SUGGESTED SOLUTION

CA INTERMEDIATE
SUBJECT- TAXATION

Test Code – IJP 2516

BRANCH - () (Date :)

Head Office : Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666

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MULTIPLE CHOICE QUESTIONS :

MCQ No. Most Appropriate MCQ No. Most Appropriate

Answer Answer

1. (a) 5. (a)

2. (c) 6. (c)

3. (c) 7. (b)

4. (b) 8. (b)

(15 MARKS)

DESCRIPTIVE - ANSWERS

ANSWER : 1(A)

Computation of total income and tax liability of Mr. Sahil for A.Y. 2024 -25

Particulars Rs. Rs.

I Income from house property
Annual value of self-occupied property Nil
Less: Deduction under section 24(b) Interest on 2,00,000
housing loan of Rs. 2,60,000 restricted to Rs.
2,00,000
(2,00,000)
II Profits and gains of business or profession
Net Profit 13,56,000
Add: Expenses debited to Profit and loss
A/c but not allowable as deduction or to be
considered under other head
- Commission paid to brother [Commission paid 10,000
to a related person/relative to the extent it is
excessive to market rate is disallowed under
section 40A(2)]
- Cash payment to a Transport Carrier [Not Nil
disallowed under section 40A(3) since the
limit for one time cash payment is Rs.
35,000 in respect of payment to transport
operators]
- Interest to bank on term loan [Interest paid 40,000
to bank after the due date of filing of return
under section 139(1) is disallowed as per
section 43B]
- Contribution to Prime Minister’s Relief Fund 10,000

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 [Not allowable since the same is not incurred
wholly and exclusively for business purpose]
- SGST Penalty paid [SGST penalty paid is not 7,000
compensatory in nature and therefore, not
allowable]
- Loss on sale of shares 20,000
- Depreciation as per books of account 2,00,000
16,43,000
Less: Incomes credited to profit and loss
account but not taxable as business income
- Dividend from Domestic Companies 15,000
- Winnings from lotteries 10,500
- Profit on sale of shares 45,000
15,72,500
Less: Depreciation allowable as per Income - tax
Rules, 1962
- On Plant & Machinery [@15% on Rs.
14,00,000, being opening WDV of Rs. 12 lakhs
and additions put to use for more than 180
days of Rs. 2 lakhs + @7.5% on Rs. 2,25,000
2,00,000, being additions put to use for less
than 180 days]
13,47,500
1
[8% of sales i.e. Rs. 43,50,000 x 8% assuming 3,48,000
entire amount of sales are not received by A/c
payee cheque or A/c payee draft or ECS or other
electronic prescribed modes]
Business Income 13,47,500
[As per section 44AD, in case of Mr. Sahil, being an
eligible assessee, a sum equal to Rs. 3,48,000 (8%1
of total turnover i.e., Rs. 43,50,000) or as the
case may be, a sum higher than the aforesaid sum
claimed to have been earned by him would be
deemed to be the business income. In this case,
since Mr. Sahil has maintained books of account,
he can claim the higher sum actually earned Rs.
13,47,500 as his income from business.] (See Note
below the solution for alternate answer)
Less: Set off of loss from house property as per 2,00,000
section 71(3A)
11,47,500
Add: Salary paid to staff not recorded in the books 48,000
[Assuming the expenditure is in the nature of

