The Finance Function Short Answer Type Questions

The Finance Function Short Answer Type Questions

Question 1.
State the aims of finance functions.
Answer:
The aims of finances functions can be summarized as follows:
1. Acquiring Sufficient and Suitable Funds: The crucial aim of finance function is to assess the needs of the enterprise, properly and procure funds in time. Time is an important element in meeting the needs of the organization. It is necessary that the funds should be, reasonably, adequate to the demands of the firm.

2. Proper Utilization of Funds: Raising funds is important more than that is its proper utilization. If proper utilization of funds were not made, there would be no revenue generation. Benefits should always exceed cost of funds so that the organization can be profitable.

3. Increasing Profitability: Profitability is necessary for every organization, the planning and control functions of finance aim at increasing profitability of the. firm. To achieve profitability, the cost of funds should be low. Idle funds do not yield any return, but incur cost.

4. Maximizing Firm’s Value: The ultimate aim of finance function is maximizing the value of the firm, which is reflected in wealth maximization Of shareholders. The market value of the equity shares is an indicator of the wealth maximization.

Question 2.
Explain the functions of financial management system.
Answer:
The functions of financial management are as follow:

  • Estimation of financial requirements of a firm
  • Selection of right and appropriate source of funds for raising the funds.
  • After selecting the right source, raising the funds required by the firm.
  • After accumulating, proper allocation of funds to different profitable avenues becomes essential.
  • After the investment of funds, proper analysis and interpretation is required to ensure profitable investment in order to increase the yield.
  • Effective working capital management to ensure smooth running of business.
  • The financial management also ensure fulfilling social obligation of business.
  • Proper financial management protects the interest of creditors, shareholders and employees.

Question 3.
State the criticisms laid against ‘Profit Maximisation”.
Answer:
Profit maximisation Advantages:

  • The efficiency level of an organisation can be ensured only through profits.
  • The interest of shareholders creditors, employees, banks financial institutions etc., can be protected and their welfare can be ensured only through profits.
  • The profits enable a concern to take up expansion and diversification programs.
  • Profits increase the demand for the shares of the company.
  • Profits ensure the survival of the concern.

Disadvantages:

  • Profit maximisation objective does not consider the element of risk.
  • Profit maximisation unnecessarily invites competition for the concern.
  • There is unnecessary government intervention because of profit maximisation.
  • Huge profits invite problems from workers.
  • Huge profits unnecessarily create doubts in the minds of customers that, they are cheated.

Question 4.
State and explain in. brief the different goals of financial management? State the advantages of wealth maximisation?
Answer:
The goals can be divided into:
(a) Specific Goals:

  • Profit Maximisation
  • Wealth Maximisation

(b) Other Goals:

  • Maintaining balanced asset structure
  • Ensuring efficiency in business operations
  • Ensuring financial discipline
  • Planning judicious utilisation of funds
  • Maintaining liquidity of funds

The advantages of wealth maximisation are:

  • Wealth maximisation includes the concept of time value of money.
  • The concept of wealth maximisation is universally accepted as it takes into account the interest of financial institutions, owners, employees and society.
  • The concept of wealth maxmisation considers the impact of risk factor.
  • Wealth maximisation concept guides the management of the firm in framing effective dividend policy to give maximum returns to equity shareholders.

Question 5.
Difference between profit maximation and wealth maximisation.
Answer:
Difference between profit maximation and wealth maximisation are:

Profit Maximization Wealth Maximization
1. Emphasizes short-term returns Emphasizes long term returns.
2. Easy to determine the link between financial decisions and profits. Offers no clear relationship between between financial decisions and stock price.
3. Ignores risk or uncertainty. Recognizes risk or uncertainty.
4. Ignores the timing of returns. Recognizes the timing of returns.
5. Does not consider stockholders Considers stockholders return.
6. Objective to make profits Objective to maximise earnings per share

Question 6.
What are the decisions of financial management?
Answer:
The functions of finance involve three important decisions:
1. Investment decisions: This decision includes all activities involved in deciding the pattern of investment. This decision involves both short term and long term investments which in other words means both capital assets and current assets. This decision involves allocation of huge financial resources.

2. Financing Decisions: This decision involves selecting appropriate sources of funds for raising money. It is a major challenge for a financial executive, because the source selected should aim in maximising returns of the investors. The different alternative sources available for mobilising funds are a) Equity b) Equity and Debentures c) Equity, debenture and preference shares d) Equity, debentures, preference shares and long term loans.

3. Dividend Decision: The .primary objective of any organisation is to fulfill the desire of the investors by promising a good percentage of dividend on their investments. A finance manager should also keep in mind the objective of retained earnings at the time of promising dividends to the investors.

Question 7.
State the role of financial markets.
Answer:
Role played by financial market is as follows:

  • Growth in Income: Financial markets allow lenders earn interest/dividend on their surplus investable funds, thus contributing to the growth in their income.
  • Productive Usage: Financial markets allow for the productive use of the funds used in financial system thus enhancing the income and the gross national production.
  • Capital Formation: Financial markets provide a channel through which new savings flow to aid capital formation of a country.
  • Price Discovery: Financial markets allow for the determination of the price of the traded financial asset through the interaction of different set of participants..
  • Sale Mechanism: Financial markets provide a mechanism for selling of a financial .asset by an investor so as to offer the benefits of marketability and liquidity of such assets.
  • Information Availability: The information generated in financial market is useful to various parties taking part in financial market.

Question 8.
Discuss the features of primary market.
Answer:
Features Of Primary Market are:

  • New long term capital: This is the market for new long term capital. The primary market is the market where the securities are sold for the first time. Therefore it is also called New Issue Market (NIM).
  • Issued by the company directly : In a primary issue, the securities are issued by the company directly to investors.
  • Issue new-security certificates : The company receives the money and issue new security certificates to the investors.
  • Setting up new business: Primary issues are used by companies for the purpose of setting up new business or for expanding or modernizing the existing business.
  • Facilitating capital formation: The primary market performs the crucial function of facilitating capital formation in the economy.
  • Converting private capital into public capital: The new issue market does not include certain other sources of new long term external finance, such as loans from financial institutions. Borrowers in the new issue market may be raising capital for converting private capital into public capital; this is known as going public.

