Question 1

Case scenario:
Vintage Cinemas Pvt. Ltd. (VCPL) is a leading chain of multiplexes operating in several States across India. The company has its corporate office in Mumbai, Maharashtra and is registered under GST in multiple States including Maharashtra. The company offers movie tickets, food and beverages and other entertainment-related services.

The turnover of the company in the preceding financial year as per the audited financial statements was ₹ 175 crore. The company crossed the aggregate turnover of ₹ 35 crore till June in the current year.

In July, VCPL opened a new multiplex in Gujarat wherein the commercial operations will commence from August 1.

Due to operations in multiple States, the finance and accounts operations are handled by a centralized team at the corporate office.…

Accepted Answer

**Answer: (b)**

Under **Section 22 of the Central Goods and Services Tax Act, 2017**, every supplier is liable to be registered in the State from which he makes a taxable supply, once the aggregate turnover in a financial year exceeds the threshold limit. Importantly, the threshold is applied to the **aggregate turnover** of the entire entity (PAN-based), not State-wise or unit-wise turnover.

Since VCPL's aggregate turnover has already crossed ₹20 lakh (in fact, it crossed ₹35 crore by June itself), any new taxable supply commenced in a new State triggers immediate GST registration in that State. VCPL cannot wait until Gujarat-specific turnover crosses ₹20 lakh.

Option (a) is incorrect because the threshold applies to aggregate turnover (all-India), not State-specific turnover. Option (c) is incorrect because GST is a State-level registration — a supplier must obtain **separate registration in each State** from which taxable supplies are made; one State's registration cannot cover supplies made from another State. Option (d) is incorrect because registration is not deferred to the next financial year when the aggregate turnover threshold is already breached.

Question 2

List the accounts and records which are not required to be maintained by a supplier who has opted for composition scheme, as per the provisions of the GST laws.

Accepted Answer

As per **Rule 56(8) of the Central Goods and Services Tax (CGST) Rules, 2017**, a registered person who has opted for the **composition levy under Section 10 of the CGST Act, 2017** is granted relaxation from maintaining certain accounts and records that are otherwise mandatory for regular registered taxpayers. This is because composition suppliers pay tax at a flat rate on turnover and are neither required to charge GST separately from customers nor entitled to avail **input tax credit (ITC)**.

**Accounts and Records NOT Required to be Maintained by a Composition Supplier:**

1. **Accounts of production or manufacture of goods** — A composition supplier is not required to maintain detailed accounts showing the description, value, and quantity of goods produced or manufactured. Regular taxpayers must maintain such records under Rule 56(1) to track inputs used and ITC eligibility; since composition dealers have no such requirement, this record is dispensed with.

2. **Accounts of stock in respect of goods received from every registered supplier** — The requirement to maintain stock-wise accounts showing description, value, and quantity of goods received, goods supplied, and balance of stock including raw materials, finished goods, scrap, and wastage is not applicable to a composition dealer.

3. **Accounts of input tax credit availed** — Since composition suppliers are prohibited from claiming ITC under Section 10(4) of the CGST Act, 2017, maintaining records of eligible/inel…

Question 3

Case scenario:
Vintage Cinemas Pvt. Ltd. (VCPL) is a leading chain of multiplexes operating in several States across India. The company has its corporate office in Mumbai, Maharashtra and is registered under GST in multiple States including Maharashtra. The company offers movie tickets, food and beverages and other entertainment-related services.

The turnover of the company in the preceding financial year as per the audited financial statements was ₹ 175 crore. The company crossed the aggregate turnover of ₹ 35 crore till June in the current year.

In July, VCPL opened a new multiplex in Gujarat wherein the commercial operations will commence from August 1.

Due to operations in multiple States, the finance and accounts operations are handled by a centralized team at the corporate office.…

Accepted Answer

**Answer: (b)**

Under the GST framework, each registration is treated as a separate taxable person. Since VCPL is registered in multiple States, it is required to file **separate GST returns for each State registration** independently. There is no concept of a consolidated return across multiple State registrations, nor is there any option to file only in the State of the corporate office or the State with the highest turnover. This follows from **Section 39 of the Central Goods and Services Tax Act, 2017**, which mandates that every registered person shall furnish returns for each registration separately.

Question 4

Case scenario:
Vintage Cinemas Pvt. Ltd. (VCPL) is a leading chain of multiplexes operating in several States across India. The company has its corporate office in Mumbai, Maharashtra and is registered under GST in multiple States including Maharashtra. The company offers movie tickets, food and beverages and other entertainment-related services.

The turnover of the company in the preceding financial year as per the audited financial statements was ₹ 175 crore. The company crossed the aggregate turnover of ₹ 35 crore till June in the current year.

In July, VCPL opened a new multiplex in Gujarat wherein the commercial operations will commence from August 1.

Due to operations in multiple States, the finance and accounts operations are handled by a centralized team at the corporate office.…

Accepted Answer

**Answer: (d)**

VCPL's GST liability on rental charges arises from its own registration status and taxable supply, not from the tenant's turnover. Since VCPL is already registered under GST (with turnover far exceeding the threshold), every taxable supply it makes — including leasing of space in the food court — attracts GST **irrespective of the turnover of the tenant or the amount of rental charges collected**. Under the CGST Act 2017, the obligation to charge and collect GST is on the registered supplier (VCPL), and there is no exemption linked to the recipient's turnover for commercial rental/leasing services.

Question 5

Case scenario:
Vintage Cinemas Pvt. Ltd. (VCPL) is a leading chain of multiplexes operating in several States across India. The company has its corporate office in Mumbai, Maharashtra and is registered under GST in multiple States including Maharashtra. The company offers movie tickets, food and beverages and other entertainment-related services.

The turnover of the company in the preceding financial year as per the audited financial statements was ₹ 175 crore. The company crossed the aggregate turnover of ₹ 35 crore till June in the current year.

In July, VCPL opened a new multiplex in Gujarat wherein the commercial operations will commence from August 1.

Due to operations in multiple States, the finance and accounts operations are handled by a centralized team at the corporate office.…

Accepted Answer

**Answer: (c)**

A **refundable security deposit** does not constitute 'consideration' for a supply under Section 2(31) of the Central Goods and Services Tax Act, 2017. Since it is returnable at the end of the lease term and does not represent any payment for goods or services, it does not attract GST. Neither the owner of the premises nor VCPL is liable to pay GST on such a deposit.

Question 6

Case scenario:
Vintage Cinemas Pvt. Ltd. (VCPL) is a leading chain of multiplexes operating in several States across India. The company has its corporate office in Mumbai, Maharashtra and is registered under GST in multiple States including Maharashtra. The company offers movie tickets, food and beverages and other entertainment-related services.

The turnover of the company in the preceding financial year as per the audited financial statements was ₹ 175 crore. The company crossed the aggregate turnover of ₹ 35 crore till June in the current year.

In July, VCPL opened a new multiplex in Gujarat wherein the commercial operations will commence from August 1.

