GUIDELINE ANSWERS

JUNE 2024 EXAMINATION

TAX LAWS AND PRACTICE
GROUP 2 PAPER 7
EXECUTIVE PROGRAMME
(SYLLABUS 2022)

Question Paper https://www.icsi.edu/media/webmodules/examination/june2024/527.pdf

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PART – I
Answer to Question No. 1 (a)

Computation of Taxable Capital Gain in the hands of Mr. Bajrang for the AY 2024-25

Particulars Amount (Rs.)

Actual Sale Consideration 14,00,000
Value of vacant land for stamp duty purposes 15,00,000
Since the difference between sale consideration and value of stamp 14,00,000
duty purposes is less than 10% of the actual sale consideration,
therefore, actual sale consideration is to be considered
Less: Indexed Cost of Acquisition (Rs. 200000 * 348/167) (4,16,766)
Long Term Capital Gains 9,83,234
Less: Exemption u/s 54EC [Deposited in CG bond pf REC Ltd.) (9,00,000)
Taxable Long Term Capital Gains 83,234

Answer to Question No. 1 (b)

Computation of Taxable HRA in the hands of Mrs. Usha for the AY 2024-25

Particulars Amount (Rs.) Amount (Rs.)

HRA Received (Rs. 30,000 x 12) 3,60,000
Less: Exempt u/s 10(13A)
a) 50% of salary since the accommodation is at Chennai 9,00,000
salary = Rs. 14,40,000 + 3,60,000 = Rs. 18,00,000
b) Rent paid minus 10% of salary 3,00,000

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Rent paid 40,000 x 12 = Rs. 4,80,000 – Rs. 1,80,000 [10%
of Rs. (14.40 lakhs + 3.6 lakhs)
c) Actual HRA received Rs. 30,000 * 12 3,60,000
Least of (a), (b) or (c) is deductible (3,00,000)
Taxable HRA 60,000

Answer to Question No. 1 (c)

Computation of total income of Mr. Bajrang for the AY 2024-25
Particulars Amount

Income from Salary

Arrear salary from Ex-employer 1,50,000
Less: Standard deduction (50,000)
Taxable Income from Salary 1,00,000
Income from House Property
Rent from house property at Chennai 4,80,000
Less: Statutory Deduction u/s 24 @ 30% (1,44,000)
Taxable Income from House Property 3,36,000
Income from Business
Income from wholesale trade of garments u/s 44AD 9,60,000
@ 8% of Rs. 120 lakhs
Less: Brought forward loss for AY 2022-23 (3,00,000)
Taxable Income from Business & Profession 6,60,000
Capital Gains: As computed above 83,234

Income from Other Sources

Rent from vacant site at Chennai 96,000
Gift received from relatives on the occasion of birthday Nil
[exempt]
Gift of motor car from a friend residing outside India. Nil
Motor Car is not a 'property' as per clause (d)
of Explanation to section 56(2)(x). Hence not taxable.
Taxable Income from Other Sources 96,000

Gross Total Income / Total Income 12,75,234

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Answer to Question No. 1 (d)
Computation of Total Income of Mrs. Usha for the AY 2024-25
Particulars Amount

Income from Salary

Basic Salary (Rs. 1,20,000 * 12 month) 14,40,000
Dearness Allowance (Rs. 60,000 * 12 month) 7,20,000
Lunch allowance 10,000 per month fully taxable 1,20,000
Medical allowance 5,000 per month fully taxable 60,000
Children education allowance (2,000 x 2 x 12) 48,000
Less: Education allowance deductible (Rs. 100 per month x 45,600
12 x 2 child) (2400)
Health Club membership fee provided similarly to all staff Nil
by employer is exempted
House rent allowance (taxable calculated as above) 60,000
Gross Salary 24,45,600
Less: Standard Deduction (50,000)
Taxable Income from Salary 23,95,600

Income from Other Sources

Bank FD Interest 50,000
Saving bank account interest 15,000
Taxable Income from Other Sources 65,000
Gross Total Income 24,60,600
Less: Deduction under Chapter VI-A
Under section 80C in respect of contribution to PPF 1,50,000
1,80,000 (Rs. 1,00,000 + 40,000 + 40,000) but restricted to
1,50,000
Under section 80TTA in respect of saving bank interest 10,000 (1,60,000)
23,00,600
Total Income