Question 9.
Explain functions of primary market.
Answer:
Functions of primary market are as follows:
1. Facilitate capital growth: The key function of the primary market is to facilitate capital growth by enabling individuals to convert savings into investments.

2. Issue new stocks: It facilitates companies to issue new stocks to raise money directly from households for business expansion or to meet financial obligations.

3. Raise funds from the public : It provides a channel for . the government to raise funds from the public to finance public sector projects.

4. Issuance of new securities by corporations: Unlike the secondary market, such as the stock market which trades listed shares between buyers and sellers, the primary market exists for the issuance of new securities by corporations and the government directly to investors.

5. Methods of issuing securities: Methods of issuing securities in the Primary Market

  • Initial Public Offer or IPO
  • Rights Issue (For existing Companies); and
  • Preferential Issue.

Question 10.
What are the functions of Capital Market?
Answer:
The functions of capital market are:

  • Allocation functions: Capital market helps the investors to invest their savings into various productive avenues. Capital market attracts new investors who are willing to make new funds available to business.
  • Liquidity functions: It helps to buyers and sellers can exchange securities at mutual satisfactory prices. This allows better liquidity for the securities that are trade.
  • Indicative function: It act as a barometer showing the progress of a company and also economy as a whole through share price movements.
  • Savings and investment functions: It helps quickly converting long-term investment into liquid funds. This creates confidence among investors.
  • Transfer function: It helps for transfer of existing assets among individual units or groups.
  • Merger function: It encourages for voluntary or coercive take over mechanism to put the management of inefficient companies to more competent hands.

Question 11.
Explain features of money market.
Answer:
The features of money market are:
(i) Short term financing: It helps for providing short term financino. Money market meets working capital requirements of industry, trade and commerce.

(ii) No fixed place: For conduct of their operations, there is no fixed place and even transactions can be conducted over the phone.

(iii) Liquidity adjustment: It serves as a medium of exchange between the holders of temporary cash surplus and temporary cash deficits. The short-term financial assets are converted into money with speed, without loss and with minimum transaction cost.

(iv) Existence of sub-markets: In a developed money market, the various sub-markets existed and functioned smoothly. That is the money market will have a developed sub-market, such as bill markets, call money market acceptance market, discount market, buillion market, central bank, co-opratives bank etc.

(v) Prevalence of healthy competition: In each sub-market, there should be a reasonable and healthy competition. That is a developed money market, there are a large numbers of borrowers, lenders and dealers.

(vi) Highly developed industrial system: The money market will function smoothly and can fulfil the basic purpose of its existance only when there is a highly developed industrial system.

(vii) International attraction: Well developed money markets attract funds from foreign countries also. The dealers, borrowers and lenders of foreign countries are eagerly coming forward to participants in the activities of developed money market.

(viii) Uniformity of interest rate: Prevalence of uniformity in interest rates in different parts of the country is the important characteristic feature of money market.

(ix) Highly organised banking system: As there are many dealers in short-term funds, the commercial banks are considered as the nervous system of the money market. Therefore a well-developed money market will have a highly organised and developed commercial banking system.

Question 12.
Distinguish between capital market and money market.
Answer:
The distinction between capital market and money market is shown below:

Capital Market Money Market
1. It is a market for long term funds 1. It is a market for short term funds
2. This market deals in instruments like shares, debentures, bond etc. 2. This market deals with bills of exchange, treasury bills, commercial papers, certificate of deposits etc.
3. Development banks and insurance companies are primary players in capital market. 3. Central Bank and commercial banks are the major players in money market.
4. The instruments of capital market generally have secondary market. 4. The instruments of money market do not have a secondary market
5. Authorised dealers are the mediators. 5. There are no brokers involved in who conduct the capital market transactions money market transactions.

Question 13.
Explain any three financial institution.
Answer:
Financial institutions are the firms that provide financial services and advice to their clients. The financial institutions are generally regulated by the financial laws of the government authority.
1. Commercial Banks Institutions:
A commercial bank can be defined as a type of financial institution which provides a wide range of services such as mortgage lending, giving business and auto loans and accepting deposits. The commercial bank also deals with basic investment products such as savings accounts and certificates of deposit.

The traditional commercial banks come with, all facilities such as safe deposit boxes, bank tellers, ATMs and vaults. However, there are some commercial banks that do not have any physical branches. Here the customer is required to undertake all transactions either through the Internet or by phone.

2. Credit Unions Institutions:
The Credit Union is known by various names across the world and is a member-owned, not-for-profit financial cooperative. Unlike other banks and financial institutions, the Credit Unions are. established and operated by the members. In the Credit Union, the profits are shared amongst the members. There is no set standard for the Credit Union. It can range from an organization – with just a few members to a large one where there are thousands of people.

In the Credit Union the members pool their money in the bank so that they can provide loan money to each other. Further, the profits that are achieved , are employed to fund projects and services for the overall benefit of the community. Some of the services offered by the Credit Unions are online banking, share accounts (savings accounts), share draft accounts (checking accounts), credit cards and share term certificates (certificates of deposit).

3. Stock Brokerage Firms institutions:
The stock brokerage firm is responsible for facilitating buying and selling of financial securities between a buyer and a seller. A brokerage firm serves a clientele of investors and employs a number of stockbrokers through whom they trade public stocks and other securities.

Once a transaction has been successfully completed the brokerage company receives compensation, which is by means of a commission. Full-service brokerages offer estate planning services, tax advice and consultations. A discount brokerage charges less money than the i traditional brokerage and here clients conduct trades via computerized trading systems. In online brokerages, the investor is offered a website to conduct his h or her transactions.

The Finance Function Very Short Answer Type Questions

The Finance Function Very Short Answer Type Questions

Question 1.
What do you mean by finance?
Answer:
The term “Finance” is understood as provision of funds as and when needed. It refers to the science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities.