Due to operations in multiple States, the finance and accounts operations are handled by a centralized team at the corporate office.…

Accepted Answer

**Answer: (d) liable to generate a tax invoice as well as an E-Way Bill.**

Under **Section 25(4) of the CGST Act, 2017**, a person holding multiple GST registrations across different States is treated as **distinct persons** for each registration. Consequently, transfer of advertisement material from VCPL's Maharashtra registration to its Gujarat registration constitutes a **supply between distinct persons**. Even though both registrations share the same PAN, they are legally distinct under GST.

As per **Schedule I of the CGST Act, 2017**, supply of goods between distinct persons — even without consideration — is a **deemed taxable supply**, and VCPL had also claimed ITC on these goods, confirming their taxable nature. Accordingly, a **Tax Invoice** must be issued under **Section 31 of the CGST Act, 2017**.

Further, since the value of goods dispatched is ₹35 lakh (exceeding the ₹50,000 threshold) and the movement is **inter-State**, generation of an **E-Way Bill** is mandatory under **Rule 138 of the CGST Rules, 2017**.

Options (a), (b), and (c) are incorrect: same-PAN entities with separate State registrations are distinct persons; a delivery challan applies to non-supply movements; and a bill of supply is issued for exempt supplies or by composition dealers — neither applies here.

Question 7

M/s Consultease Services Private Limited, a company registered under GST in Mumbai, Maharashtra, offers business consultancy, digital marketing and project management services across India. The company recorded the following transactions in October:

1. Consultancy services for market analysis: Provided consultancy services for market analysis to XYZ Ltd., a registered client in Chennai, Tamil Nadu (Inter-State), for ₹ 4,50,000. Additionally, the company paid an amount of ₹ 4,500 as professional tax applicable in the State of Maharashtra as per requirement of local state legislation. The amount of professional tax was recovered separately from XYZ Ltd.

2. Digital Marketing Services for Launch Event: Conducted digital marketing for an upcoming product launch for Mr. A based in Rajasthan, w…

Accepted Answer

**Computation of Total Value of Supply for October — M/s Consultease Services Pvt. Ltd.**

The **value of supply** is governed by **Section 15 of the Central Goods and Services Tax Act, 2017**. The transaction value is the starting point, to which certain items are added under Section 15(2) and from which certain discounts may be deducted under Section 15(3).

---

**Transaction 1 — Consultancy Services for Market Analysis (₹4,50,000 + Professional Tax ₹4,500)**

As per **Section 15(2)(a) of the CGST Act**, the value of supply includes any taxes, duties, cesses, fees and charges levied under any other law (i.e., other than GST laws) **if charged separately** by the supplier. Here, the professional tax of ₹4,500 payable under Maharashtra state legislation was recovered separately from XYZ Ltd. Accordingly, it forms part of the value of supply.

**Value of Supply = ₹4,50,000 + ₹4,500 = ₹4,54,500** (IGST applicable, being inter-State supply)

---

**Transaction 2 — Digital Marketing Services (Agreed Fee ₹3,00,000; ₹25,000 paid by Mr. A)**

As per **Section 15(2)(b) of the CGST Act**, the value of supply includes any amount that the **supplier is liable to pay** but which has been incurred by the **recipient** of supply and not included in the price. Since ₹25,000 was part of the agreed fee of ₹3,00,000 and the supplier (Consultease) was originally liable to pay it, it cannot be excluded merely because Mr. A discharged it. The full agreed fee is the value of supply.

**Value of S…

Question 8

M/s Consultease Services Private Limited, a company registered under GST in Mumbai, Maharashtra, offers business consultancy, digital marketing and project management services across India. The company recorded the following transactions in October:

1. Consultancy services for market analysis: Provided consultancy services for market analysis to XYZ Ltd., a registered client in Chennai, Tamil Nadu (Inter-State), for ₹ 4,50,000. Additionally, the company paid an amount of ₹ 4,500 as professional tax applicable in the State of Maharashtra as per requirement of local state legislation. The amount of professional tax was recovered separately from XYZ Ltd.

2. Digital Marketing Services for Launch Event: Conducted digital marketing for an upcoming product launch for Mr. A based in Rajasthan, w…

Accepted Answer

**Computation of Output Tax Payable by M/s Consultease Services Pvt. Ltd. for October**

All transactions are inter-State; therefore IGST @18% applies throughout. CGST/SGST do not arise on any of the transactions below.

**Transaction 1 – Consultancy to XYZ Ltd. (₹4,50,000 + ₹4,500 professional tax)**
Professional tax, though a statutory levy under Maharashtra state legislation, is a tax charged separately by the supplier to the recipient. Under **Section 15(2)(a) of the CGST Act, 2017**, any taxes, duties, cesses or charges levied under any law other than GST laws, if charged separately by the supplier, are includible in the value of supply. The ₹4,500 professional tax recovered from XYZ Ltd. is therefore part of the taxable value.
Taxable value = ₹4,50,000 + ₹4,500 = **₹4,54,500**; IGST @18% = ₹81,810.

**Transaction 2 – Digital Marketing for Mr. A, Rajasthan (Agreed fee ₹3,00,000)**
The ₹25,000 was incurred directly by Mr. A (recipient) but the company (supplier) was liable to pay it as part of the supply. Under **Section 15(2)(b) of the CGST Act, 2017**, any amount incurred by the recipient but which the supplier is liable to pay in relation to the supply is includible in the taxable value. Accordingly, the full agreed fee of ₹3,00,000 is the taxable value (not ₹2,75,000 actually received).
Taxable value = **₹3,00,000**; IGST @18% = ₹54,000.

**Transaction 3 – Travel reimbursement charged to clients (₹50,000)**
Employees' travel expenses reimbursed by the company and then…

Question 9

M/s Consultease Services Private Limited, a company registered under GST in Mumbai, Maharashtra, offers business consultancy, digital marketing and project management services across India. The company recorded the following transactions in October:

1. Consultancy services for market analysis: Provided consultancy services for market analysis to XYZ Ltd., a registered client in Chennai, Tamil Nadu (Inter-State), for ₹ 4,50,000. Additionally, the company paid an amount of ₹ 4,500 as professional tax applicable in the State of Maharashtra as per requirement of local state legislation. The amount of professional tax was recovered separately from XYZ Ltd.

2. Digital Marketing Services for Launch Event: Conducted digital marketing for an upcoming product launch for Mr. A based in Rajasthan, w…

Accepted Answer

**Net GST Payable: ₹1,28,000**

**CALCULATION OF OUTPUT TAX**

1. **Consultancy Services to XYZ Ltd (Inter-State)**: Supply value ₹4,50,000. Professional tax of ₹4,500 is a state-specific levy, not part of GST consideration. IGST at 18% applies: ₹4,50,000 × 18% = **₹81,000**

2. **Digital Marketing Services to Unregistered Person (Rajasthan)**: Agreed fee ₹3,00,000. The ₹25,000 incurred by the company is a business expense, not affecting supply value. Inter-State supply to unregistered person attracts IGST at 18%: ₹3,00,000 × 18% = **₹54,000**

3. **Late Payment Charges**: Amount received ₹1,00,000. Interest and late charges are taxable supplies under GST (not exempt under Section 6 of CGST Act, 2017). IGST at 18%: ₹1,00,000 × 18% = **₹18,000**

