wages of driver, conductor, attender, tyres and tubes, spares, repairs and maintenance etc.

Question 5.
What is composite cost unit?
Answer:
The cost unit for services are usually tangible any they are often composite cost unit that is they are often made up of two parts, for example if we were attempting to monitor and control the cost of a delivery services.

Question 6.
Name the industries where the operating costing system is applied.
Answer:
The following are the industries, where in the operating costing is applied:

  • Railways
  • Hospitals
  • Hotels (Lodging)
  • Gas distribution
  • Educational institutions
  • Cinemas

Question 7.
What is Power house costing? or boiler house costing.
Answer:
Power house costing is the process of ascertain the cost per unit of electricity generated. Power house operating cost sheet is prepared to ascertain cost per unit of electricity generated. The cost of producing steam used in power house for the generation of electricity is also included in the power house cost.

Question 8.
What is canteen costing?
Answer:
Canteen costing is a method of ascertaining the cost providing meals, dishes of different type.

Question 9.
What do you mean by hotel costing?
Answer:
Hotel costing is the process of recording on providing daily accommodation facility to general public, have mushroomed all over the country due to the movement provide by modern civilization to travel both on personal and commercial work. Hotels have many unavoidable costs such as labor, utilities, property operation costs, customer acquisition costs, etc.

Question 10.
What is hospital costing?
Answer:
Hospital cost information is divided by relating the inputs of resources in monetary terms to the outputs of services provided by the hospital. Cost information is part of the basic information needed by managers and policy makers for making decisions about how to improve the performance of a hospital, were to allocate the resources within or among hospital or to compare the performance of different hospitals to one another.

Question 11.
What are standing charges in operating costing?
Answer:
Standing charges are expenses which are more or less fixed in nature. For example in case transport service garage charges, insurance, taxes, license and depreciation are standing cost.

SECTION- B

Question 1.
Explain various application of operating costing.
Answer:
The various applications of operating system are as following:

  • Administrative and office expenses like rent, salaries, to staff, insurance, director’s fees etc.
  • Selling and distribution expenses like advertisement, salaries of salesmen.
  • Fuel costs such as power for operations, fuel for production.
  • Public Utilities such as telephone service, Internet connectivity etc.
  • Maintenance of equipment.
  • Office supplies and consumables.
  • Insurance premium.
  • Depreciation of equipment and eventual replacement costs.
  • Taxes on production or operation (such as subsidence fees imposed on oil wells).
  • Income taxes.

Question 2.
State the characteristic features of operating costing.
Answer:
The main characteristic features of operating costing are as following:

  • It is adopted in industries which does not produce any tangible goods.
  • The expenses are divided into fixed and variable cost.
  • The cost unit may be simple or composite.
  • Total cost is averaged over the total amount of service rendered.
  • Costs are usually computed period-wise.
  • Service costing can be used for service performed internally or externally.
  • Documents like the daily log sheet, cost sheet etc. are used for the collection of cost data.

Question 3.
State the objectives of transport costing.
Answer:
The objectives of motor transport costing are as follows:

  • To provide information, whereby the efficiency with which the vehicles are rented may be judged.
  • To provide an accurate basis for quotation and fixing of rates.
  • To ensure that all journeys have been carried out in proper time.
  • To provide cost comparison between own transport and alternative, e.g. hiring.
  • To compare the cost of maintaining of one group of vehicles with another group.
  • To determine what should be charged against departments using the service.
  • To decide at what price the use and vehicle can be charged.

Question 4.
What is Power house costing? What are the objectives of power house costing?
Answer:
Power house costing is the process of ascertain the cost per unit of electricity generated. Power house operating cost sheet is prepared to ascertain cost per unit of electricity generated. The cost of producing steam used in power house for the generation of electricity is also included in the power house cost.

The objectives of power house costing are:

  • To minimize a plant’s overall energy costs by controlling operations.
  • To achieve the optimum cost of purchased fuel and electricity.
  • To provide reliable process steam and electricity to the plant as needed and with minimum variation.
  • Instantly and consistently respond to any change in load demand.
  • Fulfill with operating regulations and constraints.