Question 2.
What is business finance?
Answer:
Business- Finance refers to that business activity which is concerned with the acquisition and conservation of capital funds in meeting financial needs and overall objectives of business enterprises.

Question 3.
What do you mean by financial management?
OR
Define financial management.
Answer:
According to J.F. Bradley “Financial Management is the area of business management devoted to the judicious use of capital and a careful selection of sources of capital in order to enable a business firm to move in the direction of reaching its goals”.

Question 4.
State four functions of financial mangement.
OR
Outline the functional areas of financial mangement.
Answer:
The functions of financial management are as follows:

  • Estimation of financial requirements of a firm.
  • Selection of right and appropriate source of funds for raising the funds.
  • After selecting the right source, raising the funds required by the firm.
  • Lastly accumulating, proper allocation of funds to different profitable avenues becomes essential.

Question 5.
State the objectives of financial management.
Answer:
Financial management has three main objectives they are:

  • Maintaining of adequate Liquid Assets
  • Maximisation of profit
  • Maximisation of wealth.

Question 6.
What is profit maximisation?
Answer:
Profit Maximisation is a primary objective and a social obligation. Profit is a tool through which efficiency of the organisation can be measured. The growth and survival of a company depends upon its ability to earn profit. The profit earned can be preserved for meeting future deficiency.

Question 7.
What is wealth maximisation?
Answer:
Wealth Maxmisation refers to creation of wealth of the concern.- In other words, it refers to the increase in the market value of shares.

Question 8.
State the goals of financial management.
Answer:
The goals of financial management are:

  • Profit maximisation
  • Wealth maximisation
  • Maximising firm value
  • Acquiring sufficient fund

Question 9.
What is economic environment for business?
Answer:
Economic Environment refers to all those economic factors, which have a bearing on the functioning of a business. Business depends on the economic environment for all the needed inputs. It also depends on the economic environment to sell the finished goods.

The economic environment consists of external factors in a business market and the broader economy that can influence a business. Macroeconomic influences are broad economic factors that either directly or indirectly affect the entire economy and all of its participants, including the business.

Question 10.
What are Financial Markets?
Answer:
Financial markets represent an important segment of the financial system. It refers to an outlet where financial products, financial services and financial securities are traded.

Question 11.
Classify the Financial markets?
Answer:
Financial markets can be classified into:

  • Money market and capital market
  • Primary market and secondary market
  • Organised and unorganised market
  • Foreign exchange market
  • Broad, deep and shallow market.

Question 12.
Give the meaning of secondary market.
Answer:
Secondary market is a market for all those securities and stock which are already issued to the public. It deals with sale/purchase of already issued equity/debts by corporates and others. It is also known as stock market.

Question 13.
Name the intermediaries of secondary markets.
Answer:
The intermediaries of secondary markets are:

  • Market Intermediaries Registration and Supervision Department (MIRSD).
  • Market Regulation Department (MRD).

Question 14.
Give the meaning of capital market.
Answer:
Capital market is the market for long term finance. Capital market is the medium that channelises the small savings of the community and makes it available for industrial outlets.

Question 15.
What is Money Market?
Answer:
Money market basically deals with short term financial assets, which are close substitute of money. It is a place where short term surplus funds at the disposal of financial institutions and individuals are borrowed by individual institutions and also by government facing financial deficit.

Question 16.
What do you mean by Financial Dualism?
Answer:
The financial system of most developing countries are characterised by coexistence and cooperation between the formal and informal financial sectors. The coexistence of these two sectors is known as ‘financial dualism’.

Question 17.
What is financial system?
Answer:
A financial system is a system that allows the exchange of funds between lenders, investors and borrowers. Financial systems operate at national, global, and firm-specific levels. Money, credit, and finance are used as medium of exchange in financial systems.

Question 18.
What are financial institutions?
Answer:
Financial institutions render financial services of dealing in financial assets i.e. mobilise the savings against financial claims. Financial Institutions range from pawn shops and money lenders to banks, pension funds, insurance companies, brokerage houses, investment trusts and stock exchanges.

Question 19.
What are financial instruments?
Answer:
Financial instruments range from the common – coins, currency notes and cheques; mortgages, corporate bills, and stocks – to the more exotic – futures and swaps of high-finance.

GST and Technology Notes

GST and Technology Notes

GST providers: To enable taxable persons to comply with the requirements of GST, 34 companies have been given permission to act as GST suvidha providers. These providers will enable a middle tier of entrepreneurs, who can develop innovative services and solutions for a variety of tax payers.

GSTN: Goods and Services Tax Network (GSTN) is a nonprofit non-government company, which will provide shared IT infrastructure and service to both central and state governments including tax payers and other stakeholders. The Frontend services of registration, Returns and payments to all taxpayers will be provided by GSTN. It will be the interface between the government and the taxpayers.

GST system: Under GST system a uniform sharing of IT infrastructure between the center and states has been established.

GSP: GSP stands for GST Suvidha Provider. A GSP is considered as an enabler for the taxpayer to comply with the provisions of the GST law through its web platform (essentially an online compliance platform such as ClearTax).

GSP eco-system: Under GSP eco-system uploading invoice information, matching of input tax credit (ITC) claims, creation of party-wise ledgers, uploading of returns, payment of taxes, signing of documents with digital signature is done electronically.

Mandatory for e-commerce operator to obtain registration: Yes it it mandatory for e-commerce operator to obtain registration. Section 19 r/w Schedule-III of the MGL, provides, that the threshold exemption is not available to e-commerce operators and they would be liable to be registered irrespective of the value of supply made by them.

Aggregator: Section 43B(a) of the MGL defines aggregator to mean a person, who owns and manages an electronic platform, and by means of the application and communication device, enables a potential customer to connect .with the persons providing service of a particular kind under the brand name or trade name of the said aggregator. For instance, Qla cabs would be an aggregator.

Aggregator required to be registered under GST: Yes an aggregator required to be registered under GST. Section 19 r/w Schedule-III of the MGL, provides that the threshold exemption is not available to aggregators and they would be liable to be registered irrespective of the value of supply made by them.