3
Answer to Question No. 2 (a)

Computation of Income from House Property of Mr. Sanjay

Particulars Self-occupied Let out
Gross annual value Nil 3,60,000
Less: Municipal tax paid Nil (35,000)
Net Annual Value Nil 3,25,000

Less: Deduction u/s 24

(i) Statutory deduction @ 30% of NAV Nil (97,500)

(ii) Interest on Loan: (18,000) (18,000)

(a) Capital Interest: Pre-construction period interest

(from 01.07.2021 till 31.03.2021) (30,00,000 * 8%
x 9/12) = 180000. Allowable in 5 equal instalments
(180000/5)
(b) Revenue Interest: Current period Interest
(1,20,000) (1,20,000)
(Allowed on due basis) (30,00,000 * 8%)
Income from house property (1,38,000) 89,500

Net Loss from house property (48,500)

Answer to Question No. 2 (b)

Capital gains on conversion of capital asset into stock-in-trade:
Where a capital asset is converted into stock-in-trade, the capital gain arising on such conversion
will have to be computed. However, the same will be chargeable to tax only in the year in which
such converted asset is sold in the business.
In the given situation, the capital gain, though arising in the PY 2022-23, will be taxable only in
the AY 2024-25 i.e. 2023-24, being the year in which the plot is actually sold by the assessee, as
per section 45(2) of the Income tax Act, 1961.

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 Computation of Income chargeable to tax of Giriraj in the AY 2024-25
Particulars Amount

Income from Capital Gain:

Sales Consideration (FMV on date of conversion is deemed as
Consideration, since in the question, FMV is not given, Stamp duty value 28,00,000
as on date of conversion is taken as Consideration)
Less: Cost of Acquisition (Original purchase price i.e. 22,00,000)

Indexed cost of acquisition (Rs. 22,00,000 x 331/280) (26,00,714)

Long-term capital gain 1,99,286

Income from Business & Profession:

Sales consideration form Business (Stamp duty valuation) 40,00,000

Less: Brokerage on sale (2% of Rs. 34,00,000) (68,000)

Net Sale Consideration 39,32,000

Less: Cost of Acquisition (as taken while computing capital gains) (28,00,000)

Income from PGBP 11,32,000

Answer to Question No. 2 (c)

Computation of Total Income

Section
Particulars Section 44AE
44AD
Name Umesh Suresh
Nature of activity Retail trade Plying of
heavy goods
vehicle
Presumptive income @ 6% on 25,00,000 1,50,000

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Presumptive income @ 8% on 47,00,000 3,76,000
Presumptive income for 3 heavy goods vehicles of 15 - 5,40,000
tonnes each @ Rs. 1,000 per tonne per month per
vehicle. (15* Rs. 1000 * 3 *12)
Income as per presumptive taxation 5,26,000 5,40,000
Not allowed
to set-off
Less: Set off of loss brought forward (90,000)
long term
capital loss
Total Income 5,26,000 450,000

Answer to Question No. 3(a)

Computation of Total Income of Ms. Laxmi for AY 2024-25

Particulars Amount (Rs.) Amount (Rs.)
Income from Salary
Pension from State Government 6,80,000
Less: Standard deduction (allowed under New Scheme) (50,000)
6,30,000
Income from Other Sources:
Family pension (her husband died 3 years ago) 1,20,000
Less: Deduction u/s 57(iia) (allowed under New Scheme) (15,000)
1,05,000
Dividend from Indian companies 90,000
Less: Interest on moneys borrowed for investment in shares (18,000)
of Indian companies referred above but limited to 20% of
dividend income
Consultant fee for portfolio investment in shares fetching Nil
dividend income - not eligible for deduction
72,000
Agricultural income from land located outside India taxable 60,000

8,67,000
Total Income

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Answer to Question No. 3(b)