4. **Post-Supply Discount (Credit Note)**: Discount of ₹50,000 against September supply. Supplier must issue credit note reducing output tax. Reduction = ₹50,000 × 18% = **-₹9,000** (The fact that the customer did not reverse ITC is their compliance matter, not the supplier's responsibility)

5. **Sponsorship**: Amount paid ₹2,00,000 to event organizers. Sponsorship is a taxable supply. Under reverse charge mechanism (if organizer unregistered) or normal supply (if registered), the recipient is liable. IGST at 18%: ₹2,00,000 × 18% = **₹36,000**

**Total Output Tax = ₹81,000 + ₹54,000 + ₹18,000 - ₹9,000 + ₹36,000 = ₹1,80,000**

**CALCULATION OF INPUT TAX CREDIT**

1. **Digital Marketing Expenses (₹25,000)**: Business expense for servic…

Question 10

Mr. Bholuram, a supplier located in Meerut, U.P. supplied the bedsheets, pillow covers and blankets to a Governmental agency, registered in U.P. under a contract. The total contract value is ₹ 4,61,000 excluding GST. The value of supply is bifurcated as below:

400 Blankets for ₹ 600 each       ₹ 2,40,000
850 Bed Sheets for ₹ 180 each     ₹ 1,53,000
1700 Pillow Covers for ₹ 40 each  ₹   68,000

Is Governmental agency required to deduct tax at source (while making the payment to Mr. Bholuram) under section 51 of the CGST Act, 2017 and if yes, determine the amount of tax to be deducted at source?

Accepted Answer

**Applicability of TDS under Section 51 of the CGST Act, 2017**

Under **Section 51 of the CGST Act, 2017**, certain specified persons (including a **Governmental agency**) are required to deduct tax at source (TDS) while making payment to the supplier of taxable goods or services, where the **total value of supply under a contract exceeds ₹2,50,000** (excluding GST). TDS is **not** deducted on the GST component of the invoice.

**Checking Conditions for TDS:**

(1) **Deductor:** The deductor is a Governmental agency registered under GST in U.P. — this falls squarely within the category of deductors specified under Section 51.

(2) **Contract Value:** The total contract value is ₹4,61,000 (excluding GST), which **exceeds the threshold of ₹2,50,000**. Hence, TDS is **applicable**.

(3) **Nature of Supply:** All three items — blankets, bed sheets, and pillow covers — are **taxable goods**. TDS is not applicable on exempt supplies, but none of these items is exempt under the GST exemption schedule.

(4) **Location of Supplier and Place of Supply:** Both Mr. Bholuram (supplier) and the Governmental agency (deductor) are located in **U.P.**, making this an **intra-State supply**. TDS is therefore deductible under CGST and SGST (not IGST). Note: TDS is not required where the location of supplier and place of supply are in a State/UT different from the State/UT of registration of the deductor; that exception does not apply here.

**Conclusion:** Yes, the Governmental agency is **req…

Question 11

Blue Panda Pvt. Ltd. is a manufacturing company that supplies goods to various registered dealers across India. The company had an aggregate turnover of ₹ 6 crore in the financial year 2023-24. The finance team of the company is not sure whether e-invoicing provisions are applicable to the company and is of the view that under e-invoicing system, invoices need to be generated directly on the e-invoicing portal instead of its ERP system.

You are required to advise the finance team on the following question:

(a) What is e-invoicing, and whether it would apply to Blue Panda Pvt. Ltd.?

Accepted Answer

**Part (a): What is E-Invoicing and its Applicability to Blue Panda Pvt. Ltd.**

**Meaning of E-Invoicing:**

E-invoicing under GST does **not** mean that invoices are generated directly on a government portal. It is a system of **electronic authentication of invoices** generated by the taxpayer on their own ERP/accounting/billing system. Under this system, B2B invoices (and certain other documents) generated by a registered person are uploaded to the **Invoice Registration Portal (IRP)** operated by the GST Network (GSTN). The IRP validates the invoice data, generates a unique **Invoice Reference Number (IRN)**, digitally signs the invoice, and returns a **QR code** embedded in a signed JSON to the taxpayer. The invoice is then considered a valid tax invoice only after it has been authenticated (i.e., assigned an IRN) by the IRP.

The finance team's understanding is therefore **incorrect**. Businesses continue to generate invoices through their own ERP/software systems; they are only required to report those invoices to the IRP for authentication before or at the time of issuance to the recipient.

**Legal Basis:**

E-invoicing is mandated under **Rule 48(4) of the Central Goods and Services Tax Rules, 2017**, read with notifications issued by the Central Government prescribing the class of registered persons required to comply. The threshold for applicability has been progressively reduced over the years and currently stands at an **aggregate turnover exceeding ₹5 crore** i…

Question 12

Blue Panda Pvt. Ltd. is a manufacturing company that supplies goods to various registered dealers across India. The company had an aggregate turnover of ₹ 6 crore in the financial year 2023-24. The finance team of the company is not sure whether e-invoicing provisions are applicable to the company and is of the view that under e-invoicing system, invoices need to be generated directly on the e-invoicing portal instead of its ERP system.

You are required to advise the finance team on the following question:

(b) Does Blue Panda Pvt. Ltd. need to create its invoices directly on the e-invoicing portal?

Accepted Answer

**No, Blue Panda Pvt. Ltd. does NOT need to create its invoices directly on the e-invoicing portal.** This is a common misconception that the finance team needs to be corrected on.

**Correct Understanding of the E-Invoicing Process:**

Under the e-invoicing framework notified under Rule 48(4) of the CGST Rules, 2017, the process is as follows:

**Step 1 – Generation of Invoice in Own System:** The supplier (Blue Panda Pvt. Ltd.) continues to generate invoices using its own ERP or accounting software, in the same manner as before. The e-invoicing system does **not** require the taxpayer to abandon its internal system or create invoices on the government portal.

**Step 2 – Upload to Invoice Registration Portal (IRP):** Once the invoice is generated in the ERP, the invoice data is uploaded to the **Invoice Registration Portal (IRP)** — operated by authorized bodies such as the National Informatics Centre (NIC) — either in real-time or before issuance. The data is uploaded in a prescribed **JSON format** as per the e-invoice schema notified by the GSTN.

**Step 3 – Validation by IRP:** The IRP validates the uploaded invoice data for correctness (GSTIN validity, mandatory fields, etc.) and checks for duplicate invoices.

**Step 4 – Generation of IRN and QR Code:** Upon successful validation, the IRP generates a unique **Invoice Reference Number (IRN)** — a 64-character hash — along with a digitally signed **QR code** containing key invoice particulars. The IRP returns the signed…

Question 13

Briefly examine the place of supply in the following independent case:

(a) Ms. Shanti (unregistered resident of Gujarat) went to meet her parents at the native place Patna, Bihar and buys a medical insurance policy for her parents from an insurance company – MNT Insurers – of Patna (registered in Bihar). The location of the recipient of services in the records of the MNT Insurers is Patna.

Accepted Answer

**Relevant Provision:** The place of supply of services provided by way of **insurance** is governed by **Section 12(13) of the Integrated Goods and Services Tax (IGST) Act, 2017**.