Tax Collection at Source (TCS): In terms of Section 43C(1) of the MGL, the e-commerce operator is required to collect (i.e. deduct) an amount out of the consideration paid or payable to the actual supplier of goods or services in respect of supplies of goods and / or services made through such operator. The amount so deducted/collected -is called as Tax Collection at Source (TCS).

Concept of GST Eco-system: A common GST system will provide linkage to all State/UT Commercial Tax departments, Central Tax authorities, Taxpayers, Banks and other stakeholders. The eco-system consists of all stakeholders starting from taxpayer to tax professional to tax officials to GST portal to Banks to accounting authorities.

Empowered Group on IT Infrastructure for GST with following members:

  • Member (B&C), CBEC.
  • Additional Secretary (Revenue), DoR.
  • DG (Systems), CBEC as Member-Secretary
  • FA, Ministry of Finance
  • Member Secretary, Empowered Group of State Finance Ministers
  • Member Technology Advisory Group for Unique Protects (TAGUP).
  • Commercial Tax Commissioners of Maharashtra, Assam, Karnataka, West Bengal and Gujarat.

Services will be rendered by GSTN:

  • Registration (including existing taxpayer master migration and issue of PAN based registration number)
  • Payment management including payment gateways and integration with banking systems
    Return filing and processing.
  • Taxpayer management, including account management, notifications, information, and status tracking.
  • Tax authority account and ledger Management.
  • Computation of settlement (includinq IGST settlement) between the Centre and States; Clearing house for IGST].

Basic features of GST common portal:

  • Tax payer registration (New, surrender, cancelation, etc.)
  • Invoices upload, auto-draftirig of Purchase register- of buyer Periodic GST Returns filing.
  • Tax payment including integration with agency banks.
  • ITC and Cash Ledger and Liability Register
  • MIS reporting for tax payers, tax officials and other stakeholders.
  • BI/Analytics for Tax officials.

Assessment and Returns Notes

Assessment and Returns Notes

Assessment: Assessment means determination of tax liability under this act and includes self- assessment, re-assessment, provisional assessment, summary assessment and best judgment assessment.

First returns needs to be filed by taxable in respect of outward suppliers: 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.

First returns needs to be filed by taxable in respect of inward suppliers: 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.

Required to furnish the details of outward taxable supply: All registered taxable persons are required to furnish the details of outward supplies of goods and services made during the tax period.

GST payment to be done by the taxable person: 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 supply. Different situations envisaged and different tax points have been explained in the aforesaid sections.

Tax liability register: Tax Liability Register will reflect the total tax liability of a taxpayer (after netting) for the particular month.

Cash Ledger: The information will be reflected on real time basis. This ledger can be used for making any payment on account of GST.

Input tax: “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.

E-FPB: E-FPB stands for Electronic Focal Point Branch. These are branches of authorized banks which are authorized to collect payment of GST. 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.

Supplier account for this TDS while filing his return: 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.

Input tax includes tax (CGST/ IGST/ SGST): 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.

Details to be submitted while furnishing the details of outward supply: The supplier has to furnish the details of invoices, debit notes, credit notes and revised invoices issued in relation to outward supplies made durjnq the tax period.

Required to file an annual return: AH 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.

Required to furnish final return: 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.

Zero rated transactions: 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.

Main features of GST payment process:

  • Electronically generated challan from GSTN Common Portal.
  • Warehousing of Digital Challan.
  • 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.

Claim of 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 deDosited/oaid to the government by the supplier in cash or via claiming input credit.
  • Supplier has filed GST returns

Various heads under which information needs to be furnished:

  • Name of Taxable Person
  • Whether Liable to Statutory Audit
  • Auditors
  • Details of Expenditure
  • Details of Income
  • Return Reconciliation Statement
  • Other
  • Profit as per the Profit and Loss Statement.

Sections which will be auto-populated at the time of system login:

  • GSTIN
  • Legal Name
  • Business Name
  • Address

Sections under which information needs to be furnished:

  • Application Reference Number
  • Effective Date of Surrender/ Cancellation.
  • Whether cancellation order has been passed.
  • If Yes, Unique ID of Cancellation order
  • Date of Cancellation Order
  • Particulars of Closing Stock
  • Amount of Tax Payable on Closing Stock
  • Verification.

Procedure and Levy Under GST Notes

Procedure and Levy Under GST Notes

Power to levy GST derived from 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 interstate trade or commerce.

Deemed registration: 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.

Registration granted under GST can be cancelled: 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.

Nonresident become liable for registration: A nonresident taxable person shall become liable for registration, when he makes any taxable supply.

Registered person required display his certificate of registration: 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.

Compulsory registration: 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.

Bill of supply: A bill of supply should be issued instead of a tax invoice in case of the following supplies:

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

Copies of invoices are required in case of supply of goods: The invoice should be prepared in triplicate. The original is for the recipient, the duplicate for the transporter and the triplicate for the supplier.

Receipt voucher: Receipt voucher is issued when advance is collected/ received in relation to supply of goods or services.

Every Registered person is required to maintain books of account: Every registered person is required to maintain books of accountancy his principal place of business that is mentioned in the certificate of registration.

Basic accounts to be maintained by every registered person: 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.

Provisional input tax credit: 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.

Tax deducted at source: 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.

Authorized to undertake the audit of a taxable person: The commissioner of CGST/SGST or any. officer authorized by him may undertake audit of any registered person.

Threshold for opting to pay tax under the composition scheme: The threshold for composition scheme is Rs. 50 Lakhs of aggregate turnover in financial year.

Minimum rate of tax prescribed for composition scheme: The minimum rate of tax prescribed for composition scheme is 1%.

Remission of tax/duty: 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.

Documents required for GST registration:

  • 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.

Cases in which registration is compulsory:

  • 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.