Question 5.
What do you mean by hotel costing? Mention any two objectives of hotel costing.
Answer:
Hotel costing is the process of recording on providing daily accommodation facility to general public, have mushroomed all over the country due to the movement provide by modern civilization to travel both on personal and commercial work. Hotels have many unavoidable costs such as labor, utilities, property operation costs, customer acquisition costs, etc.
The two objectives of hotel costing.

  • To ascertain the cost of producing meals or dishes,
  • To fixed the rate of meals to be charge.

Question 6.
Give the concept of canteen Costing.
Answer:
The expenses of the canteen are shown under the following heading:
→ Provision: Example – Milk, tea, coffee, coal drinking, bread, biscuits, cake, vegetable cooked and eggs etc.

→ Labour: Example – Salaries of cook, wages of cook, assistance cook, supervisor etc.

→ Fuel and power: Example – Gas, steam, coal, power, fire wood.

→ Miscellaneous expenses: Example – Rent, insurance, depreciation etc. With regard to food provision it should be kept in view that:

  • Article should be kept in the canteen according to the daily sales requirements.
  • The use of refrigerators and the air conditions rooms help to preserve the food ingredients and quality.
  • The demand of the articles in the canteen various with change in season. The seasonal article should be provided according to the demand.
  • The needless and cleanliness in the canteen is very essential and it helps In the sale to grow.

Question 7.
What is hospital costing? What are the objectives of hospital costing?
Answer:
Hospital cost information is divided by relating the inputs of resources in monetary terms to the outputs of services provided by the hospital, Cost information is part of the basic information needed by managers and policy makers for making decisions about how to improve the performance of a hospital, were to allocate the resources within or among hospital or to compare the performance of different hospitals to one another.

The objectives of hospital costing are:

  • Utilisation of resources.
  • Department-wise profitability analysis.
  • Fixation of doctors’ honorarium.
  • Fixing schedule of charges.
  • Monitoring of factors affecting pricing.

Practical Problems

Question 1.
Kumar Transport Limited is running four buses between two towns which are fifty miles apart; Seating capacity of each bus is 40 sengers. Actual passengers carried were 75% of the seating capacity. All the four buses ran on 25 days in the month. Each bus made one round trip per day.
Calculate the total passenger kms. covered during the month.
Solution:
The total passenger kms. covered during the month.
= No. of buses x distance x No. of trips x capacity x actual capacity x No. of days in a month
= 4 x (50 x 2) 40 x \(\frac {75}{100}\) x 25
= 3,00,000 passenger miles
or 4,80,000 passengers kms.

Question 2.
From the following information calculate:
(a) Total Kilometers
(b) total passenger kilometers
Days operated in a month – 30 days
Trips made by each bus covering a distance of 200 kms one side No. of buses – 4
Capacity of each bus 50 passengers Average passenger travelling – 75% capacity.
Solution:
Total Km = No. of bus x No. of days x Distance
= 4 x 30 x 200 x 2 = 48,000 km
Total passenger Km = 48,000 x 50 of 75/100
= 48,000 x 50/1 x 75/100
= 18,00,000

Question 3.
A transport company has 4 busses running between two cities which are 60 kms apart.
Seating capacity of each bus is 60 passengers. The actual capacity carried is 80%. Each bus makes one round trip per day.
Calculate total kilometers and total passenger kms for the month of September assuming that 25% of the busses are off the road always for repairs and maintenance. Solution:

Cost per passenger/Kms (76012.33/304000) =  0.250
Profit (1/4 taking or 1/3 of cost) =  0.083
Rate per passenger 0.333

Rate per passenger to be charged:
(a) Bangalore to Mysore 140 x 0.333 = 46.62
(b) Bangalore to Chitradurga 200 x 0.333 = 66.66
Total passenger/Kms
= No. of Passenger x No. of trips x No. of Buses x Capacity x No. of days x Kms
= 60 x 2 x 3 x 80/100 x 30 60
= 5,18,400 passengers/Kms
Total Kms run = Trips distance x No. of Buses x No. days
= 60 x 3 x 30
= 5400 Kms

Question 4.
A transport company runs 4 buses between two cities which are 60 kms apart. The seating capacity of each bus is 60 passengers. The actual capacity carries is 80%. Each bus makes 4 round trips per day. On the onward journey, the buses run to full capacity and on return trip run 20% empty. Calculate the kilometers and total passenger kilometers for a month assuming that no bus is off the road due to repairs and maintenance.
Solution:
Calculation of total passenger kilometer
Total passenger/Kms
= No. of passenger x No. of trips x No. of buses x capacity x No. of days x Kms
Onward = 60 x 4 x 4 x 80% x 30 x 60 = 17,28,000
Return = 60 x 4 x 4 80% x 30 x 60 = 13,82,400
Total passenger Kilometer 31,10,400.