Computation of Normal depreciation

Opening Used for > Rate of Used for < Rate of Normal
WDV 180 days Dep. 180 days Dep. Depreciation
32,00,000 15% 4,80,000
25,00,000 15% 3,75,000
18,00,000 7.5% 1,35,000
Total Normal Depreciation 9,90,000

Computation of Additional Depreciation

Date of Type of asset Amount Rate of Additional
purchase (Rs.) Additional Depreciation
Depreciation
12.01.2023 Machinery (New) 10,00,000 1,00,000
10%
Note 1
23.05.2023 Machinery (New) 12,20,000 2,44,000
20%

14.06.2023 Motor Car 12,80,000 Nil

(Not eligible)
12.01.2024 Machinery 18,00,000 Nil
(Second hand - not
eligible for additional
depreciation)

Total Additional Depreciation 3,44,000

Total Depreciation allowable u/s 32 (Normal depreciation + 13,34,000
additional Depreciation)

Note 1 - In the AY 2023-24, additional depreciation on this asset was allowed only at 10%.
balance 10% can be claimed in the current assessment year 2024-25.

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Answer to Question No. 3(c)
Computation of Income from Salary of Mr. Ramesh for the Assessment Year 2024-25
Particulars Amount Amount

Basic salary (1,25,000 x 12) 15,00,000

Commission on sales 40,000
Employer's contribution to recognized provident fund 3,00,000
Less: Exempt @ 12% of Salary and commission 1,15,200
(1,84,800)
(15,40,000 x 12%) (Note 1)
Employer's contribution to National Pension Fund 1,00,000

Employer's contribution to Superannuation Fund

As per sec 17(2)(vii) of the Income tax Act, 1961, Employer -
contribution to Recognised Provident Fund + Approved
Superannuation fund + Notified Pension scheme in excess of
7.5 lakhs per annum is deemed as perquisite. Since total of all
three does not exceed 7.5 lakh, no perquisites is deemed u/s
17(2)(vii) of the Act.
Interest free Loan Facility (15,00,000 x 9.5% x 10/12) 1,18,750
Less: Interest recovered from employee (15,00,000 x 6% x 10/12) (75 000) 43,750
Gross salary 17,98,950
Less: Standard deduction u/s 16 (ia) (50,000)
Income chargeable under the head 'Salary' 17,48,950

Note 1: It is assumed that commission is not fixed at 40,000 per annum but based on 2% of
turnover. If sales commission is assumed as fixed 40,000 p.a., then it will not be included
while calculating limit of 12% of salary for the purpose of computing exempt value of
Employer's contribution to recognized provident fund.

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 Attempt all parts of either Q. No. 4 or Q. No. 4A

Answer to Question No. 4(a)

The Income of minor child is to be clubbed in the hands of either of his parents. Such income
shall be clubbed in the hands of that parents whose total income (excluding the income of the
minor) is higher. If the marriage of his parents does not subsist, the income shall be clubbed in the
hands of that parent who maintains the minor child during the previous year.

Where the income of a minor child has been clubbed in the total income of a parent, such parent
shall be entitled to an exemption to the extent of such income or 1500 whichever is less, in respect
of each minor child whose income is so included.

The following income of minor child shall be taxable in the hands of minor child only and not to
be clubbed in the hands of parents:
• Any income of a minor child suffering any disability specified u/s 80U.

• Income on account of manual work done by the minor child.

• Income on account of any activity involving application of skill, talent or specialized

knowledge and experience

Answer to Question No. 4(b)

As per section 208 of Income Tax Act, 1961, Advance Tax, shall be payable during a financial
year, only when the amount of such tax during that year is 10,000 or more. In order to reduce the
compliance burden on senior citizen who does not have income chargeable under the head of
profits and gains from business or profession are not required to pay advance tax.

Due Dates for Payment of Advance Tax

Due date of
Amount Payable
instalment

On or before the
Not less than 15% of such advance tax.
15th June

On or before the Not less than 45% of such advance tax, as reduced by the
15th September amount, if any paid in the earlier instalment.

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On or before the Not less than 75% of such advance tax, as reduced by the
15th December amount or amounts, if any paid in the earlier instalment or
instalments.