**Rule:** As per Section 12(13) of the IGST Act 2017, the place of supply of services provided by an insurance company shall be the **location of the recipient of services**.

**Analysis of the given case:**

- **Supplier:** MNT Insurers, Patna — **registered in Bihar** (Location of Supplier = Bihar)
- **Recipient:** Ms. Shanti — an **unregistered** individual, resident of Gujarat
- **Location of recipient as per MNT Insurers' records:** Patna (Bihar)

Ms. Shanti, though actually residing in Gujarat, has purchased the insurance policy for her parents while physically present in Patna. The insurance company MNT Insurers has recorded the **location of the recipient as Patna, Bihar** in its records.

Since the recipient (Ms. Shanti) is **unregistered**, the location of the recipient is determined based on the **address available in the ordinary course of business** — i.e., from the insurance company's records. As per those records, the location is **Patna, Bihar**.

Therefore, applying Section 12(13), the **Place of Supply = Bihar (Patna)**.

**Conclusion:** Since both the **location of the supplier** (Bihar) and the **place of supply** (Bihar) are in the **same State**, this transaction constitutes an **intra-State supply**. Accordingly, **CGST and SGST (Bihar)** shall be levied on this insurance s…

Question 14

Briefly examine the place of supply in the following independent case:

(b) Lakhan Singh Transports Pvt. Ltd., a Goods Transportation Agency registered in Noida, Uttar Pradesh, is hired by Ram Trade Links (registered supplier in New Delhi) to transport its consignment of goods from its warehouse in Delhi to the house of a buyer located in Roorkee, Uttar Pradesh.

Accepted Answer

**Relevant Provision:** As per **Section 12(8) of the Integrated Goods and Services Tax (IGST) Act, 2017**, the place of supply of services by way of transportation of goods, including by mail or courier, is determined as follows:

- Where the **recipient is a registered person** → Place of supply = **Location of the recipient**.
- Where the recipient is an unregistered person → Place of supply = Location at which the goods are handed over for transportation.

**Analysis of the Given Case:**

In this case, **Lakhan Singh Transports Pvt. Ltd.** (GTA) is the **supplier of service**, registered in Noida, Uttar Pradesh. **Ram Trade Links** is the **recipient of the transportation service**, and it is a **registered supplier located in New Delhi**.

Since the recipient of service (Ram Trade Links) is a **registered person**, the place of supply shall be the **location of the recipient**, i.e., **New Delhi**.

The fact that the goods are being transported from Delhi to Roorkee (Uttar Pradesh) is irrelevant for determining place of supply when the recipient is registered.

**Determination of Nature of Supply:**

- Location of Supplier (GTA): Noida, **Uttar Pradesh**
- Place of Supply: **New Delhi** (location of registered recipient)

Since the location of supplier (Uttar Pradesh) and the place of supply (New Delhi/Delhi) are in **different states**, this qualifies as an **inter-state supply**. Accordingly, **IGST** shall be levied on this transaction.

Question 15

Briefly examine the place of supply in the following independent case:

(c) Mr. Karan (Mumbai) takes a post-paid mobile connection in Mumbai from the service provider – Freesia Ltd. and gives his residence address at Mumbai as the address for billing with the said company.

Accepted Answer

**Governing Provision:** The place of supply for telecommunication services is determined under **Section 12(11) of the Integrated Goods and Services Tax (IGST) Act, 2017**.

**Relevant Rule for Post-Paid Mobile Connection:**

As per **Section 12(11)(b) of the IGST Act, 2017**, where a **post-paid mobile connection** is provided, the **place of supply shall be the location of the billing address** of the recipient of services as recorded with the supplier.

**Application to the Given Case:**

Mr. Karan has taken a **post-paid mobile connection** from Freesia Ltd. (a service provider). Since this is a post-paid connection, the applicable rule is Section 12(11)(b). Mr. Karan has provided his **residence address at Mumbai** as the billing address with Freesia Ltd.

Accordingly, the **place of supply is Mumbai, Maharashtra**.

**Tax Implication:**

Since both the supplier (Freesia Ltd., Mumbai) and the place of supply (Mumbai, Maharashtra — derived from the billing address of Mr. Karan) are in the **same State (Maharashtra)**, this constitutes an **intra-State supply**. Therefore, **CGST and SGST** (Maharashtra) shall be levied on such supply.

Question 16

Case scenario:
Sagar LLP is an LLP unit set up in Special Economic Zone (SEZ) in the financial year 2018-19 for manufacture of textiles. The unit fulfils all the conditions under section 10AA of the Income-tax Act, 1961. The details of this unit for the financial year 2023-24 are given:

Particulars                                                                          ₹
Profits of unit located in SEZ                                               58,00,000
Export sales of above unit received in India in convertible               1,00,00,000
foreign exchange on or before 30.9.2024
Domestic sales of above unit                                                 60,00,000

Sagar LLP has three partners, Mr. Ram, Mr. Shyam and Mr. Ganesh. Mr. Ram and Mr. Shyam are working partners while Mr. Ganes…

Accepted Answer

**Answer: (d) ₹24.00 lakhs**

Under **Section 40(b) of the Income Tax Act, 1961**, remuneration paid to partners of a firm/LLP is deductible subject to two conditions: (1) it must be paid only to **working partners**, and (2) it must not exceed the **maximum permissible limit** computed on the basis of book profit.

**Step 1 – Identify eligible partners:** Mr. Ram and Mr. Shyam are working partners; Mr. Ganesh is a **non-working partner**. Remuneration to Mr. Ganesh (₹12 lakhs) is **not deductible** under Section 40(b) at all, since the provision explicitly restricts deduction to working partners only.

**Step 2 – Actual remuneration to working partners:** 2 working partners × ₹1 lakh/month × 12 months = **₹24,00,000**.

**Step 3 – Compute Book Profit** (as per Explanation 3 to Section 40(b)): Book profit = Net profit as per P&L + remuneration to *all* partners (working + non-working) added back (since both were debited to P&L).

Book Profit = ₹58,00,000 + ₹36,00,000 = **₹94,00,000**

**Step 4 – Maximum permissible remuneration** under Section 40(b)(v):
- On first ₹3,00,000 of book profit: 90% = ₹2,70,000
- On balance ₹91,00,000: 60% = ₹54,60,000
- **Maximum limit = ₹57,30,000**

**Step 5 – Allowable deduction:** Lower of actual remuneration to working partners (₹24,00,000) and maximum limit (₹57,30,000) = **₹24,00,000**.

The allowable remuneration deduction to the LLP for A.Y. 2024-25 is **₹24.00 lakhs**.