Question 5.
A transport company is running 5 Buses between two cities which are 40 kms apart, seating capacity of each bus is 50 passengers, actual passengers carried were 80% of the seating capacity. Each bus made one trip per day (Assume it to be a return trip).
All the buses run on all the days of the month.
Find the total passenger kms covered during the month of Septermber 2005.
Solution:
T.P. Kms = No. of pass x No. of trips x No. of buses kms x Capacity x No. of days x kms
= 50 x 2 x 5 x \(\frac {80}{100}\) x 30 x 40
= 500 x \(\frac {80}{100}\) x 30
= 12,000 pkms x 40
= 4,80,000 pkms

Question 6.
From the following data calculate the cost per km of a vehicles Value of vehicle 30,000; Road license p.a. 1,000; Driver’s wages 400; Garage rent p.a. 1,200; insurance p.a. zoo; cost of petrol per litre 6; Kms per litre 10; Proportionate charges of tyres per k.m. Re.0.50; Estimated life 1,50,000 kms; Estimated annual kms 6000.

Question 7.
Shivaprakash Road Lines supplies the following details in respect of a truck of 5 ton capacity.
Cost of the truck – 9,00,000
Estimated life – 10 years
Diesel, oil, grease – 150 per trip each way
Repairs and maintenance – 5,000 p.m
Drivers wages – 5,000 p.m.
Cleaners wages – 2,500 p.m.
Insurance – 48,000 p.a.
Road tax – 24,000 p.a.
General supervision charges – 48,000 p.a.
The truck carries goods to and from the city covering a distance .of 50kms; each way. While going to the city, freight is available to the extent of full capacity and while returning only 20% of the capacity. Assuming the truck runs on an average 25 days in a month work out
(i) operating cost per ton-km
(ii) rate per ton per trip that should be charged to earn a profit of 50% on freight. Dec 2008

Question 8.
Adarsha Transport Company supplied the following details in respect of a truck of 5 tonne capacity.
Cost of truck – 9,00,000
Scrap value – 45,000
Estimated life – 10 years
Diesel, oil and grease – 750 per trip each way
Repair and maintenance – 5,000 per month
Driver wages – 5,000 per month
Cleaner wages – 2,000 per month
Insurance – 12,000 per annum
Tax – 24,000 per year
General supervision charges 12,000 per year. The truck cames goods to and from the city covering a distance of 50 km each way. On outward trip freight is available to the extent of full capacity and on return 40% of capacity. Assuming that truck runs on an average 25 days a month calculate:
(1) Operating cost per tonne km
(2) Rate per tonne per trip that company should charge if a profit of 50% on freightage is to be earned.

Question 9.
Pranav Transport runs a minibus with a capacity of 25 seats. The bus rungs between tow tons which are 25 km apart.
It runs for 30 days in a month and on an average 80% of seating capacity is utilised. The bus makes two round trips each day.
Cost of the bus – 30,00,000
Estimated scrap value at the end of its useful life of 10 years – 1,20,000
Driver’s salary per month – 18,000
Conductor’s salary p.m. – 15,000
Manager’s salary p.m. – 12,000
Cleaners salary p.m. – 9,000
Garage rent p.a. – 64,800
Life Tax – 1,44,000
Rent, Lighting etc. p.m. – 3,000
Repairs p.m. – 7,200
Diesel, oil etc. p.m. – 72,000
The profit expected 20% of takings
Prepare statements to show
(a) Operating cost per passenger kilometer.
(b) The fare per passenger kilometer.