On or before the 100 % of such advance tax, as reduced by the amount or

15th March amounts, if any paid in the earlier instalment or instalments.

Note: A person covered u/s 44AD or 44ADA of the Income tax Act, 1961, is required to pay
100% advance tax upto 15th March of the Financial Year.

Answer to Question No. 4(c)

Verification of Return of Income ‘ROI’
S. Type of person To be verified by
No.
(i) When an individual is unable to By any person duly authorized by the
verify due to ill health individual in this behalf.
(ii) In the case an HUF, when the karta By any other adult member of the
is unable to verify family.
(iii) Scientific research association Any member of the association or the
Principal Officer thereof.
(iv) Limited liability partnership Designated partner
(v) Political party by the chief executive officer of such
party (whether such chief executive
officer is known as secretary or by any
other designation)

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 OR (Alternative question to Q. No. 4)
Answer to Question No. 4A(i)

Computation of Total Income of Vinod for the AY 2024-25

Particulars Amount

Income from Business & Profession

Net profit as per Profit & Loss Account 6,75,000
Add: disallowed Expenses
Income tax 45,000
Depreciation 60,000
Interest paid to non-resident without TDS disallowed @ 100% 30,000
Provision for bad debts 3,10,000
Life insurance premium (self) 30,000
Amount outstanding to MSME disallowed under section 43B(h) 25,000
11,75,000
Less: Income not taxable under this head:
Agricultural Income (exempt) (70,000)
PPF interest credited to P & L account (exempt) (80,000)
10,25,000
Less: Allowed Depreciation u/s 32 (52,000)
Income from Business and Profession 9,73,000
Gross total income 9,73,000
Less: Deduction under section 80C (30,000)
(Life Insurance premium)
Total income 9,43,000

Note: Interest Paid to non-resident without deducting TDS is fully disallowed.

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Answer to Question No. 4A(ii)

TDS applicability and effective rate of TDS

(a) When a partnership firm has paid rent exceeding 2,40,000 for business premises during
the previous year, such payment is liable for deduction of tax at source under section
194I @ 10%. The amount liable for tax deduction is 36,000. [Rs. 360000 x 10%]

(b) In respect of payment to a payee engaged in the business of operation of call centre, tax
is deductible at source @ 2% under section 194J. In this case, the payment exceeds
30,000 and therefore tax is deductible @ 2%. The amount liable for tax deduction is
1,200. [Rs. 60000 x 2%]

(c) When packing material is manufactured as per the specification of the assessee and raw
material is procured by job worker from other than from customer, it does not attract
TDS. Therefore, no tax is deductible at source.

(d) Commission paid when exceeds 15,000 tax is deductible at source @ 5% of the total
amount. In this case the amount of commission is 70,000 for which the tax deductible
at source would be 3,500. [Rs. 70000 x 5%]

(e) Director sitting fee is liable for TDS under section 194J@ 10%. There is no threshold
limit for non-deduction of tax at source. The tax deductible is 2,000 each in respect of
the payment made to each director by way of sitting fee.

Answer to Question No. 4A(iii)

Determination of residential status of Mrs. Tina for the AY 2024 - 25

According to section 6(1), in order to be treated as a resident of India in the PY 2023-24, Mrs.
Tina should satisfy either of the following two conditions:
1. Her stay in India should be for a period of 182 days or more in the PY 2023-24; or
2. Her stay in India should be for a period of 60 days or more in the PY 2023-24 and for a
period of 365 days or more in the four immediately preceding previous years.

Mrs. Tina's stay in India in the PY 2023-24 was 91 days only (i.e., 31 days + 29 days +31 days).
Her stay in India in the four immediately preceding previous years was 56 days.
Consequently, she does not satisfy either condition (l) or condition (2) for being treated as a
resident.
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Further, according to section 6(1A) of the Income tax Act, 1961, an individual who is a citizen of
India would be deemed to be a resident of India if his total income, other than income from
foreign sources, exceed Rs. 15 lakh during the relevant previous year and he is not liable to tax in
any other country by reason of his domicile or residence or any other criteria of similar nature.