Question 17

Mr. Ramesh is an authorized wholesale distributor of fertilizers and other agricultural products. An analysis of his trading and profit & loss account for the previous year 31.3.2024 revealed the following information:

(1) Net Profit ₹ 75,43,000.
(2) The following incomes were credited in the profit and loss account:
    (a) Rent received ₹ 5,40,000
    (b) Income-tax refund ₹ 15,000
    (c) Dividend from Indian companies ₹ 2,50,000 (Gross)
(3) Rates and taxes debited to profit and loss account include ₹ 1,000 paid towards late filing of his IT return for A.Y. 2023-24 under section 234F of Income-tax Act.
(4) Salaries debited to profit and loss account include ₹ 35,000 paid on single day by way of cash to his accountant.
(5) Interest of ₹ 1,20,000 paid on loan of ₹ 10,00,000 taken from NB…

Accepted Answer

**Computation of Total Income of Mr. Ramesh for A.Y. 2024-25 (P.Y. 2023-24)**

**I. Income from Business or Profession**

The starting point is the net profit of ₹75,43,000 as per the P&L account. The following adjustments are required:

**Disallowances (Add Back):**

(a) **Late filing fee u/s 234F** of ₹1,000 is a fee paid under the Income Tax Act, 1961 and is not deductible as a business expense.

(b) **Cash salary u/s 40A(3) of the Income Tax Act, 1961:** Payment of ₹35,000 in cash on a single day to the accountant exceeds the limit of ₹10,000 per day per person. The entire ₹35,000 is disallowed.

(c) **Interest on NBFC loan — personal portion:** Out of the loan of ₹10,00,000, ₹2,00,000 (20%) was used for personal purposes. Proportionate interest = 2/10 × ₹1,20,000 = ₹24,000 is not deductible u/s 37(1).

(d) **Interest on NBFC loan — disallowance u/s 40(a)(ia):** Mr. Ramesh's turnover in P.Y. 2022-23 was ₹3 crores, making him liable for tax audit u/s 44AB for P.Y. 2023-24. He was therefore required to deduct TDS u/s 194A on interest paid to the NBFC. Since TDS was not deducted, 30% of the business interest (30% × ₹96,000) = ₹28,800 is disallowed u/s 40(a)(ia).

(e) **Municipal taxes for let-out portion:** Half the building is let out (HP income). Municipal taxes of ₹5,000 (50% of ₹10,000) relating to the HP portion are not deductible as a business expense; they are allowable under HP income instead.

(f) **Closing stock undervalued** by ₹40,000 — this understates profit, s…

Question 18

Case scenario:
Sagar LLP is an LLP unit set up in Special Economic Zone (SEZ) in the financial year 2018-19 for manufacture of textiles. The unit fulfils all the conditions under section 10AA of the Income-tax Act, 1961. The details of this unit for the financial year 2023-24 are given:

Particulars                                                                          ₹
Profits of unit located in SEZ                                               58,00,000
Export sales of above unit received in India in convertible               1,00,00,000
foreign exchange on or before 30.9.2024
Domestic sales of above unit                                                 60,00,000

Sagar LLP has three partners, Mr. Ram, Mr. Shyam and Mr. Ganesh. Mr. Ram and Mr. Shyam are working partners while Mr. Ganes…

Accepted Answer

**Answer: (b) ₹21.875 lakhs and ₹60 lakhs, respectively**

**Section 10AA — Deduction for Sagar LLP:**

Sagar LLP commenced operations in SEZ in FY 2018-19. For AY 2024-25 (FY 2023-24), this is the **6th year** of operation. Under Section 10AA of the Income-tax Act, 1961, the deduction is 100% of export profits for the first 5 years and **50%** for years 6 to 10.

The remuneration paid to **Mr. Ganesh (non-working partner)** @ ₹1 lakh/month = ₹12 lakhs has been debited to P&L but is **disallowed** under Section 40(b) of the Act (remuneration to non-working partners is not deductible). Accordingly, the adjusted profit of the SEZ unit = ₹58 lakhs + ₹12 lakhs = **₹70 lakhs**.

The formula under Section 10AA: **Deduction = Profit of unit × (Export Turnover ÷ Total Turnover) × applicable %**

Export Turnover = ₹1,00,00,000 (received in convertible foreign exchange on or before 30.9.2024, i.e., within 6 months — satisfies the condition).
Total Turnover = Export Sales ₹1,00,00,000 + Domestic Sales ₹60,00,000 = ₹1,60,00,000.

Deduction = ₹70 lakhs × (100/160) × 50% = ₹70 × 0.625 × 0.5 = **₹21.875 lakhs**.

**Section 35AD — Deduction for Mr. Ganesh:**

Mr. Ganesh set up a warehousing facility for storage of agricultural produce, which is a **specified business** under Section 35AD of the Income-tax Act, 1961. Section 35AD allows a **100% deduction** on capital expenditure (other than land and goodwill) incurred for such specified business.

Total capital expenditure = ₹90 lakhs. Howev…

Question 19

Case scenario:
Sagar LLP is an LLP unit set up in Special Economic Zone (SEZ) in the financial year 2018-19 for manufacture of textiles. The unit fulfils all the conditions under section 10AA of the Income-tax Act, 1961. The details of this unit for the financial year 2023-24 are given:

Particulars                                                                          ₹
Profits of unit located in SEZ                                               58,00,000
Export sales of above unit received in India in convertible               1,00,00,000
foreign exchange on or before 30.9.2024
Domestic sales of above unit                                                 60,00,000

Sagar LLP has three partners, Mr. Ram, Mr. Shyam and Mr. Ganesh. Mr. Ram and Mr. Shyam are working partners while Mr. Ganes…

Accepted Answer

**Answer: (b) ₹52,55,000**

The total income of Mr. Ganesh for A.Y. 2024-25 is computed as follows:

**Income from Salaries:**
Mr. Ganesh was employed in XYZ Ltd. till 30.9.2023, receiving ₹80,000 per month. Salary for 6 months (April 2023 to September 2023) = ₹4,80,000. Standard deduction u/s 16(ia) of the Income-tax Act, 1961 = ₹50,000. **Net Salary = ₹4,30,000.**

**Income from LLP (Remuneration):**
Mr. Ganesh is a **non-working partner**. Under Section 40(b), remuneration paid to a non-working partner is not deductible in computing the LLP's income. As per Section 28(v), remuneration received by a partner is taxable in his hands only to the extent it is **allowable as deduction** in the hands of the firm/LLP. Since Mr. Ganesh's remuneration (₹12,00,000) is disallowed u/s 40(b), **₹Nil is taxable** in his hands on this account. His share of profit from LLP is exempt u/s 10(2A).

**Profits and Gains from Business or Profession – Warehousing:**
Mr. Ganesh set up a warehousing facility for storage of agricultural produce, which is a **specified business** u/s 35AD(8)(d). The facility became operational on 1.12.2023 (within P.Y. 2023-24). Capital expenditure of ₹90 lakhs was incurred, including cost of land ₹30 lakhs. Under Section 35AD(2), no deduction is allowed in respect of expenditure on **acquisition of land**. Accordingly, eligible deduction = ₹90L – ₹30L = **₹60,00,000 (100% deduction u/s 35AD)**.

