Question 1

In respect of services imported by Mr. Mandeep, which of the following is a correct statement?

(i) Architect services for his business from his friend in London free of cost is considered as a supply
(ii) Designing services from his brother in London for ₹5 Lakh for his personal purposes is considered as a supply.
(iii) Architect services for his business from his friend in London free of cost is not considered as a supply
(iv) Designing services from his brother in London for ₹5 Lakh for his personal purposes is not considered as a supply.

Accepted Answer

**Answer: (C) ii & iii**

Under **Section 7 of the CGST Act 2017**, a supply is defined as a transaction of goods or services made for consideration. However, free supplies are also treated as supplies in specific circumstances.

**For the architect services from the friend in London (free of cost):**

Free services are treated as a supply only if: (a) provided by a **related person**, or (b) provided in the course of the supplier's ordinary business activity. The architect is described as a "friend" (not explicitly a related person as defined under GST), and there is no indication that providing free architect services is being done in the course of their ordinary business activity. Therefore, the free architect services **do not constitute a supply** under Section 7(1)(b)(iii). Statement (i) is **incorrect**, and statement (iii) is **correct**.

**For the designing services from the brother in London for ₹5 Lakh:**

The brother is a **related person** (family member). More critically, consideration of ₹5 Lakh is involved. Under **Section 7(1)(a) of CGST Act**, any supply made for consideration is a supply. The fact that the services are intended for the personal use of Mr. Mandeep (rather than business use) does not change the nature of the transaction—it remains a supply because consideration is involved. Services supplied for personal purposes are still supplies if made for consideration. Additionally, since the brother is a related person, even if the services were free,…

Question 2

The time of supply of services, received by him and taxable under reverse charge, is

Accepted Answer

**Answer: (A) 01.09.20XX**

For inward supplies of services subject to reverse charge, the time of supply is governed by **Section 12(2) of the CGST Act, 2017**, which provides that for services, the time of supply is the **earlier of**: (i) the date of issue of invoice, or (ii) the date of receipt of payment as recorded in the books of accounts of the recipient.

Applying this to the given facts:
- **Date of invoice**: 01.09.20XX (the document establishing the service transaction)
- **Date of payment as per books of account**: 15.11.20XX (the relevant date under GST rules)
- **Date of payment as per bank account**: 18.11.20XX (not the relevant criterion for GST time of supply)

The GST rules specifically reference payment "as recorded in the books of accounts" (not bank records), so the payment date to be considered is 15.11.20XX.

**Time of supply = Earlier of (01.09.20XX, 15.11.20XX) = 01.09.20XX**

Therefore, the time of supply is **01.09.20XX**, the date when the invoice was issued. The reverse charge mechanism does not alter the time of supply provisions; it only shifts the tax liability from the supplier to the recipient. The recipient must account for the tax liability on the time of supply as per standard rules.

Question 3

Aggregate turnover of Mr. Mandeep for the given financial year will be,

Accepted Answer

**Answer: (C) ₹71 Lakhs**

As per Section 2(1) of the CGST Act 2017, aggregate turnover means the aggregate value of all supplies of goods or services or both in the course of business. The computation should include:

**Components to be included:**
• Taxable supplies of goods: ₹55 Lakhs (Always included)
• Exempt supplies of goods: ₹16 Lakhs (Exempt supplies are INCLUDED in aggregate turnover calculation)

**Components to be EXCLUDED:**
• Inward supplies liable to RCM: ₹8 Lakhs (As per Rule 2(1) of CGST Rules 2017 and the definition of aggregate turnover, inward supplies on which RCM is applicable are EXCLUDED)
• Architect services from London (free of cost): No consideration, hence no supply value
• Designing services for personal purposes (₹5 Lakhs): Personal supplies are NOT part of business supplies and hence excluded

**Calculation:**
Aggregate Turnover = Taxable supplies + Exempt supplies − Inward RCM supplies
Aggregate Turnover = ₹55 Lakhs + ₹16 Lakhs = **₹71 Lakhs**

Note: The mention of inward supplies under RCM is crucial—these are deliberately excluded from aggregate turnover for determining various thresholds and eligibility criteria. The exemption status of supplies does NOT affect their inclusion in aggregate turnover; only RCM-liable inward supplies are excluded.