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 unexplained expenditure, the same is deemed to
be income as per section 69C of Mr. Sahil. No
deduction would be allowed in respect of such
expenditure.]
Alternatively, it is possible to assume that the
salary not recorded in the books of account was
an erroneous omission and the assessee has
offered satisfactory explanation about the source
of such expenditure. In such a case, it would not
be considered as deemed income and the same
would be allowed as deduction while computing
business income on the basis of books of
accounts. In such a case, business income, total
income and tax liability (rounded off) would be
Rs. 10,99,500, Rs. 10,44,500 and Rs. 1,23,080.
III Capital Gains
Long term capital gains taxable u/s 112A [Since 45,000
shares are held for 2 years and STT has been paid]
Less: Set off of short term capital loss as per 20,000 25,000
section 70(2)
IV Income from Other Sources
Dividend from Domestic Companies 15,000
Winning from lotteries (Rs. 10,500 + Rs. 4,500) 15,000
30,000
Gross Total Income 12,50,500
Less: Deduction under Chapter VI – A
Deduction under section 80C
Principal repayment of housing loan 50,000
Deduction under section 80EE
Interest on housing loan of Rs. 60,000 50,000
[Rs. 2,60,000 – Rs. 2,00,000, allowed u/s 24(b)]
allowable under section 80EE upto Rs. 50,000
Deduction under section 80G
Contribution to Prime Minister’s Relief Fund 10,000 1,10,000
Total Income 11,40,500
Tax Liability
Tax on LTCG of Rs. 25,000 u/s 112A [Exempt Nil
upto Rs. 1 lakh]
Tax on winning from lotteries of Rs. 15,000 4,500
@30%
Tax on unexplained expenditure of Rs. 48,000 28,800
@ 60%
Tax on balance income of Rs. 10,52,500 at slab rate
Upto Rs. 2,50,000 Nil
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 From Rs. 2,50,001 to Rs. 5,00,000 @5% 12,500
From Rs. 5,00,001 to Rs. 10,00,000 @20% 1,00,000
From Rs. 10,00,001 to Rs. 10,52,500 @30% 15,750 1,28,250
1,61,550
Add: Surcharge @25% on tax on unexplained
7,200
expenditure of Rs. 28,800
1,68,750
Add: Health and education cess @4% 6,750
Tax Liability 1,75,500
Note – Alternatively, if Mr. Sahil claims his business income as Rs. 3,48,000 i.e., 8% of total
turnover under section 44AD, his total income and tax liability would undergo a change.

(15 MARKS)

ANSWER : 2

Mrs. Sarika is an Indian citizen and in employment in UAE. She comes on a visit to India during the
P.Y.2023-24 for 121 days. Her stay in India in the four immediately preceding previous years
i.e., in P.Y. 2019-20 to P.Y. 2022-23 is 371 days (50 + 100 +76 + 145 days).

Her total income, other than the income from foreign sources, during the P.Y. 2023-24 would be -

Particulars Amount (Rs.)

Salary accrued or arisen in UAE (income from aforeign -
source, hence, to be excluded)
Income accrued and arisen in India 2,00,000
Income deemed to be accrued and arisen in India 7,00,000
Income arising in UAE, from a business set up in India (to be
included since the business is controlled from India, even 5,00,000
though such income accrues and is received outside India)
14,00,000
Less: Deduction u/s 80C (LIC premium paid bycheque in India) 1,00,000
Total income (excluding income from foreignsources) 13,00,000

Mrs. Sarika, an Indian citizen, having total income other than income from foreign sources not
exceeding Rs. 15 lakhs and visiting India during the P.Y 2023-24, would be a resident in India for the
A.Y.2024-25, if she has stayed in India for 182 days or more during the P.Y. 2023-24.

Since she has stayed only for 121 days in India during the P.Y. 2023-24, she is a non-resident for the
A.Y. 2024-25. Her total income during the P.Y. 2023-24 would be –

Particulars Amount (Rs.)