B.Com 5th Sem Culture, Diversity and Society MCQ Questions and Answers

B.Com 5th Sem Culture, Diversity and Society MCQ Questions and Answers

B.Com 5th Sem Culture, Diversity and Society Syllabus

Unit 1: Understanding the Diversity of Indian Society (12-14 Hours)

  • Geographical diversity
  • Religious diversity
  • Cultural diversity
  • Unity in Diversity

Unit 2: Family, Caste, Village and Women in India (12-14 Hours)

  • Family as a basic institution of Indian Society: Indian family in transition.
  • Social stratification and disparities; the caste system and its evils; the predicament of the weaker sections.
  • Scheduled castes and Tribes; Backward classes and religious minorities.
  • Rural society and its problems; rural-urban migration.
  • Gender discrimination; violence against women; measures to improve the status of women.

Unit 3: Contemporary challenges before Indian Society (12-14 Hours)

  • Communalism and religious fundamentalism
  • Regionalism and ethnocentrism
  • Globalization and mono-culturalism; McDonaldization
  • Child labour; migrant labour; bonded labour; contract labour
  • Mass media and its impact on society

GST Acts: CGST Act, SGST Act, IGST Act Notes

GST Acts: CGST Act, SGST Act, IGST Act Notes

CGST: 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.

SGST: 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.

UTGST: 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.

IGST: Integrated, Goods and service tax.

IGST: “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.

Aggregate turnover: 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.

Adjudicating authority: 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 Ruiing, Appellate Authority for Advance Ruling, the First Appellate Authority and the Appellate Tribunal.

Agent: 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.

Goods: 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.

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

Casual taxable person: 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.

Place of business: 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. Composite supply; 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.

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.

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 not be required to pay tax.

Zero-Rated Supply: It means export or supply of goods or services to a Special Economic Zone developer or a Special Economic Zone unit.

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

Taxable Supply: It means the Supply on which tax shall be paid under GST.

Inward supply: 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.

Outward supply: 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.

Job work: 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

Input: It means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business.

Input service: Input service means any service used or intended to be used by a supplier in the’ course or furtherance of business.

Input service distributor: 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.

Input tax: 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.

Reverse charge: 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.

Works contract: If 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.

Non taxable person: 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.

Supplier: 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.

Export of services:

  • 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.

Import of services:

  • 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.

Intermediary: 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.

Authorities 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.

GST and Technology Long Answer Type Questions

GST and Technology Long Answer Type Questions

Question 1.
Write short note on GSP Framework.
Answer:
Tax payer’s convenience will be a key in success of GST regime. The tax payer should have a choice to use third party applications which can provide varied interfaces on desktops, laptops and mobiles and can connect with GST System. The GSP developed apps will connect with the GST system via secure GST system APIs. Majority of GST system functionalities related to taxpayer’s GST compliance requirements shall be available to the GSP through APIs. GSPs may use GST APIs and enrich and enhance the tax payer’s experience. (The APIs of GST System are RESTful, json-based and stateless). GST System will not be available over the Internet for security reasons.

The production API end points Can only be consumed via MPLS lines. All APIs will be accessed over HTTPS protocol. The benefits of API based integration are:

  • Consumption across technologies and platforms (mobile, tablets, desktops, etc.) based on the individual requirements
  • Automated upload and download of data
  • Ability to adapt to changing taxation and other business rules and end user usage models.
  • Integration with customer software (ERP, Accounting systems) that tax payers and others are already using for their day to day activities.

Question 2.
What will be the role of GST Suvidha Providers?
Answer:
The GSP developed Apps will connect with the GST system via secure GST system APIs. Some of the functions of GSP are:

  • Development of various apps / interfaces for taxpayer, TRPs of GST system
  • Providing other value added services to the taxpayers

The GST Suvidha Providers (GSPs) are envisaged to provide innovative and convenient methods to taxpayers and other stakeholders in interacting with the GST Systems from registration of entity to uploading of invoice details to filing of returns. Thus there will be two sets of interactions, one between the App user and the GSP and the second between the GSP and the GST System.

Question 3.
What will be the role of taxpayers w.r.t GST Common Portal being developed and maintained by GSTN?
Answer:
The functions which will be performed by taxpayers through GSTN are:

  • Application for registration as well as amendment in registration, cancellation of registration and profile management.
  • Payment of taxes, including penalties, fines, interest, etc. (in terms of creation of Challan as payment will take place at bank’s portal or inside a bank premises).
  • Change of status of a taxpayer from normal to Compounding and vice-versa.
  • Uploading of Invoice data & filing of various statutory returns/Annual statements.
  • Track status of return/tax ledger/cash ledger etc. using unique Application Reference Number (ARN) generated on GST Portal.
  • File application for refund etc.
  • Status review of return/tax ledger/cash ledger

Question 4.
Write short notes on Relationship of GSTN with Tax Administrations,
Answer:
The common GST Portal developed by GSTN will function as the front-end of the overall GST IT eco-system. The IT systems of CBEC and State Tax Department will function as back-ends that would handle tax administration functions such as registration approval, assessment, audit, adjudication etc. Nine States and CBEC are developing their backend systems themselves.

GSTN is doing the backend for 20 States and 5 UTs. GSTN has been interacting with CBEC and States for ensuring mutual interaction between the front-end that would be operated by GSTN and the back-ends of the tax administrations. Till September 2016, ten workshops have been conducted with the States/CBEC. GSTN will undertake training of tax officials in GST IT system from December 2016 onwards. During the operation phase as well GSTN will continue the interaction with CBEC and states and extend help wherever necessary.

Question 5.
Explain the historical background of GSP.
Answer:
The Goods and Services Tax constitutional amendment having been promulgated by the Govt of India, the rollout of the GST Bill will be a collective effort of the Central and State Governments, the tax payers and the IT platform provider i.e. GSTN, CBEC and State Tax Departments. Besides these main participants there are going to be other stakeholders e.g. Central and States tax authorities, RBI, the Banks, the tax professionals (tax return preparers, Chartered Accountants, Tax Advocates, STPs etc.), financial services providing companies like ERP companies and Tax Accounting Software Providers etc.