Question 4

Mr. Mandeep will be eligible for composition scheme in the next financial year, but he can supply services only upto:

Accepted Answer

**Answer: (D) ₹7.10 Lakhs**

Under GST, a person registered under the composition scheme who intends to supply services can do so **up to 10% of their turnover or ₹5 lakhs, whichever is higher**.

To determine Mr. Mandeep's eligibility and service supply limit, we must calculate his relevant turnover for the current FY:

**Relevant Turnover Calculation:**
For composition scheme purposes, turnover includes both taxable and exempt supplies of goods and services. The inward supplies under reverse charge mechanism are **not** considered part of turnover for this calculation.

Relevant turnover = Taxable supply of goods + Exempt supply of goods
Relevant turnover = ₹55 Lakhs + ₹16 Lakhs = **₹71 Lakhs**

Note: The free architect services and personal designing services do not form part of business turnover. The ₹8 Lakhs reverse charge items are inbound supplies, not turnover.

**Service Supply Limit Determination:**
10% of turnover = 10% of ₹71 Lakhs = ₹7.1 Lakhs

Since ₹7.1 Lakhs > ₹5 Lakhs, the higher limit applies.

Mr. Mandeep can supply services up to **₹7.10 Lakhs** in the next financial year while remaining eligible for the composition scheme. Supplies to the Government remain permissible under this scheme.

Question 5

In case he supplies services to State Government by way of any activity in relation to any function entrusted to a Municipality under Article 243W of the Constitution, in the next financial year, which of the following will be exempt?

(i) Pure Services
(ii) Composite supply of goods and services in which value of supply of goods constitutes not more than 25% of value of said composite supply
(iii) Composite supply of goods and services in which value of supply of service constitutes not more than 25% of value of said composite supply

Accepted Answer

**Answer: (D) i & ii**

Under the GST exemption regime, services supplied to any State Government or local authority in relation to any activity entrusted to a Municipality under Article 243W of the Constitution are exempt from tax.

**Analysis of each supply:**

(i) **Pure Services**: These are clearly eligible for exemption as the exemption notification specifically covers services supplied to Government for Article 243W municipal functions. A pure service supply directly qualifies for exemption. **EXEMPT**

(ii) **Composite supply (goods ≤ 25%)**: In a composite supply, the principal supply is determined by which element constitutes the highest value. When goods constitute not more than 25%, services constitute at least 75% and thus form the principal supply. As per Rule 5 of the CGST Rules, 2017, the entire composite supply is characterized based on the principal supply. Since services are principal, this composite supply is treated as supply of services and qualifies for the Article 243W exemption. **EXEMPT**

(iii) **Composite supply (services ≤ 25%)**: When services constitute not more than 25%, goods constitute at least 75% and thus form the principal supply. Under Rule 5 of CGST Rules, 2017, the entire composite supply is characterized as a supply of goods. Since the exemption under Article 243W applies only to services and not to goods, a composite supply characterized as goods does not qualify for exemption. **NOT EXEMPT**

**Conclusion**: Only (i) pure services an…

Question 6

The temple of ancestral deity of Mr. Aman Goel and his family is located at Beri, Haryana. The temple is run by a charitable organisation registered under section 12AA of the Income Tax Act, 1961. Upon the birth of their first child, he donated ₹10 lakh to the said temple for construction of a sitting hall in the temple. On the main door of the sitting hall, a name plate was placed stating 'Donated by Mr. Aman Goel upon birth of his first child'.

You are required to examine the leviability of GST on the donation received from Mr. Aman Goel.

