CA Inter Taxation

Note on Incomplete Data: The question as presented does not include the list of transactions/items for M/s. ABC Corporation Pvt. Ltd. for January 2025. The computation below is therefore structured as a framework answer demonstrating the correct legal provisions and methodology applicable to a standard GST liability computation question under the Central Goods and Services Tax Act, 2017 (CGST Act).

Legal Framework for GST Liability Computation:

Under Section 9 of the CGST Act, 2017, CGST is levied on intra-State supplies of goods or services or both. Similarly, Section 5 of the IGST Act, 2017 governs IGST on inter-State supplies. The liability arises at the time of supply as determined under Section 12 (goods) and Section 13 (services) of the CGST Act.

Step 1 — Determine Nature of Supply (Section 7, CGST Act): Each transaction must first be classified as supply of goods or services, and whether it is taxable, exempt, zero-rated, or non-GST supply.

Step 2 — Determine Place of Supply (Sections 10–13, IGST Act): If supply is intra-State → CGST @ 9% + SGST @ 9% applies. If supply is inter-State → IGST @ 18% applies.

Step 3 — Determine Taxable Value (Section 15, CGST Act): Transaction value is the price actually paid or payable, inclusive of all incidental expenses, packing, freight (if charged to recipient), subsidies linked to supply, but excluding GST charged. Discounts given before/at time of supply are deductible if recorded in invoice. Post-supply discounts are deductible only if established under Section 15(3)(b): agreement exists prior to supply and recipient reverses ITC on discount.

Step 4 — Apply Correct Rate: CGST @ 9% + SGST @ 9% for intra-State; IGST @ 18% for inter-State, on taxable value.

Step 5 — Input Tax Credit (ITC) Set-off (Sections 49 & 49A, CGST Act): IGST credit is first utilised against IGST liability, then CGST, then SGST. CGST credit is used against CGST liability only. SGST credit is used against SGST liability only. Cross-utilisation of CGST and SGST is not permitted.

Step 6 — Net GST Payable: Output tax liability minus eligible ITC = Net GST payable in cash via Electronic Cash Ledger.

Common Items and Their Treatment:
- Advance received for future supply: Taxable at time of receipt under Section 12(2)/13(2) — time of supply is earlier of invoice date or payment date.
- Goods sent on approval basis: Time of supply is 6 months from date of removal or earlier of invoice/payment (Section 12(6)).
- Export of goods (zero-rated supply, Section 16, IGST Act): No GST charged; refund of ITC available.
- Free samples: No consideration → outside scope of supply under Schedule I only if related party or without consideration per Section 7. Otherwise, ITC reversal required under Rule 43 or Section 17(5)(h).
- Reverse Charge Mechanism (RCM) — Section 9(3)/(4), CGST Act: Liability on recipient; no ITC offset against RCM liability — RCM must be paid in cash. However, ITC of RCM paid is available subject to Section 16 conditions.
- Composition Scheme dealers (Section 10): Cannot collect GST from customers; pay tax at flat rates; cannot avail ITC.

Final Answer: To compute the precise GST liability, the specific transaction-wise data (invoice values, nature of supply, place of supply, ITC available) must be provided. Once those details are available, the above framework — taxable value determination → output tax → ITC set-off → net payable — should be applied systematically for each transaction to arrive at CGST, SGST, and IGST payable separately.

Determination of Input Tax Credit (ITC) Eligible for Veer Trading Private Limited (VTPL) — February 2025

All transactions are intra-state; therefore, CGST and SGST are applicable.

(i) Reimbursement of Local Sports Club Fees — ₹20,000

The amount represents membership fees paid to a local sports club. As per Section 17(5)(b)(ii) of the Central Goods and Services Tax Act, 2017 (CGST Act), ITC is specifically blocked on membership of a club, health and fitness centre. A sports club falls squarely within this category. The fact that the company reimburses such fees on behalf of itself does not alter the nature of the supply. Accordingly, ITC of ₹2,400 (CGST ₹1,200 + SGST ₹1,200) is not eligible — NIL ITC.

(ii) Equipment Purchased from OEM on Ex-Works Basis — ₹10,00,000

In an Ex-Works (EXW) contract, the seller's obligation is fulfilled when goods are made available to the buyer at the seller's premises or handed over to the carrier/transporter designated by the buyer. Here, the OEM handed over the equipment to the transporter (acting on behalf of VTPL) on 28th February 2025.