The GST System is going to have a G2B portal for taxpayers to access the GST Systems, however, that would not be the only w,ay for interacting with the GST system as the taxpayer via his choice of third party applications, which will provide all user interfaces and convenience via desktop, mobile, other interfaces, will be able to interact with the GST system. The third party applications will connect with GST system via secure GST System APIs.

All such applications are, expected to be developed by third party service providers who have been given a generic name, GST Suvidha Provider or GSP. The GSPs are envisaged to provide innovative and convenient methods to taxpayers and other stakeholders in interacting with the GST Systems from registration of entity to uploading of invoice details to filing of returns. Thus there will be two sets of interactions, one between the App user and the GSP and the second between the GSP and the GST System. It is envisaged that App provider and GSP could be the same entity.

In the evolving environment of the new GST regime it is envisioned that the GST Suvidha Providers (GSP) concept is going to play a very important and strategic role. It is the endeavour of GSTN to build the GSP eco system, ensure its success by putting in place an open, transparent and participative framework for capable and motivated enterprises and entrepreneurs.

Question 6.
Explain the GST Compliance Requirement by the Taxpayer.
Answer:
The taxpayer under GST Regime will have to provide following information at regular intervals:

  • Invoice data upload (B2B and large value B2C)
  • Upload GSTR-1 (return containing supply data) which will be created based on invoice data and some other data provided by the taxpayer.
  • Download data on inward supplies (receipts or purchase) in the form of Draft GSTR-2 from GST Portal created by the Portal based on GSTR-1 filed by corresponding suppliers.
  • Do matching of purchases made and that downloaded from GST portal. Finalize the same based on his own purchase (inward supply data) and upload GSTR-2
  • File GSTR-3 created by GST Portal based on GSTR-l and 2 and other info and tax paid.

Similarly there are’other returns for other categories of taxpayers like casual taxpayer or composition taxpayers.

Question 7.
Explain the Design and Implementation Framework of GSP.
Answer:
Tax payer’s convenience will be a key in success of GST regime. The tax payer should have a choice to use third party applications which can provide varied interfaces on desktops, laptops and mobiles and can connect with GST System. The GSP developed apps will connect with the GST system via secure GST system APIs. Majority of GST system functionalities related to taxpayer’s GST compliance requirements shall be available to the GSP through APIs. GSPs may use GST APIs and enrich and enhance the tax payer’s experience. (The APIs of GST System are RESTful, json-based and stateless). GST System will not be available over the Internet for security reasons.

The production API end points can only be consumed via MPLS lines. All APIs will be accessed over HTTPS protocol. The benefits of API based integration are:

  • Consumption across technologies. and platforms (mobile, tablets, desktops, etc.) based on the individual requirements.
  • Automated upload and download of data.
  • Ability to adapt to changing taxation and other business rules and end user usage models.
  • Integration with customer software (ERP, Accounting systems) that tax payers and others are already using for their day to day activities

Question 8.
Write short note on GSP Eco system.
Answer:
GST System is following a platform approach for providing services to Tax Payers.
(a) All GST System functionalities like registration of entities, uploading of invoices, filing of returns will all be available through APIs.

(b) GSTN believes in creating an ecosystem of Service Providers viz GST Suvidha Provider (GSR) providing innovative solutions (Portal, Mobile App, Enriched API) either themseh/es or through its third party partners for making tax filing more easy and convenient to tax payers.

(c) GSTN envisages a very important role of GSPs in making GST rollout easy and convenient for tax payers.

Question 9.
Briefly explain Framework and Guidelines to integrate GST System.
Answer:
Framework and Guidelines for GST/ISP integration integrate GST System are:
Mandatory guidelines and responsibilities: GSP/ISP: For integrating with GSt System project, GSPs shall opt for a robust, fault tolerant infrastructure with enterprise grade SLAs, GSPs shall procure MPLS connectivity from any of the designated ISPs providing integration connectivity to GSt system.
(i) GSTs/ISPs need to provide the CPE router, to terminate the MPLS connectivity at GSTs Data Centre locations. These guidelines and the architecture of connectivity are subject to change overtime, at discretion of GSTN. The GSP and the ISP will need to make the necessary technology changes as and when that happens at his own cost.

(ii) The access to GST system will controlled through GSTN firewalls.

(iii) Each on-boarded ISP shall bring and deploy their own infrastructure in GSTN datacenters in order to provide connectivity services to GSPs.

(iv) ISP’s must provide ISP Routers in HA mode at both DC1 (Delhi) and DC2(Bangalore) locations of GSTN.

(v) ISPs shall arrange for the required .rack space outside the GSTN cage area.

(vi) ISP routers has to be hosted in the ISP’s cage area or ISP’s Rack near to the GSTN DC1/DC2 cage area, in a highly secured manner.

(vii) MPLS connectivity order will be given directly by GSP’s to their respective ISP’s. The cost for all the MPLS link has to be borned by the ISP’s/ GSP’s.

(viii) ISPs shall provide back-haul links at both the GSTN DCs i.e. DC1 and DC2.

(ix) GSTN and/or its MSP will not provide any links or incur any cost for providing the MPLS connectivity to GSPs.

(x) ISPs along with GSPs must provision adequate bandwidth end to end for connecting to GST Systems.

(xi) The ISPs providing connectivity services to GSPs shall provide identical setup in GSTN DC1 and DC2.

(xii) GSPs has to route the GSTN related URLs IPs inside the respective ISPs/GSPs network and the IP details will be provided at the time of integration.

(xiii) The ISPs has to decide the appropriate WAN IPs and Routing Protocols for their respective PE/CE routers.

(xiv) The ISPs shall ensure appropriate P-2-P VPN tunnel till their respective router for securing the data in transit.

(xv) The ISPs shall configure their routers to enable policy based NATing based on the GSP wise traffic classification.

GST and Technology Short Answer Type Questions

GST and Technology Short Answer Type Questions

Question 1.
Discuss about the genesis of GSTN.
Answer:
The GST System Project is a unique and complex IT initiative. It is unique as it seeks, for the first time to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the Centre and States. Currently, the Centre and State indirect tax administrations work under different laws, regulations, procedures and formats and consequently the IT systems work as independent sites.