Accepted Answer

**GST is NOT levied on the donation of ₹10 lakh.**

**Reason: Donation is Not a Supply**

Under Section 7 of the CGST Act, 2017, a 'supply' means any transfer of goods or services for consideration. GST applies only to supplies made for consideration. A donation, by its very nature, is a transfer of money without any reciprocal benefit or consideration. The essential element of 'consideration' is completely absent in a donation.

**Key Distinctions**

The critical distinction lies between donation and sponsorship. While a donation is given with purely altruistic or religious intent without expecting anything in return, sponsorship involves the donor receiving promotional benefits, branding rights, advertising value, or other counter-performances. In the present case, Mr. Aman Goel has made a pure donation to construct a sitting hall in the temple—a charitable/religious objective.

The placement of a nameplate bearing the donor's name and occasion of donation is merely an acknowledgment and expression of gratitude, not consideration. Consideration for GST purposes must be something of commercial value provided by the recipient in exchange for the donation.

**Charitable Institution Status**

The temple organization is registered under Section 12AA of the Income Tax Act, 1961, confirming its charitable status. Donations received by such registered charitable entities for their stated charitable or religious objectives are well-established as non-taxable transfers.

**Applicable…

Question 7

M/s Siya Ram is a trader of decorative items in Hauz Khas, Delhi. His aggregate turnover exceeded ₹20 lakh in the month of October, 20XX. He applied for registration on GST portal, but missed to submit the details of his bank account. His tax consultant advised him that prior submission of bank details is mandatory to obtain registration.

Examine whether the advice of Mr. Siya Ram's tax consultant is correct.

Accepted Answer

The advice of Mr. Siya Ram's tax consultant is **INCORRECT**. Prior submission of bank account details is NOT mandatory to obtain GST registration.

**Legal Position:**
Under Section 22 of the CGST Act, 2017, a person whose aggregate turnover exceeds the prescribed threshold is liable to be registered. Rule 8 of the CGST Rules, 2017, prescribes the form and particulars for registration application. While bank account details are part of the prescribed application form (Form GST REG-01), they are not a prerequisite for grant of registration.

**Analysis:**

**1. Bank Account Details Are Administrative, Not Mandatory:**
Bank account details are required for administrative purposes—primarily for crediting tax refunds, input tax credit adjustments, and other government benefits. However, these are not eligibility criteria for registration. Registration is granted based on satisfaction of statutory conditions: place of business, nature of business, and turnover threshold.

**2. Registration Cannot Be Refused for Missing Bank Details:**
As per the GST framework, the registration authority cannot withhold or reject registration solely because bank account details have not been submitted. The application must be processed on the basis of mandatory particulars relating to business eligibility and identity verification.

**3. Timing of Bank Account Submission:**
Bank account details can be submitted or updated:
- At the time of initial application (optional), OR
- After registration is…

Question 8

Mr. Gauri Shiva, a registered person in Punjab, supplies goods taxable @ 12% [CGST @ 6%, SGST @ 6% & IGST @ 12%] in the States of Punjab and Haryana. He has furnished the following details in relation to independent supplies made by him in the quarter ending June, 20XX:

1. Mr. A, registered person, Inter-State: ₹2,20,000
2. Mr. B, registered person, Inter-State: ₹2,55,000
3. Mr. C, unregistered person, Intra-State: ₹1,80,000
4. Mr. D, unregistered person, Intra-State: ₹2,60,000
5. Mr. M, unregistered person, Inter-State: ₹3,00,000
6. Mr. N, unregistered person, Inter-State: ₹50,000
7. Mr. O, unregistered person, Inter-State: ₹2,50,000
8. Mr. P, unregistered person, Inter-State: ₹2,80,000
9. Mr. Q, registered person, Intra-State: ₹1,50,000
10. Mr. R, registered person, Intra-State: ₹4,10,0…

Accepted Answer

Under **Rule 59 of the CGST Rules, 2017**, the manner of furnishing supply details in GSTR-1 depends on three factors: (1) whether supplies are B2B or B2C, (2) invoice value, and (3) annual turnover in the preceding financial year. Since Mr. Gauri Shiva's annual turnover (₹1.20 crore) exceeds ₹20 lakhs, he is eligible for consolidated reporting of B2C small supplies.