Salary accrued or arisen in UAE (income from a foreign -
source, hence, to be excluded)
Income accrued and arisen in India 2,00,000
Income deemed to be accrued and arisen in India 7,00,000

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 Income arising in UAE, from a business set up in India (not
taxable) -
Gross Total Income 9,00,000
Less: Deduction u/s 80C (LIC premium paid bycheque in India) 1,00,000
Total income 8,00,000
(i) If Income arising and received in UAE, from a business set up in India is Rs. 10,00,000
instead of Rs. 5,00,000, her total income, other than the income from foreign sources, during
the P.Y. 2023-24 would have been Rs. 18 lakhs.
In such a case, Mrs. Sarika, an Indian citizen, having total income other than income from
foreign sources exceeding Rs. 15 lakhs and visiting India during the P.Y 2023-24, can be a
resident in India for A.Y.2024-25, if she has been in India for 120 days or more but less than
182 days in the P.Y. 2023-24 and during the 4 years immediately preceding the P.Y. 2023-
24 for a total period of 365days or more.

Since she has stayed in India for 121 days during the P.Y. 2023-24 and her stay in India
in the four immediately preceding previous years is 371 days, she would a resident in India
for A.Y. 2024-25 and by default, she would be treated as resident but not ordinarily resident.

In such case, income arising and received in UAE, from a business set up in India would also
form part of total income of Mrs. Sarika and her total income during the P.Y. 2023-24
would be Rs. 18 lakhs[Rs.8,00,000 (computed in (i) above) plus Rs.10,00,000].

(ii) If Mrs. Sarika comes to India in P.Y. 2022-23 for 45 days instead of 145 days, she would
not be a resident in India for the P.Y. 2023-24 as per section 6(1) since her stay in India in
the four immediately preceding previous years would be less than 365 days.
However, since she is an Indian citizen having total income (excluding income from foreign
sources) of Rs. 18 lakhs, which exceeds the threshold of Rs. 15 lakhs during the previous
year; and not liable to tax in UAE, she would be a deemed resident in India for the P.Y.
2023-24 by virtue of section 6(1A).

A deemed resident is always a resident but not ordinarily resident. In such case, her total
income during the P.Y. 2023-24 would be same i.e., Rs. 18 lakhs as computed in point (ii)
above.

(10 MARKS)

ANSWER : 3(A)
Computation of gross total income of Ms. Priyanka for the A.Y.2024-25 under normal
provisions of the Act

Particulars Rs. Rs.

(a) Income from salaries (See WorkingNote below) 5,81,000
(b) Income from Other Sources
(i) Interest on fixed deposit with acompany 7,000
(ii) Income from specified mutual fund 3,000
(iii) Interest on Fixed Deposit received by minor
daughter (Rs. 4,000 - Rs. 1500) 2,500 12,500
Gross total income 5,93,500

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Working Note:
Computation of salary income of Ms. Priyanka for theA.Y. 2024-25

Particulars Rs.
Salary [Rs. 40,000 x 12] 4,80,000
Medical facility [in the hospital maintained by thecompany is exempt] _
Rent free accommodation
15% of salary from 1.4.2023 to 31.8.2023 and 10% of salary from 58,000
1.9.2023 to 31.3.2024 (Rs. 4,80,000 × 15% x 5/12) + (Rs. 4,80,000 ×
10% x 7/12)
Valuation of perquisite of interest on loan
[Rule 3(7)(i)] – 9.5% is taxable which is to be reducedby actual rate 24,500
of interest charged i.e. [9.5% - 6% = 3.5%]
Use of dining table for 1 month
[Rs. 60,000 x 10/100 x 1/12] 500
Perquisite on sale of dining table
Cost 60,000
Less: Depreciation on straight line method@ 10% for 2 12,000
years
Written Down Value 48,000
Less: Amount paid by the assessee 30,000 18,000
Purchase through credit card 10,000
Perquisite on sale of car
Original cost of car 2,50,000
Less: Depreciation from 16.7.2021 to15.7.2022 @ 20% 50,000
Value as on 14.07.2023 - being the date of sale to 2,00,000
employee
Less: Amount received from the assessee on 14.07.2023 1,60,000 40,000

Gross salary 6,31,000

Less: Standard deduction upto Rs. 50,000 50,000
Income from Salaries 5,81,000

(6 MARKS)
ANSWER : 3(B)
(i) Computation of book profit of the firm under section 40(b)