In the given problem, the friends of Mrs. Tina have presented her with cash gifts to the tune of
Rs. 21,00,000, which is to be treated as Income from other sources. Hence, her Indian income
exceeds 15 lakhs.

Since Mrs. Tina is a citizen of India who is not liable to pay income-tax in Dubai and her total
income, other than income from foreign sources, exceed 15 lakhs, she would be deemed resident
in India under section 6(1A) of the Act for AY 2024-25. A deemed resident is, by default, a
resident but not ordinarily resident.

In case of a resident but not ordinarily resident, income accrues or arises, deemed to accrue or
arise and received or deemed to be received in India, is taxable. In addition, Income which
accrues or arises outside India would also be taxable if it is derived from a business controlled in
or a profession set up in India.

The Finance Act, 2020, w.e.f. Assessment Year 2021-22 has amended the above exception to
provide that the period of 60 days as mentioned in (2) above shall be substituted with 120 days, if
an Indian citizen or a person of Indian origin whose Total Income, other than Income from
Foreign Sources, exceeds ₹ 15 lakh during the previous year.
The Finance Act, 2020 has also introduced new Section 6(1A) which is applicable from
Assessment Year 2021-22. It provides than an Indian citizen earning Total Income in excess of ₹
15 lakh (other than income from foreign sources) shall be deemed to be Resident in India if he /
she is not liable to pay tax in any country.

Computation of total income of Mrs. Tina for AY 2024-25

Particulars Amount

Salary earned in Dubai (Does not form part of total income, since it accrues Nil
or arises outside India)

Income from other sources (Cash gifts received from friends) 21,00,000

Total Income 21,00,000

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 PART - II

Answer to Question No. 5(a)

Computation of eligible input tax credit for Majumdar Industries for the Month of
December, 2023

Particulars Amount
Purchase of raw materials received in instalments: Input tax credit shall be Nil
allowed only when the last instalment has been received. In the given case, last
instalment was received in January, 2024 hence input lax credit shall be allowed in
the month of January, 2024.

Purchase of consumables which were delivered directly to job workers is eligible 1,50,000
for input tax credit though only invoice was received by Majumdar Industries.

Purchase of bus (seating capacity 18) for transport of employees from residence to 8,40,000
factory and back is eligible for input tax credit.
Input tax credit in respect of general insurance taken on motor cars of the firm Nil
used by Chief Engineers and Supervisors for official purposes not eligible for
input tax credit.
Payment made to ABC Caterers for providing breakfast and lunch to the workers Nil
as voluntary labour welfare measure is not eligible for input tax credit.
9,90,000
Total input tax credit for the month of December, 2023

Answer to Question No. 5(b)

Time limit for return of semi-finished goods sent to job worker

The inputs by way of semi-finished goods sent to the job worker should be brought back to the
premises of the principal or alternatively supplied by the principal directly from the job workers
premises within the time period as given below:

Within one year in the case of inputs;

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And within 3 years in the case of capital goods.

Moulds and dies, jigs and fixtures or tools sent out to a job worker are not to be treated as capital
goods and therefore need not be brought back within 3 years' time referred above.
If the goods are not sold or brought back within the stipulated time as mentioned above, the
activity between the principal and the job worker would be treated as 'supply' from the date of
original dispatch of goods by the principal and accordingly tax is payable thereon by the
principal.

Job work includes intermediate goods arising from any treatment or process carried out on the
inputs by the principal or the job worker.

Answer to Question No. 5(c)

Separate registration for multiple places of business within a State

Any person having multiple places of business within a State or a Union Territory requiring
separate registration for any such place of business under section 25(2) shall be granted
separate registration in respect of each place of business subject to the following conditions,
viz.
(i) Such person has more than one place of business as defined in section 2(85);
(ii) Such person shall not be allowed to pay tax under section 10 (composition levy) for any of
his places of business if he is paying tax under section 9 for any other place of business.
(iii) All separately registered places of business of such person shall pay tax under the Act on
supply of goods or services or both made to another registered place of business of such person
and issue a tax invoice or a bill of supply, as the case may be, for such supply.
For the purpose of (ii) above, it is clarified that where any place of business of a registered
person has been granted a separate registration it becomes ineligible to pay tax under section 10
for all other registered places of business.
A registered person opting to obtain separate registration for a place of business shall submit a
separate application in Form GST REG 01 in respect of each such place of business.