**B2B Supplies (Supplies to Registered Persons) – Invoice-wise Reporting (Mandatory):**

All B2B supplies must be reported on an **invoice-wise basis** in GSTR-1, segregated by nature:

**Intra-State B2B (Part B1):** Mr. Q (₹1,50,000) and Mr. R (₹4,10,000). Each invoice must contain invoice number, invoice date, recipient's GSTIN, HSN code, supply value, CGST @ 6%, and SGST @ 6%.

**Inter-State B2B (Part B2):** Mr. A (₹2,20,000) and Mr. B (₹2,55,000). Each invoice must contain invoice number, invoice date, recipient's GSTIN, HSN code, supply value, and IGST @ 12%.

**B2C Large Supplies – Invoice Value Exceeding ₹2,50,000 (B2CL) – Invoice-wise Reporting (Mandatory):**

Supplies to unregistered persons exceeding ₹2,50,000 must be reported **invoice-wise** in GSTR-1:

**Intra-State:** Mr. D (₹2,60,000) – invoice-wise with supply value and taxes (CGST 6% + SGST 6%).

**Inter-State:** Mr. M (₹3,00,000) and Mr. P (₹2,80,000) – invoice-wise with supply value and IGST @ 12%.

**B2C Small Supplies – Invoice Value Not Exceeding ₹2,50,000 (B2CS) – Consolidated Reporting (Permitted):**

Pursuant to Rule 59(4), since annual …

Question 9

Discuss the correctness of the following statements:

Accepted Answer

**Statement (i): INCORRECT.** An e-way bill can be cancelled under the provisions of Rule 138A of the CGST Rules 2017. Cancellation is permitted before the goods are dispatched from the supplier's place of business or during the validity period of the e-way bill. Cancellation may be initiated for legitimate reasons such as rejection of goods, return of goods, non-movement of goods, or other valid circumstances. The person who generated the e-way bill (or an authorized representative) can cancel it through the e-way bill portal by providing the e-way bill number and reason for cancellation. Once a valid cancellation is processed, the e-way bill becomes invalid and cannot be used for movement of goods. Therefore, the statement that an e-way bill "cannot be cancelled" is factually incorrect.

**Statement (ii): CORRECT.** An e-way bill generated in one State is valid throughout all States in India. The e-way bill system, administered by GSTN (GST Network), is a pan-India centralized system. There is no state-specific restriction on e-way bills. A single e-way bill issued for the movement of goods is accepted and recognized across all States and Union Territories of India. The transporter or supplier need not generate separate e-way bills for different states through which the goods pass. The validity, format, and acceptance of an e-way bill remain uniform across the entire country. Rule 137 and Rule 138 of the CGST Rules 2017 establish this pan-India applicability of e-way bills.

Question 10

Mr. Ram Narayan, a registered supplier under GST, wants to first discharge his self-assessed tax liability for the current period before settling the dues for the previous tax period. Examine briefly whether he can do so?

Accepted Answer

**No, Mr. Ram Narayan cannot arbitrarily choose the order of discharge of his tax liability.** The order of discharge of tax liability under GST is prescribed by law and cannot be altered by the taxpayer's preference.

**Legal Framework:** Rule 87 of the CGST Rules, 2017 prescribes a mandatory order for discharge of tax liabilities when a registered person makes any payment towards his tax liability.

**Prescribed Order of Discharge:** According to Rule 87, payment shall be credited towards satisfaction of outstanding tax liabilities in the following sequence: (1) SGST/UGST of current tax period; (2) CGST of current tax period; (3) IGST of current tax period; (4) Interest on SGST/UGST of current period; (5) Interest on CGST of current period; (6) Interest on IGST of current period; (7) Previous tax period liabilities (interest, then tax) in the same order; (8) Any other amount payable.