Profit from warehousing before 35AD = ₹1,10,00,000; Less: Deduction u/s…

Question 20

Case scenario:
Sagar LLP is an LLP unit set up in Special Economic Zone (SEZ) in the financial year 2018-19 for manufacture of textiles. The unit fulfils all the conditions under section 10AA of the Income-tax Act, 1961. The details of this unit for the financial year 2023-24 are given:

Particulars                                                                          ₹
Profits of unit located in SEZ                                               58,00,000
Export sales of above unit received in India in convertible               1,00,00,000
foreign exchange on or before 30.9.2024
Domestic sales of above unit                                                 60,00,000

Sagar LLP has three partners, Mr. Ram, Mr. Shyam and Mr. Ganesh. Mr. Ram and Mr. Shyam are working partners while Mr. Ganes…

Accepted Answer

**Answer: (d) ₹40,65,200**

Under the **default tax regime (Section 115BAC of the Income-tax Act, 1961)**, certain deductions are not available. The tax liability of Mr. Ganesh for A.Y. 2024-25 is computed as follows:

**Head 1 – Salary Income (XYZ Ltd.)**
Mr. Ganesh was employed from April 2023 to September 2023 (6 months). Gross salary = 6 × ₹80,000 = ₹4,80,000. Under the new regime, **standard deduction of ₹50,000** is available (inserted w.e.f. A.Y. 2024-25). Net salary = ₹4,30,000.

**Head 2 – Profits and Gains of Business or Profession (PGBP)**
*(a) Remuneration from Sagar LLP:* Under **Section 28(v)**, remuneration received by a partner from a firm is taxable as PGBP. Mr. Ganesh receives ₹1,00,000 per month × 12 = ₹12,00,000. The fact that he is a non-working partner (making this disallowable under Section 40(b) at the LLP level) does not relieve him of personal tax liability on what he actually receives.

*(b) Warehousing facility income:* The profit before Section 35AD deduction is ₹1,10,00,000. However, **Section 35AD deduction is NOT available under Section 115BAC**. Instead, normal depreciation under **Section 32** is available. Capital expenditure = ₹90,00,000 less land ₹30,00,000 = **₹60,00,000** (depreciable building). The warehouse commenced operations on 1st December 2023 — used for less than 180 days in the year, so only **50% of depreciation** is allowable. At 10% on building: ₹60,00,000 × 10% × 50% = ₹3,00,000. Net warehousing income = ₹1,10,00,000 − ₹3,00…

Question 21

Case scenario:
Sagar LLP is an LLP unit set up in Special Economic Zone (SEZ) in the financial year 2018-19 for manufacture of textiles. The unit fulfils all the conditions under section 10AA of the Income-tax Act, 1961. The details of this unit for the financial year 2023-24 are given:

Particulars                                                                          ₹
Profits of unit located in SEZ                                               58,00,000
Export sales of above unit received in India in convertible               1,00,00,000
foreign exchange on or before 30.9.2024
Domestic sales of above unit                                                 60,00,000

Sagar LLP has three partners, Mr. Ram, Mr. Shyam and Mr. Ganesh. Mr. Ram and Mr. Shyam are working partners while Mr. Ganes…

Accepted Answer

**Answer: (c) ₹15,89,020**

**Computation of Total Income of Mr. Ganesh for A.Y. 2024-25 (Old/Regular Tax Regime)**

**Income from Salaries (XYZ Ltd.):**
Mr. Ganesh was employed from April 2023 to September 2023 (6 months). Gross salary = ₹80,000 × 6 = ₹4,80,000. Less: Standard deduction under **Section 16(ia) of the Income Tax Act, 1961** = ₹50,000. Net salary income = **₹4,30,000**.

**Income from Business or Profession (PGBP):**

**(i) Remuneration from Sagar LLP:** Mr. Ganesh is a **non-working partner**. Under **Section 40(b)**, remuneration paid to a non-working partner is not allowable as a deduction to the LLP. Consequently, such remuneration is not includible in the non-working partner's income under **Section 28(v)** (which applies to remuneration deductible at the firm/LLP level). The disallowed amount gets absorbed into the LLP's taxable income, and the partner's share of LLP profit remains exempt under **Section 10(2A)**. Accordingly, remuneration of ₹12,00,000 received by Ganesh from LLP is **Nil** in his hands.

**(ii) Warehousing facility income:** Profit from warehousing before **Section 35AD** deduction = ₹1,10,00,000. Section 35AD allows 100% deduction of capital expenditure for specified businesses (warehousing for storage of agricultural produce). Total capital expenditure = ₹90,00,000. However, as per **Section 35AD(6)**, expenditure on acquisition of **land is excluded**. Eligible expenditure = ₹90,00,000 − ₹30,00,000 = ₹60,00,000. Deduction under Secti…

Question 22

Mr. Akshay (aged 59 years), an Indian citizen, travelled frequently out of India for his business trip as well as for his outings. He left India from Delhi airport on 20th April 2023 and returned on 15th October 2023. He has been in India for less than 700 days during the 7 years immediately preceding the previous year. Determine his residential status and his total income for the assessment year 2024-25 from the following information:

(1) Long term capital gain on sale of shares of Shama India Ltd., a listed Indian company, amounting to ₹ 1,12,000. The sale proceeds were credited to his bank account in UK.

(2) Dividend amounting to ₹ 40,000 (gross) received from RIL Ltd., an Indian company. He had borrowed money from Mr. Abhay, a non-resident Indian, for the above-mentioned investment o…

Accepted Answer

**Part 1: Determination of Residential Status for A.Y. 2024-25 (P.Y. 2023-24)**

Mr. Akshay left India on 20th April 2023 and returned on 15th October 2023.

**Days in India during P.Y. 2023-24:**
- 1st April 2023 to 20th April 2023 (day of departure counted in India): **20 days**
- 15th October 2023 to 31st March 2024 (day of return counted in India): 17 (Oct) + 30 (Nov) + 31 (Dec) + 31 (Jan) + 29 (Feb – leap year) + 31 (Mar) = **169 days**
- **Total: 189 days**

Since 189 days > 182 days, **Basic Condition 1 under Section 6(1) of the Income Tax Act, 1961** is satisfied → Mr. Akshay is a **Resident**.

**Test for RNOR under Section 6(6):** An individual is Resident but Not Ordinarily Resident (RNOR) if he has been in India for 729 days or less during the 7 years immediately preceding the relevant previous year. Since he has been in India for **less than 700 days** during those 7 years (given), which is less than 729 days, the RNOR condition is satisfied.

**Conclusion: Mr. Akshay is a Resident but Not Ordinarily Resident (RNOR) for A.Y. 2024-25.**

---

**Part 2: Taxability for RNOR**

For an RNOR, income taxable in India includes: (i) income received or deemed to be received in India, and (ii) income accruing or arising in India. Income accruing outside India from a business controlled outside India is **not** taxable for RNOR.