As per the Explanation to Section 16(2)(b) of the CGST Act, it is deemed that the registered person has received the goods where the goods are delivered by the supplier to any other person on the direction of such registered person — whether acting as an agent or otherwise — before or during movement of goods, by way of transfer of documents of title to goods or otherwise.

Since the transporter acts on behalf of VTPL and goods were handed to the transporter on 28th February 2025, VTPL is deemed to have received the goods in February 2025. Physical receipt on 2nd March 2025 is irrelevant in this context. All other conditions under Section 16(2) being satisfied, ITC of ₹1,20,000 (CGST ₹60,000 + SGST ₹60,000) is fully eligible in February 2025.

(iii) Event Charges from M/s Daksh Event Company — ₹2,50,000 (inclusive of food ₹40,000)

The total invoice of ₹2,50,000 comprises two distinct components:

Event management service (₹2,10,000 @ 9% CGST + 9% SGST): ITC on event management services is not blocked under Section 17(5) of the CGST Act, and since VTPL uses this service in the course or furtherance of business, ITC of ₹37,800 (CGST ₹18,900 + SGST ₹18,900) is eligible.

Food supply (₹40,000 @ 14% CGST + 14% SGST): As per Section 17(5)(b)(i) of the CGST Act, ITC is blocked on food and beverages unless the inward and outward supply are of the same category or the supply is part of a composite supply where the principal supply is taxable. VTPL is engaged in wholesale trading of sports items — food supply is neither their outward supply category nor part of such a composite supply. Accordingly, ITC of ₹11,200 (CGST ₹5,600 + SGST ₹5,600) on food is blocked — NIL ITC on food component.

Net eligible ITC for item (iii) = ₹37,800.

(iv) Goods Transport Vehicle — ₹14,00,000 @ 14% CGST + 14% SGST

VTPL has claimed depreciation of ₹2,10,000 (₹14,00,000 × 15%) under the Income Tax Act, 1961 on this capital asset. As per Section 16(3) of the CGST Act, where a registered person has claimed depreciation on the cost of capital goods under the provisions of the Income Tax Act, 1961, ITC on such capital goods shall not be allowed.

Since depreciation has been claimed under the IT Act, the GST paid (CGST ₹1,96,000 + SGST ₹1,96,000 = ₹3,92,000) is ineligible for ITC. NIL ITC.

(Note: Even if depreciation had not been claimed, Section 17(5)(a) blocks ITC on motor vehicles except where used for transportation of goods. Since VTPL is a trading entity using this vehicle for goods transport, that exception would have applied — but the issue is rendered academic by Section 16(3).)

Summary — Total Eligible ITC for February 2025:

E-way Bill Requirements under Rule 13(1) of CGST Rules, 2017:

An E-way Bill is required to be generated when goods of value exceeding ₹50,000 are transported from one place to another. The key requirements are:

Generation and Responsibility: The e-way bill must be generated on the GST portal before the commencement of movement of goods. It is generated on the GSTIN of the principal (the person responsible for movement of goods). The principal includes the supplier, recipient, or any other registered person authorized to send goods on behalf of another.

Content Requirements: The e-way bill must contain details of: (i) the supplier and recipient with their GSTINs; (ii) the goods being transported, including HSN code, quantity, value, and applicable tax; (iii) vehicle registration number and type; (iv) transporter identification or name; and (v) the route of transportation.

Validity Period: The validity of the e-way bill depends on the distance: up to 100 km - 1 day; 101-500 km - 3 days; 501-1000 km - 5 days; above 1000 km - 10 days from the date of generation.

"Bill to Ship to" Model (Third Party Supply):

In the "Bill to Ship to" model, the supplier raises an invoice to one party (Bill to) while physically delivering goods to another party (Ship to). This is a three-party arrangement where the actual consignee differs from the invoice recipient.

E-way Bill Provision: The supplier issuing the invoice is responsible for generating the e-way bill. The consignor in the e-way bill is the supplier raising the invoice. However, the consignee details in the e-way bill must reflect the actual physical recipient (Ship to address), not the invoice recipient (Bill to party).

Applicability: Such supplies are permitted under GST, and the e-way bill requirements apply based on the actual movement of goods. The value limit of ₹50,000 is determined on the invoice value. The supplier, as the principal, bears the responsibility for e-way bill compliance even though the goods are shipped to a third party on behalf of another registered person.