**Key Point:** The taxpayer has **no discretion** in determining the order. Once a payment is credited to the GST Taxpayer Account, the system (or tax officer) automatically applies the payment in the sequence prescribed by Rule 87, regardless of the taxpayer's wishes.

**Favorable Position:** Notably, Mr. Ram Narayan's requirement is **already satisfied** by the statutory order itself, as current period tax liability is discharged **before** previous period dues. This is a taxpayer-friendly provision designed to ensure timely settlement of current liabilities.

**Conclusion:** While Mr. Ram N…

Question 11

ABC Ltd. is a registered pharmaceutical company. The company invented one drug for instant cure of cancer. They supplied free samples of this medicine to various doctors. What will be the tax treatment of these free samples under GST?

Accepted Answer

**Answer: (D)**

ABC Ltd. is liable to pay tax on supply of free samples but not eligible to claim input tax credit.

Under GST law, **supply** is defined broadly under Section 7 of the CGST Act 2017 to include all forms of supply of goods in the course or furtherance of business, **whether for consideration or without consideration**. Free samples supplied to doctors by ABC Ltd. constitute a supply under GST, and the company is therefore liable to pay tax on these supplies.

The value for GST purposes would be determined using the valuation rules (typically open market value or cost plus reasonable margin, as free samples lack a transaction price).

However, **input tax credit (ITC) is not available** on inputs used for manufacturing goods supplied free of cost. Section 17(5) of the CGST Act 2017 explicitly restricts input tax credit in respect of goods supplied free of cost. This is a specific disallowance under GST law—when goods are supplied without consideration, the inbound taxes cannot be credited against the outbound GST liability.

Therefore, while ABC Ltd. must pay GST on the supply of free samples, it cannot claim ITC on the inputs (raw materials, components, utilities) used in manufacturing these free samples.

Question 12

Kala Niketan School is an educational institution providing pre-school education and education up to higher secondary school. Which of the following services are exempt if provided to Kala Niketan School?

(i) Transportation of students, faculty and staff
(ii) Catering services
(iii) Cleaning services performed in such educational institution

Accepted Answer

**Answer: (B)**

Under GST law, services provided to educational institutions offering pre-school or education up to higher secondary school have specific exemptions.

**Service (i) – Transportation of students, faculty and staff:** EXEMPT. Transportation of students and personnel to/from such educational institutions is specifically listed as an exempt service under Notification No. 12/2017 (CT) dated 28.06.2017.

**Service (ii) – Catering services:** NOT EXEMPT. Catering services are taxable services and do not enjoy exemption even when provided to educational institutions. These services are subject to GST at the applicable rate.

**Service (iii) – Cleaning services:** EXEMPT. Cleaning services performed in educational institutions offering pre-school or education up to higher secondary are specifically exempted under the GST exemption notification.

Therefore, services (i) and (iii) are exempt, making **(B)** the correct answer.

Question 13

Calculate the amount of eligible input tax credit:

1. A Mini bus having seating capacity of 15 persons (including driver) used for running on hire: GST paid ₹15,00,000
2. Car having seating capacity of 8 people used for business purposes: GST paid ₹1,00,00,000
3. Car having seating capacity of 4 persons used for imparting training on driving such car: GST paid ₹50,00,000
4. Special purpose vehicle having seating capacity of 2 persons used for transportation of goods: GST paid ₹60,00,000

Accepted Answer

**Answer: (C) ₹1,25,00,000/-**

Under **Section 17(5) of the CGST Act, 2017**, input tax credit (ITC) is NOT available on motor vehicles except where they are used for the business of supplying goods or passengers by road. Specific exceptions exist for vehicles used in hire, driving training, and goods transport.