Integrating them for GST implementation would be complex since it would involve integrating the entire indirect tax ecosystem so as to bring all the tax administrations (Centre, State and Union Territories) to the same level of IT maturity with uniform formats and interfaces for taxpayers and other external stakeholders.

Besides, GST being a destination based tax, the interstate trade of goods and services (IGST) would need a robust settlement mechanism amongst the States and the Centre. This is possible only when there is a strong IT Infrastructure and Service back bone which enables capture, processing and exchange of information amongst the stakeholders (including taxpayers, States and Central Government, Bank and RBI).

Question 2.
What is GSTN? Explain the Structure of GSTN.
Answer:
Goods and Services Tax Network (GSTN) is a Section 8 (under new companies Act, not for profit companies are governed under section 8), non-Government, private limited company. It was incorporated on March 28, 2013.

The Government of India holds 24.5% equity in GSTN and all States of the Indian Union, including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-Government financial institutions. The Company has been set up primarily to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST). The Authorised Capital of the company is Rs. 10,00,00,000 (Rupees ten crore only).

Structure of GSTN:
1. The GST System Project is a unique and complex IT initiative. It is unique as it seeks, for the first time to establish a uniform interface for the tax payer and a common and shared IT infrastructure between the Centre and States. Currently, the Centre and State indirect tax administrations work under different laws, regulations, procedures and formats and consequently the IT systems work as independent sites.

Integrating them for GST implementation would be complex since it would involve integrating the entire indirect tax ecosystem so as to bring all- the tax administrations (Centre, State and Union Territories) to the same level of IT maturity with uniform formats and interfaces for taxpayers and other external stakeholders.

Besides, GST being a destination based tax, the inter- state trade of goods and services (IGST) would need a robust settlement mechanism amongst the States and the Centre. This is possible only when there is a strong IT Infrastructure and Service back bone which enables capture, processing and exchange of information amongst the stakeholders (including tax payers, States and Central Governments, Accounting Offices, Banks and RBI).

2. This aspect was discussed in the 4th meeting of 2010 of the Empowered Committee of State Finance Ministers (EC) held on 21/7/2010. In the said meeting the EC approved creation of an Empowered Group on IT Infrastructure for GST(EG) under the chairmanship of Dr Nandan Nilekani along with five state commissioners of Trade Taxes. Department of Revenue, Ministry of Finance, Government of India vide OM no. S.34011/19/201Q-SO(ST) dated 26th July 2010 notified the Empowered Group on IT Infrastructure for GST with following members:

  • Member (B&C), CBEC
  • Additional Secretary (Revenue), DoR
  • DG (Systems), CBEC as Member-Secretary
  • FA, Ministry of Finance
  • Member Secretary, Empowered Group of State Finance Ministers,
  • Member Technology Advisory Group for Unique Projects (TAGUP)
  • Commercial Tax Commissioners of Maharashtra, Assam, Karnataka, West Bengal and Gujarat.

3. The Group was mandated to suggest, inter alia, the modalities for setting up a National Information Utility (NIU/ SPV) for implementing the Common Portal to be called GST Network (GSTN) and recommend the structure and terms of reference for the NIU/ SPV, detailed implementation strategy and the road map for its creation in addition to. other items like training, outreach, etc.

4. Prior to this, the Union Ministry of Finance had set up the Technical Advisory Group for Unique Projects (TAGUP) in March 2010 to make recommendations on the roadmap to roll out five major financial projects including GST. TAGUP recommended setting up of National Information Utilities as private companies
with a public purpose for implementation of large and complex Government IT projects including GST.

Question 3.
What services will be rendered by GSTN?
Answer:
GSTN will render the following services through the Common GST Portal:

  • Registration (including existing taxpayer master migration and issue of PAN based registration number)
  • Payment management including payment gateways and integration with banking systems
  • Return filing and processing
  • Taxpayer management, including account management, notifications, information, and status tracking
  • Tax authority account and ledger Management
  • Computation of settlement (including IGST settlement) between the Centre and States; Clearing house for IGST
  • Processing and reconciliation of GST on import and integration with EDI systems of Customs
  • MIS including need based information and business intelligence
  • Maintenance of interfaces between the Common GST Portal and tax administration systems
  • Provide training to stakeholders
  • Provide Analytics and Business Intelligence to tax authorities
  • Carry out research, study best practices and provide training to the stakeholders

Question 4.
What is the interface system between GSTN and the states/CBEC?
Answer:
In GST regime, while taxpayer facing core services of applying for registration, uploading of invoices, filing of return, making tax payments shall be hosted by GST System, all the statutory functions (such as approval of registration, assessment of return, conducting investigation and audit etc.) shall be conducted by the tax authorities of States and Central governments.

Thus, the frontend shall be provided by GSTN and the backend modules shall be developed by states and Central Government themselves. However 24 states (termed as Model 2 states) have asked GSTN to develop their backend modules also. The CBEC and rest of the states (Model 1) have decided to develop and host the back-end modules themselves.

Question 5.
Explain the vision and mission of GSTN.
Answer:
Vision: To become a trusted National Information Utility (NIU) which provides reliable, efficient and robust IT Backbone for the smooth functioning of the Goods & Services Tax regimen enabling economic agents to leverage the entire nation as One Market with minimal Indirect Tax compliance cost.

Mission:

  • Provide common and shared IT infrastructure and services to the Central and State Governments, Tax Payers and other stakeholders for ‘implementation of the Goods & Services Tax (GST).
  • Provide common Registration, Return and Payment services to the Tax payers.
  • Partner with other agencies for creating an efficient and user-friendly GST Eco-system.
  • Encourage and collaborate with GST Suvidha Providers (GSPs) to roll out GST Applications for providing simplified services to the stakeholders.
  • Carry out research, study best practises and provide Training and Consultancy to the Tax authorities and other stakeholders.
  • Provide efficient Backend Services to the Tax Departments of the Central and State Governments on request.
  • Develop Tax Payer Profiling Utility (TPU) for Central and State Tax Administration.
  • Assist Tax authorities in improving Tax compliance and transparency of Tax Administration system.