The provisions of rule 9 and rule 10 relating to the verification and the grant of registration
shall, mutatis mutandis, apply to an application submitted under this rule.

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Answer to Question No. 5(d)
Under Rule 138 of the CGST Rules, 2017, an e-way bill is required to generated for the
transportation of goods where the consignment value is Rs. 50,000 or more in relation
to-
(a) supply i.e. supply to customer;
(b) other than supply i.e. movement of goods for job work, repairs, etc;
(c) due to inward supply from unregistered persons (any procurement made from any
unregistered persons).
(d) Where the goods are sent for job work located in a different state or Union
Territory, e-waybill is required to be generated without any value threshold.
Salient features of e-way bill:
(i) For the purpose of calculating the threshold of Rs. 50,000, the value shall be such
as shown on the tax invoice / bill of supply / delivery challan, as the case may be,
including the value of taxes but excluding the value of goods which are exempted
from payment of tax, where the invoice is issued in respect of both exempt and
taxable goods.
(ii) The limit of Rs. 50,000 is not applicable where goods sent by principal in one
State/UT to job worker in other State/UT or handicraft goods sent from one
State/UT to another State/UT + by person exempted from registration u/s
24(i)(ii).
(iii) E-way bill can be generated voluntarily even if the value of goods is less than Rs.
50,000.
(iv) E-way bill has to be generated for each movement of goods whether it constitutes
a taxable supply or an exempt supply or for reasons other than supply.
(v) E-way bill is also required to be generated regardless of the mode of
transportation i.e. Railways, air, vessel or road. However, it is not required where
the goods are transported in a non-motorized conveyance.
(vi) It is required even where the goods are transported through a transporter or by
own conveyance.

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 Attempt all parts of either Q. No. 6 or 6A

Answer to Question No. 6(a)

Time of Reason
S.
Supply
No.
‘TOS’
(i) 05.09.2023 For Payment of 50% i.e. Rs. 45,000 received on 05.09.2023

In this case Invoice is issued within 30 days from the date of providing service.
Hence Time of supply is (a) Date of Invoice, or (b) date of receipt of payment;
whichever is earlier.

10.09.2023 For Payment of 50% i.e. Rs. 45,000 received on 05.10.2023

In this case Invoice is issued within 30 days from the date of providing service.
Hence Time of supply is (a) Date of Invoice, or (b) date of receipt of payment;
whichever is earlier.
(ii) 15-07-2023
Time of supply in case of Reverse Charge Mechanism ‘RCM’ is (a) date of
Date of
receipt of goods; or (b) date of payment; or (c) the date immediately following
goods
30 days from the date of issue of invoice whichever is earlier.
received
(iii) 27-12-2023 Time of supply for advance exceed 1000 is on the date when advance money is
actually received.
(iv) 15-03-2024 Time of supply for voucher: When the supply is identifiable at the point of issue
of vouchers, the Time of supply of voucher is the date of issue of voucher.

When the supply is not identifiable at the point of issue of vouchers, the Time of
supply of voucher is the date of Redemption of voucher.

Note: Questions says voucher can be redeemed against the purchase of any
garments but does not specify which garments and different garments may have
different GST Rates. So, it is assumed that the purchase of garments is
identifiable.
(v) 20-04-2024 In this case, the supply was not identifiable at the point of issue of vouchers as
Arun can purchase anything from Shoppers Paradise. Therefore, the time of
supply would be the date of redemption of voucher.

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Answer to Question No. 6(b)

Determination of taxable or exempt supply

S. Particulars
No.
(i)
As per Notification No. 12/2017 dated 28th June, 2017 services by way of transfer of division
as a going concern, as a whole or independent part is exempt from GST.