---

**Income (1): LTCG on shares of Shama India Ltd. – ₹1,12,000**

Shama India Ltd. is a **listed Indian company**. The capital gain **accrues in…

Question 23

Mr. Rohan, an employee of ABC Ltd. is posted at Mumbai. He was appointed on 1st March 2023 on the scale of ₹ 60,000 - ₹ 2,000 - ₹ 80,000. Details of his other income for the previous year 2023-24 are as follows:

(i) Dearness allowance: 40% of basic salary (60% forms part of pay for retirement benefits)
(ii) Telephone allowance @ ₹ 500 per month
(iii) Both Mr. Rohan and the company contribute 15% of basic salary to RPF. Interest accrued in this Fund @12% p.a. amounted to ₹ 25,800.
(iv) The company has provided him with the rent free unfurnished accommodation in Mumbai owned by the company.
(v) The salary of ₹ 2,500 p.m. of domestic servant is reimbursed by the company.
(vi) Rohan has used his own motor car of 1.8 ltr engine capacity for both official and personal purposes. The running and …

Accepted Answer

**Computation of Gross Total Income of Mr. Rohan for A.Y. 2024-25**

**1. Basic Salary:**
Mr. Rohan was appointed on 1st March 2023 at ₹60,000 p.m. The increment of ₹2,000 is effective from 1st March 2024 (after completing one year). Therefore, for P.Y. 2023-24: April 2023 to February 2024 (11 months) × ₹60,000 = ₹6,60,000; March 2024 (1 month) × ₹62,000 = ₹62,000. **Total Basic Salary = ₹7,22,000.**

**2. Dearness Allowance:**
DA = 40% × ₹7,22,000 = ₹2,88,800. Of this, 60% (i.e., ₹1,73,280) forms part of salary for retirement benefits — this is relevant for RPF and RFA calculations.

**3. Telephone Allowance:**
Telephone allowance of ₹500 × 12 = ₹6,000 is **fully taxable** as no exemption is available under Section 10(14) of the Income Tax Act, 1961 for telephone allowance (unlike conveyance or certain specified allowances).

**4. Employer's Contribution to RPF — Taxable Portion:**
Under Section 17(1)(vi) and Rule 6(1) of Part A of the Fourth Schedule, employer's contribution to RPF exceeding 12% of salary is taxable. Salary for this purpose = Basic + DA (retirement portion) = ₹7,22,000 + ₹1,73,280 = ₹8,95,280. Employer contributes 15% × ₹7,22,000 = ₹1,08,300. Exempt limit = 12% × ₹8,95,280 = ₹1,07,434. **Taxable = ₹1,08,300 − ₹1,07,434 = ₹866.**

**5. Interest on RPF — Taxable Portion:**
Under Rule 6(1) of Part A of the Fourth Schedule, interest on RPF exceeding 9.5% p.a. is taxable. Interest credited at 12% p.a. = ₹25,800. Fund balance = ₹25,800 ÷ 12% = ₹2,15,000. Exempt (…

Question 24

Mr. Mayank, a resident individual, furnished the following information in respect of income earned and losses incurred by him for the F.Y. 2023-24:

Particulars                                                                              Amount (₹)
Income from Salary (Computed)                                                            27,40,000
Long term capital loss on sale of shares of Reliance Ltd.                                (1,25,000)
  STT has been paid both at the time of acquisition and sale
Income from let out property in Kanpur                                                    5,50,000
Loss from let out property in Delhi                                                      (3,75,000)
Interest on self-acquired property in Mumbai                                             (1,…

Accepted Answer

**Computation of Gross Total Income of Mr. Mayank for A.Y. 2024-25 under Section 115BAC**

Mr. Mayank has opted for Section 115BAC of the Income Tax Act, 1961 (new tax regime) in A.Y. 2023-24 and wishes to continue with it in A.Y. 2024-25. The following restrictions apply under Section 115BAC(2):
- **Additional depreciation** under Section 32(1)(iia) is not available
- **Deduction under Section 24(b)** for self-occupied/vacant property is not available
- Loss under **Income from House Property** cannot be set off against income under any other head
- Brought forward losses relating to deductions disallowed under 115BAC cannot be set off

**Head-wise Analysis:**

**1. Income from Salary:** ₹27,40,000 (as computed; standard deduction assumed already deducted)

**2. Income from House Property:**
Income from Kanpur let-out property: ₹5,50,000; Loss from Delhi let-out property: ₹(3,75,000). **Interest on self-occupied Mumbai property ₹(1,50,000) is NOT deductible under Section 115BAC** — Section 24(b) deduction is unavailable for self-occupied property. Net current year HP income = ₹1,75,000. Set off of **brought forward Delhi HP loss from A.Y. 2023-24** ₹(2,10,000) is permissible within the head: ₹1,75,000 − ₹2,10,000 = **₹(35,000)** net HP loss. Under Section 115BAC, this loss **cannot be set off against any other head**. Contribution to GTI = **NIL**.

**3. Capital Gains:**
Long-term capital loss on sale of Reliance Ltd. shares (STT paid) = ₹(1,25,000). This is a loss under Sec…

Question 25

Examine the applicability of Tax deduction at source (TDS) or Tax collection at source (TCS) as per the Income-tax Act, 1961 for the A.Y 2024-25 in the following situation:

(i) Mr. Arjun, a resident Indian, is in retail business in Delhi and his turnover for F.Y.2022-23 was ₹ 9.90 crores. He regularly purchases goods from another resident, Mr. Saurabh, a wholesaler in Noida. GST rate on such goods is 5%. The aggregate amount of sales made by Mr. Saurabh to Mr. Arjun during the F.Y.2023-24 was ₹ 49 lakhs (without GST). Mr Arjun made the payment for consideration of goods (₹ 21 lakhs on 8.7.2023, ₹ 26.25 lakhs on 27.8.2023 and ₹ 4.2 lakhs on 11.3.2024). Mr. Saurabh's turnover for F.Y.2022-23 was ₹ 10.10 crores.

Accepted Answer

**Applicability of Section 194Q (TDS on Purchase of Goods) — Income Tax Act, 1961**

Section 194Q, inserted by the Finance Act 2021, requires a buyer to deduct TDS @ 0.1% on purchase of goods from a resident seller if the aggregate purchase value exceeds ₹50 lakhs during a financial year, **provided the buyer's turnover exceeds ₹10 crores in the immediately preceding financial year**.

Mr. Arjun's turnover for F.Y. 2022-23 (the preceding year) is **₹9.90 crores**, which does **not exceed ₹10 crores**. Therefore, **Section 194Q is NOT applicable** to Mr. Arjun for F.Y. 2023-24.

**Applicability of Section 206C(1H) (TCS on Sale of Goods)**

Section 206C(1H) requires a seller to collect TCS @ 0.1% on consideration received from a buyer in excess of ₹50 lakhs during a financial year, **provided the seller's turnover exceeds ₹10 crores in the immediately preceding financial year**. An important proviso under Section 206C(1H) states that TCS is **not applicable where the transaction is subject to TDS under any other provision** of the Act.

Mr. Saurabh's turnover for F.Y. 2022-23 is **₹10.10 crores**, which exceeds ₹10 crores. Hence, the turnover threshold for applicability is met. Since Section 194Q does not apply (as Mr. Arjun's turnover is below ₹10 crores), the proviso excluding TCS does not apply. Therefore, **Section 206C(1H) IS applicable** to Mr. Saurabh.

**Determination of TCS Liability**

The total consideration received by Mr. Saurabh from Mr. Arjun during F.Y. 2023-24 …

Question 26

Examine the applicability of Tax deduction at source (TDS) or Tax collection at source (TCS) as per the Income-tax Act, 1961 for the A.Y 2024-25 in the following situation:

(ii) Mr. Raja paid ₹ 12 lakhs on 1.11.2023 to M/s. Thomas Cook for a holiday package to Singapore for a week with his family, comprising of his wife and two children, being twins aged 22 years, in the last week of November. Mr. Raja also remitted ₹ 10 lakhs on 28.3.2024, out of his personal savings, under LRS through Bank of India, as gift to his sister residing in London, on the occasion of her 50th birthday.