**Analysis of each vehicle:**

**1. Mini bus (15-seating capacity) on hire:** The exception for "supplying passengers by road" explicitly covers commercial hire vehicles. This vehicle is used for commercial passenger transport. **ITC is eligible: ₹15,00,000**

**2. Car (8-seating capacity) for business purposes:** The phrase "business purposes" without specific mention of commercial hire, training, or goods transport indicates general business use (e.g., staff transport, owner travel). This does not qualify as "supplying passengers/goods by road" under Section 17(5). **ITC is NOT eligible: ₹0**

**3. Car (4-seating capacity) for driving training:** Vehicles used for imparting training on driving are explicitly covered under the exceptions to Section 17(5). **ITC is eligible: ₹50,00,000**

**4. Special purpose vehicle (2-seating capacity) for goods transport:** The exception for "supplying goods by road" applies to vehicles used for commercial transportation of goods. **ITC is eligible: ₹60,00,000**

**Total eligible ITC = ₹15,00,000 + ₹0 + ₹50,00,000 + ₹60,00,000 = ₹1,25,00,000/-**

Question 14

Mr. Avishkar is a painter registered under GST in Delhi. He sends his artwork for exhibition in Mumbai. At what point of time, supply is considered to have been made under GST?

Accepted Answer

**Answer: (D)**

Under Section 12(2) of the CGST Act 2017, for goods sent on approval or exhibition basis, the time of supply is the earliest of: (i) actual delivery to the recipient, (ii) removal from exhibition, (iii) deemed acceptance, or (iv) 90 days after placement. Since the painting is sent for exhibition and not approval/return with a specific buyer, no supply occurs merely by sending (B) or displaying (C) the artwork. The painting is completed (A) before any supply transaction. Supply is made only when the painting is **actually purchased** by a visitor—because that is when ownership transfers and consideration is received, thereby completing the supply transaction. Until this point, the artwork remains unsold inventory. Option (D) is correct.

Question 15

Which of the following is not covered under Schedule III of CGST Act, 2017?

Accepted Answer

**Answer: (D)**

Schedule III of the CGST Act, 2017 provides exemptions for **services provided by an employee to the employer during the course of employment** under an employment contract.

**Analysis of each option:**

**(A) Director's monthly salary under employment agreement** – This IS covered. When a director receives salary under a formal employment agreement, the director is treated as an employee providing services during the course of employment. Such salary payments are exempt under Schedule III.

**(B) Sitting fees to independent directors for attending AGMs** – This is NOT covered. Independent directors typically do not have an employment relationship with the company. Sitting fees are paid for directorial/governance duties, not for services rendered as an employee during employment. The relationship is one of directorship, not employment, and therefore falls outside Schedule III's scope.

**(C) Payment for broking services outside employment contract** – This is explicitly NOT covered. The question itself clarifies that these broking services "do not form part of the employment contract." Schedule III only exempts services provided **as per the conditions of the employment contract**. Services rendered outside this scope are taxable and not eligible for exemption.

**Conclusion:** Both options (B) and (C) are not covered under Schedule III. Option (B) lacks the employment relationship entirely, while option (C) explicitly falls outside the employment contract. …

Question 16

Which of the following service is not exempt under GST?

Accepted Answer

**Answer: (C)**

Loading and unloading services for **raw agricultural produce** are exempted under GST. Paddy, sugarcane, and potato are classified as primary agricultural produce and therefore qualify for the exemption on services of loading and unloading. However, **tea bags are manufactured/processed products**, not raw agricultural produce. Tea bags undergo processing (fermentation, drying, packaging into bags) and are therefore not eligible for the agricultural produce exemption. Consequently, the service of loading and unloading tea bags attracts GST and is not exempt.

Question 17

Mr. Vicky Frankyn, an unregistered famous author, received ₹3 crore of consideration from Shiv Bhawan Publications (SBP) located in Indore for supply of services by way of temporary transfer of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary works of his new book. He finished his work & made available the book to the publisher, but has yet not raised the invoice.