(ii) Service rendered by person by way of conducting any religious ceremony is exempted service
as per Notification No. 12/2017.
(iii) Services provided by incubate is exempt if:
• its total turnover had not exceeded 50 lakhs during preceding financial year; and
• a period of 3 years has not been elapsed from the date of entering in to an agreement as
an incubate.
In the present case, since the turnover of the incubate exceeds Rs. 50 lakhs in the previous
financial year, it would not satisfy the first condition, it is not exempt from GST.
(iv) Service by way of fumigation in a warehouse of agricultural produce is taxable under GST.
Earlier it used to be exempt but after amendment in Notification No.12/2017, it has become a
taxable service.
(v) Services by an artist by way of a performance in folk or classical art forms of theatre is not
liable for GST if the consideration is not more than Rs. 150000. In this case, the amount paid
is more than the monetary limit of Rs. 1,50,000, hence it is not exempt from GST.

Answer to Question No. 6(c)

S. Determination of Value of Supply

No.
(i) As per section 15(3) and rule 31A, the value of supply of lottery shall be deemed to be 100/128
of the face value of ticket or the price as notified in the official gazette by the organizing State
whichever is higher.
Therefore, the value of supply shall be 640 x 100/128 = Rs. 500 as it is higher than the price
notified in the official gazette being Rs. 450.
(ii) As per section 15(3) read with rule 32, the difference in the buying rate or the selling rate and
RBI reference rate for that currency would be adopted for the total units of currency
exchanged.
In this case, Rs. 80 - Rs. 78 = Rs. 2 x USD 10,000 = Rs. 20,000 shall be the value of supply of
service on purchase of USD (foreign currency) for conversion into INR.
18
(iii) As per section 15(3) read with rule 32(3), the value of supply in relation to domestic booking
shall be 5% of the basic fare.
Therefore, the value of supply would be Rs. 60,000 x 5% = Rs. 3,000.
(iv) As per section 15(3) read with rule 27, the value of supply of goods or services where the
consideration is not wholly in money, the sum of total consideration in money and such further
amount in its equivalent shall be the value of supply.
In this case, the mobile handsets would have been sold for 35,000 if there was no exchange and
therefore, that would be the value of supply when the new mobile handset is supplied for
30,000 along with an exchange of an old handset.
(v) As per section 15(3) read with rule 29, the value of supply between principal and his agent
shall be the open market value of the goods being supplied or 90% of the price charged for the
supply of goods of like kind and quality by the recipient to his customer (not being related
person) - at the option of the supplier.
In this case 90% of the like kind and quality amounts to Rs. 4,500 (90% of Rs. 5,000) or the
value of supply made by another independent supplier being Rs. 4,600 (being an open market
value). The choice is open to the supplier regarding adoption of value of taxable supply. So as
more beneficial for supplier is Rs. 4,500 will be treated as value of supply.

Answer to Question No. 6(d)

Computation of Assessable Value under Custom Law

Particulars Amount
(USD)
Cost of machine at the factory of the exported country 50,000.00
Transport charges incurred by exporter from his factory to port for shipment 3,000.00
Handling charges paid for loading the machine in the ship 500.00
Design charges for the machine 9,500.00
FOB Value 63,000.00
Buying commission paid to the agent - not includible -
Freight charges from foreign country to port in India 8,000.00
Insurance charges @ 1.125% of FOB (63,000 x 1.125%) 708.75
CIF value / assessable value in USD 71,708.75
Assessable value in Indian Currency (CBIC Exchange rate is taken on the date of Rs. 57,36,700
bill of entry for Import duty purpose) (71,708.75 x Rs. 80)
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 OR (Alternative Question to Q. No. 6)

Answer to Question No. 6A(i)(a)

Particulars
Discount offered by suppliers to customers shall be excluded to determine the value of supply.
This discount can either be given in the tax invoice itself or at later date through credit notes
provided it satisfies the conditions under section 15(3) CGST Act.
The conditions for providing discount after the supply has been affected are —
i. such discount is established in terms of an agreement entered into at or before the time
of such supply and specifically linked to relevant invoices; and
ii. input tax credit as is attributable to the discount on the basis of document issued by the
supplier has been reversed by the recipient of the supply.
In the present case, Abdul & Co can offer discount through credit note as there is already an
agreement entered between the parties towards such discount. Further, Khan & Co must
reverse ITC while accounting the credit note towards the discount.