Particulars Amount Amount

(Rs.) (Rs.)
Net Profit (before deduction of depreciation,salary 7,50,000
and interest)
Less: Depreciation under section 32 2,50,000
Interest @ 12% p.a. [being the maximum allowable as 72,000 3,22,000
per section 40(b)] (Rs. 6,00,000 × 12%)
Book profit 4,28,000

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 “Book profit” means the net profit as per the profit and loss account for the relevant
previous year computed in the manner laid down in Chapter IV-D as increased by the
aggregate amount of the remuneration paid or payable to the partners of the firm if the
same has been already deducted while computing the net profit. Hence, brought forward
loss of Rs. 50,000 of P.Y.2022-23 is not allowed to be set off for computation of “book
profit”.
(ii) Salary actually paid to working partners = Rs.25,000 × 2 × 12 = Rs.6,00,000
As per the provisions of section 40(b)(v), the maximum allowable working partners’ salary for
the A.Y. 2024-25 in this case would be:

Particulars Rs.
On the first Rs. 3,00,000 of book profit [(Rs. 1,50,000 or 90% of 2,70,000
Rs.3,00,000) whichever is more]
On the balance of book profit [60% of (Rs. 4,28,000 – 76,800
Rs.3,00,000)]
Maximum allowable working partners’ salary 3,46,800

(10 MARKS)
ANSWER : 4(A)
Gross Total Income of Mr. Mohit for A.Y. 2024-25

Particulars Rs. Rs.

Salaries
Income from salary 6,50,000
Less: Loss from house property of Rs. 2,60,000, restricted to 2,00,000 4,50,000

Income from house property

Income from House I 55,000
Less: Loss from House II (self -occupied) 1,25,000
Loss from House III 1,90,000 3,15,000
(2,60,000)
Set-off of loss from house property against salary income, 2,00,000
restricted to
Loss to be carried forward to A.Y. 2025 – 26 (60,000)
Profits and gains of business or profession
Profit from cloth business 1,70,000
Less: Loss from leather business 68,000
Capital Gains 1,02,000
Short term capital loss in equity-oriented funds on which STT -
is paid Rs. 35,000 to be carried forward to A.Y. 2025-26 since
such loss can be set-off only against capital gains and not
against income under any other head
Income from other sources

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 Income from owning and maintenance of race bulls 9,000
Loss of Rs. 7,500 from the activity of owning and
maintenance of race horses cannot be set-off against any
source other than income from the activity of owning and Nil
maintaining race horses. Hence, such loss has to be carried
forward to A.Y. 2025-26.
Income from crossword puzzles 12,000
Dividend from foreign company 8,500 29,500
Gross Total Income 5,81,500

Losses to be carried forward to A.Y.2025-26:

Particulars Rs.
Loss from house property 60,000
[to be carried forward for set-off against income from house property]
Short-term capital loss in equity oriented funds on which STT was paid 35,000
[to be carried forward for set-off against capital gains, long- term or short-
term]
Loss from owning and maintaining race horses 7,500
[to be carried forward for set-off against income from the activity of
owning and maintaining race horses]

Note: Loss from house property can also be set-off to the extent of Rs. 1,02,000 from
profits and gains from business or profession and balance i.e., Rs. 98,000 against Income
under the head “Salaries”.
(6 MARKS)

ANSWER : 4(B)
If a person, who has been allotted PAN as on 1st July, 2017 and is required to intimate his Aadhaar
number, has failed to intimate the same on or before 31st March, 2022, the PAN of such person
would become inoperative.
A person, whose PAN has become inoperative, would be liable for following further consequences
for the period commencing from the date notified by the CBDT till the date it becomes operative
–
(i) no refund of any amount of tax or part thereof, due under the provisions of the Act;
(ii) interest would not be payable on such refund for the period, beginning with the date
notified by the CBDT and ending with the date on which it becomes operative;
(iii) where tax is deductible at source in case of such person, such tax shall be deducted at
higher rate, in accordance with provisions of section 206AA;
(iv) where tax is collectible at source in case of such person, such tax shall be collected at higher
rate, in accordance with provisions of section 206CC:
Where a person, who is required to intimate his Aadhar Number under section 139AA(2), fails to do
so on or before the notified date i.e., 31.3.2022, he shall be liable to pay such fee, as may be