Question 6.
What will be the role of GSTN in registration?
Answer:
The application for Registration will be made Online on GST Portal. Some of the key data like PAN, Business Constitution, Aadhaar, CIN/DIN etc. (as applicable) will be validated online against respective agency i.e. CBDT, UID, MCA etc, thereby ensuring minimum documentation. The application data, supporting scanned documents shall be sent by GSTN to states/ Centre which in turn shall send the query, if any, approval or rejection intimation and digitally signed registration to GSTN for eventual download by the taxpayer.

Question 7.
What are the basic features of GST common portal?
Answer:
The GST portal shall be accessible over Internet (by Taxpayers and their CAs/Tax Advocates etc.) and Intranet by Tax Officials etc. The portal shall be one single common portal for all GST related services example.

  • Tax payer registration (New, surrender, cancelation, etc.)
  • Invoices upload, auto-drafting of Purchase register of buyer Periodic GST Returns filing.
  • Tax payment including integration with agency banks.
  • ITC and Cash Ledger and Liability Register.
  • MIS reporting for tax payers, tax officials and other stakeholders.
  • BI/Analytics for Tax officials.

Question 8.
What is GSP (GST Suvidha Provider)?
Answer:
A. The GST System is being developed by Infosys, the Managed Service Provider (MSP). The work consists of development of GST Core System, provisioning Of required IT infrastructure to host the GST System and running and operating the system for five years.

The proposed GST envisages all filings by taxpayers electronically. To achieve this, the taxpayer will need tools for uploading invoice information, matching of input tax credit (ITC) claims, creation of party-wise ledgers, uploading of returns, payment of taxes, signing of such document with digital signature etc.

The GST System will have a G2B portal for taxpayers to access the GST Systems, however, that would not be the only way for interacting with the GST system as the taxpayer via his choice of third party applications, which will provide all user interfaces and convenience via desktop, mobile, other interfaces, will be able to interact with the GST system. The third party applications will connect with GST system via secure GST system APIs. All such applications are expected to be developed by third party service providers who have been given a generic name, GST Suvidha Provider or GSP.

Taxpayers will interface with GST System, via GST system portal or via GSP ecosystem provided by way of applications for activities such as Registration, Tax payments, Returns filing and other information exchange with GST core system. The GSPs will become the user agencies of the GST system APIs and build applications and web portals as alternate interface for the taxpayers.

GST and Technology Very Short Answer Type Questions

GST and Technology Very Short Answer Type Questions

Question 1.
Who are GST providers?
Answer:
To enable taxable persons to comply with the requirements of GST, 34 companies have been given permission to act as GST suvidha providers. These providers will enable a middle tier of entrepreneurs, who can develop innovative services and solutions for a variety of tax payers.

Question 2.
What is GSTN?
Answer:
Goods and Services Tax Network (GSTN) is a nonprofit non-government company, which will provide shared IT infrastructure and service to both central and state governments including tax payers and other stakeholders. The Frontend services of registration, Returns and payments to all taxpayers will be provided by GSTN. It will be the interface between the government and the taxpayers.

Question 3.
What is GST system?
Answer:
Under GST system a uniform sharing of IT infrastructure between the center and states has been established.

Question 4.
Who is a GSP?
Answer:
GSP stands for GST Suvidha Provider. A GSP is considered as an enabler for the taxpayer to comply with the provisions of the GST law through its web platform (essentially an online compliance platform such as ClearTax ).

Question 5.
What is GSP eco-system?
Answer:
Under GSP eco-system uploading invoice information, matching of input tax credit (ITC) claims, creation of party-wise ledgers, uploading of returns, payment of taxes, signing of documents with digital signature is done electronically.

Question 6.
State any two features of GST Portal.
Answer:
The two features of GST Portal are:
(i) The Official portal of GST has added two important functionalities including the Form GST-ARA 01, an electronic form for Advance Ruling and the Application for revocation of cancellation of registration.

(ii) The GST portal also enabled the functionality to revoke or cancel the GST registration.

Question 7.
Is it mandatory for e-commerce operator to obtain registration? Explain.
Answer:
Yes it it mandatory for e-commerce operator to obtain registration. Section 19 r/w Schedule-Ill of the MGL, provides that the threshold exemption is not available to e-commerce operators and they would be liable to be registered irrespective of the value of supply made by them.

Question 8.
Who is an aggregator?
Answer:
Section 43B(a) of the MGL defines aggregator to mean a person, who owns and manages an electronic platform, and by means of the application and communication device, enables a potential customer to connect with the persons providing service of a particular kind under the brand name or trade name of the said aggregator. For instance, Ola cabs would be an aggregator.

Question 9.
Is an aggregator required to be registered under GST?
Answer:
Yes an aggregator required to be registered under GST. Section 19 r/ w Schedule-III of the MGL, provides that the threshold exemption is not available to aggregators and they would be liable to be registered irrespective of the value of supply made by them.

Question 10.
What is Tax Collection at Source (TCS)?
Answer:
In terms of Section 43C(1) of the MGL, the e-commerce, operator is required to collect (i.e. deduct) an amount out of the consideration paid or payable to the actual supplier of goods or services in respect of supplies of goods and / or services made through such operator. The amount so deducted/collected is called as Tax Collection at Source (TCS).

Question 11.
At what time/intervals should the e-commerce operator make such deductions?
Answer:
The timings for such collection/deduction are earlier of the two events:

  • the time of credit of any amount to the account of the actual supplier of goods and / or services;
  • the time of payment of any amount in cash or by any other mode to such supplier.

Question 12.
What is the concept of GST Eco-system?
Answer:
A common GST system will provide linkage to all State/UT Commercial Tax departments, Central Tax authorities. Taxpayers, Banks and other stakeholders. The eco-system consists of all stakeholders starting from taxpayer to tax professional to tax officials to GST portal to Banks to accounting authorities.

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