Answer to Question No. 6A(i)(b)

Particulars
In this case, since the discount is being allowed after the supply is affected and there is no
agreement between the parties for allowing such discount on or before the supply, the value
shall be computed without considering the discount.
These discounts shall not be excluded while determining the value of supply. There is no
impact on the availability or otherwise of ITC in the hands of the supplier.
Therefore, the value of taxable supply shall be Rs. 2,00,000. (10000 packets @ Rs. 20)
[Ignoring the discount given subsequently amounting to 10,000].

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Answer to Question No. 6A(ii)

Procedure to be followed for change over to Composition Scheme:

In the present case, Lamb & Co. is already registered under GST in regular scheme.
Now, from 1.4.2024 onwards, it wants to opt for composition scheme under section
10 of CGST Act. The procedure in this regard is as below.
Lamb & Co. shall intimate electronically in form GST CMP 02 prior to the
commencement of the financial year 2024-25.
The amount of input tax credit relating to inputs held in stock, inputs contained in
semi-finished and finished goods held in stock, and capital goods held in stock shall,
be determined in the following manner, namely, -

a. for inputs held in stock and inputs contained in semi-finished and finished
goods held in stock, the input tax credit shall be calculated proportionately on
the basis of the corresponding invoices on which credit had been availed by
the registered taxable person on such inputs;
b. for capital goods held in stock, the input tax credit involved in the remaining
useful life in months shall be computed on pro rata basis, taking the useful
life as five years.

On determination of credit liable to be reversed, it shall further furnish the statement

in Form GST ITC 03 i.e. ITC reversal on stock within a period of 60 days from the
date of commencement of the relevant financial year. [Rule 3(3)].
The credit if any remained in electronic credit ledger after such reversal shall lapse.

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Having opted for section 10, the registered person shall not collect any tax from the
appointed day but shall issue bill of supply for supplies made after the said day.
[Proviso to rule 3(1)]
The intimation filed by Lamb & Co. shall be applicable shall be deemed to be an
intimation in respect of all other places of business registered on the same PAN.
[Rule 3(5)]
The option to pay tax under section 10 shall be effective from the beginning of the
financial year i.e. w.e.f. 1.4.2024. Composite dealer not to collect tax & not claim
Input Tax Credit [Section 10(4)]

Answer to Question No. 6A(iii)

Particulars
Taxability of compensation received:
Agreeing to obligation to refrain from an act, or to tolerate an act or situation, or to do an
act has been specifically declared to be a supply of service vide para 5(e) of Schedule II of
the CGST Act, 2017 if the same constitutes a supply as per the CGST Act, 2017.
In the given case, B Homes Ltd. has agreed to build only six floors, even though it is
permitted to construct ten floors by the Corporation, for at one time compensation of Rs.
75 lakh. As a consequence, supply of service emerges.
The conditions to be fulfilled are:
i. There must be an expressed or implied agreement or contract must exist.
ii. Consideration must flow in return to this contract/agreement.

Assuming that the amount of Rs.75 lakhs is all inclusive, it has to be treated as inclusive
of GST component; hence, GST will be 75,00,000 x 18/118 = 11,44,068 (CGST Rs.
5,72,034 and SGST Rs. 5,72,034)

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Answer to Question No. 6A(iv)
Correctness of the given propositions
(i) The given statement is true.
The definition of customs area as provided under section 2(11) of the Customs Act,
1962 has been amended vide the Taxation Laws (Amendment) Act, 2017 to include
within its ambit a warehouse also.
As a logical corollary, the customs area is now defined to mean the area of a customs
station or a warehouse and includes any area in which imported goods or export goods
are ordinarily kept before clearance by customs authorities.
(ii) This statement is false.
The Finance Act, 2017 has included international courier terminal and foreign post
office within the scope of customs station as defined under section 2(13) of the
Customs Act, 1962.
As per the amended section 2(13), a customs station means any customs port, customs
airport, international courier terminal, foreign post office or land customs station.

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