Question 10.
A person owns a bus which runs between Bangalore and Mysore and back for 10 days in a month.
The distance between Bangalore and Mysore is 140 kins. The bus completes one round trip each day. The bus goes for another 10 days in the month to Chitradurga. The distance between Bangalore and Chitradurga is 200 kms. The bus completes one round trip each day. For the rest 4 days of its operation in a month, it runs in the local city. The daily distance covered in the local trip is 60 kms.
Calculate the rate, the person should charge, if he wants to earn a profit of 25% on his takings. The other details are as follows:
Cost of the bus 6,00,000
Depreciation 15% p.a.
Salary of the driver 4,000 p.m.
Salary of the conductor 3,000 p.m.
Accountant salary 1,800 p.m.
Insurance 12,000 p.a.
Diesel consumption 5 kms per litre costing 40 per litre Token tax 2,500 p.a Lubricant oil ‘ 10 for 50 kms.
Repairs and maintenance 5,000 p.m.
Permit fee 3,800 per 6 months.
Normal capacity 50 passengers
The bus is generally occupied 80% of its capacity when it goes to Mysore and 90% when it goes to Chitradurga. It is normally full when it rungs with in the city. Nov 2016

Question 11.
Union transport company supplies the following details in respect of a truck of 5-tonne capacity.
Cost of truck – 90,000
Estimated life – 10 years
Diesel, oil, grease – 15 per trip each way
Repairs and maintenance – 500 per month
Cleaner’s wages – 250 per month
Driver’s wages – 500 per month
Insurance – 4,800 per year
Tax – 2,400 per year
General supervision charges – 4,800 per year
The truck carries goods to and from city covering a distance of 50k. meter each way.
While going to the city, freigh is available to the extent of full capacity and on return 20% of capacity.
Assuming that the truck run on an average 25 days a month. Work out
i) Operating cost per tonne k. meter and
ii) Rate per trip that the company should charge, if profit of 50% on freightage is to be earned.

Question 12.
A transport company operates two trucks. The following is the data regarding the monthly cost of operating them. Trucks

A B
Drivers salaries 250 275
Clearners wages 150 160
Petrol 300 350
Mobile oil 25 30
Garage rent 125 125
Tax and Insurance 50 50
Depreciation 560 620
Expenses of supervision 100 100
Repairs 120 140
Overheads 40 40

Two trucks carried 150 tonnes of goods each during the month of November 2004. The distance covered were A – 3,500 kms and B- 5,000 kms respectively.
Prepare an operating cost sheet for Nov. 2004.

Question 13.
From the following data relating to 2 different vehicles A and B. Compute the cost per running km.

Particulars Vehicle A Vehicle B
Kms run (annual) 30,000 12,000
Cost of vehicle 6,50,000 3,00,000
Road licence (annual) 1,500 1,500
Insurance (annual) 1,400 800
Garage rent (annual) 1,200 1,000
Supervision and Salaries (annual) 2,400 2,400
Driver’s wages per hour 8 8
Cost of fuel per litre 28 28
Kms run per litre 10 7
Repairs and maintenance per km 0.65 2
Tyres allocation per km 0.75 0.55
Estimated life of vehicle 1,00,000 75,000

Charge interest at 6% on cost of vehicles. The vehicles runs 16 kms per hour on an average.

Question 14.
Workout in an appropriate cost sheet and find the unit cost i.e. per passenger km, for the year 2018-19, for a fleet of passenger buses run by a transport company, the following information is extracted from its books.
(a) 5 passenger buses of 1,00,000, 2,40,000, 90,000, 1,10,000 and 1,60,000 respectively.
(b) Yearly depreciation on vehicle is 20% of cost.
(c) Annual repair charges, maintenance and spare parts 80% of depreciation.
(d) Wages of 10 drivers is 200 per month
(e) Wages of 20 cleaners at ‘ 100 per month
(f) Director’s fees 800 per month
(g) Office establishment 2,000 per month
(h) License and taxes at 4,000 per annum
(i) Realization by sale of old tyres and tubes 6,400 for every 6 months.
(j) Yearly rate of interest is 4% on capital
(k) Diesel expenses per annum is 40,000
(i) 900 passengers were carried over 1,600 kms during the year
(m) Rent of 6 garages at 100 each per month.