Accepted Answer

**Applicability of TCS under Section 206C(1G) of the Income Tax Act, 1961 – A.Y. 2024-25**

**Transaction 1: Payment of ₹12 Lakhs to M/s Thomas Cook for Overseas Tour Package (1.11.2023)**

Under **Section 206C(1G)** of the Income Tax Act, 1961, every **seller of an overseas tour program package** is required to collect **Tax Collected at Source (TCS)** from the buyer at the time of receipt of the amount.

Pursuant to the **Finance Act, 2023**, with effect from **1st October 2023**, the rate of TCS on overseas tour packages was revised upward to **20%** on the entire amount received. **No threshold exemption** is available for overseas tour packages — TCS applies from the first rupee.

Since the payment of ₹12 lakhs was made on **1.11.2023** (after 1.10.2023), the revised rate of **20%** is applicable.

**M/s Thomas Cook** (the seller) is liable to collect TCS from **Mr. Raja** (the buyer) at the time of receipt of payment.

**TCS collectible = 20% × ₹12,00,000 = ₹2,40,000**

Note: TCS is collected on the full amount of the package regardless of the number of travellers covered under the package. No TDS obligation arises here; only TCS is applicable, to be collected by Thomas Cook.

---

**Transaction 2: LRS Remittance of ₹10 Lakhs through Bank of India (28.3.2024)**

Under **Section 206C(1G)**, every **authorised dealer** receiving an amount from a person for **remittance outside India under the Liberalised Remittance Scheme (LRS)** must collect TCS at the time of debiting t…

Question 27

Is Mr. Naveen eligible to declare income on presumptive basis under the provisions of the Income-tax Act, 1961 for A.Y. 2024-25?

Accepted Answer

**Answer: (d)**

Under **Section 44AD of the Income Tax Act, 1961**, the threshold limit for presumptive taxation is **₹2 crores**. However, as amended by the Finance Act 2023 (effective from A.Y. 2024-25), the enhanced threshold of **₹3 crores** is available **only if BOTH** the following conditions are simultaneously satisfied:

1. **Cash receipts** during the year do not exceed **5% of total turnover/gross receipts**, AND
2. **Cash payments** during the year do not exceed **5% of total aggregate payments**.

In Mr. Naveen's case, checking the cash payment condition: Total payments = ₹1.60 crores; Cash payments = ₹9 lakhs. 5% of ₹1.60 crores = ₹8 lakhs. Since cash payments of ₹9 lakhs **exceed** ₹8 lakhs (i.e., exceed 5% of aggregate payments), the enhanced limit of ₹3 crores is **not available**.

The applicable threshold therefore remains ₹2 crores. Since Mr. Naveen's **turnover is ₹2.80 crores**, which exceeds ₹2 crores, he is **not eligible** to declare income on a presumptive basis under Section 44AD for A.Y. 2024-25.

Option (a) is incomplete because it ignores the enhanced ₹3 crore limit entirely. Options (b) and (c) are incorrect because, while the cash receipts condition is satisfied, they ignore the cash payments condition which fails. **Option (d) correctly identifies** that the disqualifying factor is the breach of the 5% cash payment threshold.

Question 28

Which of the following statements is correct under GST law in relation to the hotel accommodation service received by the Company?

Accepted Answer

**Answer: (b)**

Under GST law, the place of supply for hotel accommodation services is determined by the location where the accommodation is physically provided (i.e., the location of the hotel). In this case, the hotel is located in Udaipur, Rajasthan.

According to Section 12 of the CGST Act, 2017 read with the Place of Supply of Services Rules, 2017, since the place of supply (Rajasthan) is in a **different state** from the location of the recipient (XYZ Private Limited, registered in Delhi), the applicable tax is **IGST (Integrated Goods and Services Tax) at 18%**.

IGST is levied when goods or services move between different states. The hotel must issue a tax invoice charging IGST on the accommodation service provided.

Option (a) is incorrect because CGST and SGST would apply only if the recipient were located in the same state (Rajasthan) as the place of supply. Option (c) is incorrect as a bill of supply is issued for exempt supplies, not taxable accommodation services. Option (d) is incorrect because the place of supply is determined solely by the location of the recipient establishment, not by the location of individual participants attending the event.

Question 29

What would be your answer to MCQ 1, assuming for the purpose of answering this MCQ and MCQ 3 that Mr. Naveen has additionally received ₹10 lakhs by way of crossed cheque (out of turnover) during the P.Y. 2023-24?

Accepted Answer

**Answer: (d)**

With the additional receipt of ₹10 lakhs by way of **crossed cheque** (out of turnover), the eligibility under **Section 44AD of the Income Tax Act, 1961** for the presumptive taxation scheme must be re-examined.

Under the Finance Act 2023 amendment to Section 44AD, the enhanced turnover threshold of **₹3 crore** is available only if (i) aggregate cash receipts do not exceed **5% of total gross receipts/turnover**, and (ii) aggregate cash payments do not exceed 5% of total payments. If either condition fails, the original limit of ₹2 crore applies.

A **crossed cheque** is not the same as an **account payee cheque**. A crossed cheque merely requires deposit into a bank account but remains negotiable by endorsement. For the purposes of Section 44AD, only receipts through account payee cheque, account payee bank draft, electronic clearing system, or other prescribed electronic modes (NEFT, RTGS, UPI, etc.) qualify as non-cash prescribed mode receipts. A crossed cheque does **not** fall within these prescribed modes and is therefore treated akin to a non-prescribed mode receipt — effectively counted alongside cash for the 5% test.

Accordingly, effective cash/non-prescribed receipts = ₹8 lakhs (cash) + ₹10 lakhs (crossed cheque) = **₹18 lakhs**. The 5% threshold on turnover of ₹2.80 crores = ₹14 lakhs. Since ₹18 lakhs **exceeds** ₹14 lakhs, condition (i) fails — the enhanced limit of ₹3 crore is unavailable.

With only the basic limit of ₹2 crore applicable, th…

Question 30

What shall be the place of supply in relation to the gift items purchased by XYZ Private Limited?

Accepted Answer

**Answer: (a)**

The place of supply of the gift items is Rajasthan, the location where the goods were received. According to Schedule II of the CGST Act, 2017, the place of supply of goods shall be the location where the goods are when put at the disposal of the recipient of the supply. In this case, the gift items purchased from the vendor in Ludhiana, Punjab were delivered to the hotel in Udaipur, Rajasthan, where the distributor conclave was held. The goods were put at the disposal of the recipient distributors at Udaipur, Rajasthan. Therefore, the place of supply is determined to be Rajasthan, regardless of where the goods were originally purchased (Punjab) or where the supplier is registered (Delhi). The location from which goods commence their journey is not the determining factor for place of supply under the general rule. Similarly, since individual distributors from different states received gifts at a single location (Udaipur), the place of supply is that location, not the permanent locations of individual participants.

CA Inter Taxation

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