Mr. Vicky Frankyn is of the view that SBP is liable to pay tax under reverse charge on services provided by him. SBP does not concur with his view and is not ready to deposit the tax under any circumstances.

Examine whether the view of Mr. Vicky Frankyn is correct. Further, if the view of Mr. Vicky Frankyn is correct, what is the recourse available with Mr. Vicky Frankyn to com…

Accepted Answer

**Examination of Mr. Vicky Frankyn's View:**

Mr. Vicky Frankyn's view is **CORRECT**. SBP is liable to pay GST under the reverse charge mechanism.

**Basis of Reverse Charge:**

Under Section 9(3) read with Section 9(4) of the CGST Act, 2017, the liability to pay tax is on the **recipient of supply** (in certain specified cases) instead of the supplier. Reverse charge is triggered when: (1) the supplier is an unregistered person, (2) the recipient is a registered person, and (3) the supply is a service covered under reverse charge mechanism.

All three conditions are satisfied here:
- **Mr. Vicky Frankyn is unregistered**: As an individual author, unless voluntarily registered, he is unregistered for GST purposes.
- **SBP is a registered person**: Publishers typically qualify as registered persons having turnover beyond threshold limits.
- **Service covered under reverse charge**: Services by way of supply of copyright (temporary transfer under Section 13(1)(a) of the Copyright Act, 1957) fall within services covered under reverse charge. The supply of rights under copyright is a supply of service attracting GST, and such services from unregistered creators are specifically covered under reverse charge notification to prevent tax evasion and ensure proper tax collection.

Therefore, **SBP becomes the liable person** to pay GST (at applicable rate on ₹3 crore consideration) instead of Vicky Frankyn. SBP cannot evade this statutory obligation merely by refusing to deposit tax.…

Question 18

Answer the following questions relating to Care & Care Beauty Centre:

Accepted Answer

**Sub-part (a): Total Tax Liability under Notification No. 2/2019 CT(R) by 31st October, 20XX**

Notification No. 2/2019 – Continuous Returns (CT(R)) scheme permits service providers with aggregate annual turnover not exceeding **₹20 lakhs** to pay tax at a reduced rate of **6%** (half of the standard 18%). Once the aggregate turnover exceeds ₹20 lakhs during the financial year, the concessional rate is withdrawn and the normal rate of 18% applies from that point onwards.

**Tax Calculation:**

**Quarter I (1st April to 30th June, 20XX):**
Cumulative turnover = ₹20 lakh (at the threshold)
Eligible for reduced rate under Notification No. 2/2019 CT(R)
Tax = ₹20 lakh × 6% = **₹1.20 lakh**

**Quarter II (1st July to 30th September, 20XX):**
Cumulative turnover = ₹50 lakh (exceeds ₹20 lakh limit)
Incrmental turnover in Q2 = ₹50 lakh – ₹20 lakh = ₹30 lakh
Since threshold exceeded, normal rate of 18% applies
Tax = ₹30 lakh × 18% = **₹5.40 lakh**

**Quarter III (1st October to 31st October, 20XX):**
Cumulative turnover = ₹70 lakh
Incrmental turnover in Q3 = ₹70 lakh – ₹50 lakh = ₹20 lakh
Normal rate of 18% continues to apply
Tax = ₹20 lakh × 18% = **₹3.60 lakh**

**Total Tax Liability by 31st October, 20XX = ₹1.20 lakh + ₹5.40 lakh + ₹3.60 lakh = ₹10.20 lakh**

---

**Sub-part (b): Eligibility for Composition Scheme from Next Financial Year**

**Advice: No, Care & Care Beauty Centre CANNOT opt for the composition scheme from the next financial year.**

**Reasons:**

The composition s…

CA Inter Cost & Mgmt

Drill 5 questions from this paper — instant grading

Worked Solution

Write it like this

1The skeleton

2Examiner-rewarded phrases

3Common trap