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prescribed, at the time of making intimation under section 139AA(2) after 31.3.2022.
However, such fee shall not exceed Rs. 1,000.
(6 MARKS)
OR

ANSWER : 4(B)
(i) Fee for default in furnishing return of income u/s 234F
Where a person who is required to furnish a return of income under section 139, fails to do so
within the prescribed time limit under section 139(1), he shall pay, by way of fee, a sum of
Rs. 5,000.
However, if the total income of the person does not exceed Rs. 5 lakhs, the fees payable shall
not exceed Rs. 1,000

(ii) Persons to whom provisions of section 139AA relating to quoting of Aadhar Number
does not apply
The provisions of section 139AA relating to quoting of Aadhar Number would not
apply to an individual who does not possess the

Aadhar number or Enrolment ID and is:

(i) residing in the States of Assam, Jammu & Kashmir and Meghalaya;
(ii) a non-resident as per Income-tax Act, 1961;
(iii) of the age of 80 years or more at any time during the previous year;
(iv) not a citizen of India.
(4 MARKS)
SECTION B: GST

MULTIPLE CHOICE QUESTIONS

MCQ No. Most Appropriate Answer

1. (a)
2. (b)
3. (a)
4. (b)
5. (a)
(15 MARKS)

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 DESCRIPTIVE -ANSWERS

ANSWER : 1(A)
Computation of net GST payable in cash by Craftmodel Ltd. for themonth of January, 2024

Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)

Outward intra-State supply of goods made in the 36,000 36,000
State of Bihar. [4,00,000 [4,00,000
[Value of supply is the transaction value of the × 9%] × 9%]
goods.]
Outward supply of goods madeto other States. 1,08,000
[Value of supply is the transaction value of the [6,00,000
goods.] × 18%]
Pledging of 5% equity shares to the merchant Nil
banker [Supply includes supply of goods and
services. Shares being securities are neither goods
nor services. Thus, transfer of shares which is
neither goods nor services is nota supply.]
Intra-State stock transfer to Gaya Branch with no - -
separate registration.
[Stock transfer between 2 units of a legal entity
under single registration is not a deemed supply
under GST and hence, the same is not liable to tax
under GST since branch with same GSTIN is not a
distinct person.]
Services of milling of paddyinto rice. 18,000 18,000
[Milling of paddy into ricecannot be (2,00,000 (2,00,000
considered as an x 9%) x 9%)
Intermediate production process in relation to
cultivation of plants for food, fibre or other similar
products or agricultural produce. Thus, it is not
eligible for exemption.]
Services of giving trucks on hire to a 13,500 13,500
Governmental authority [Services by way of giving (1,50,000 (1,50,000
motor vehicles on hire to a Governmental x 9%) x 9%)
authority are taxable.]

Total output tax 67,500 67,500 1,08,000

Less: Input Tax Credit [Refer Working Note below] (90,000)

IGST credit should first be utilized towards
payment of IGST.

ITC of CGST should be utilized for payment of (67,500) (18,000)

CGST and IGST in that order. ITC of CGST cannot be (CGST) (CGST)
utilized for payment of SGST

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 ITC of SGST should be utilized for payment of SGST (67,500) -
and IGST in that order. However, ITC of SGST (SGST)
should be utilized for payment of IGST, only after
ITC of CGST has been utilized fully. ITC of SGST
cannot be utilizedfor payment of CGST.

Minimum Net GST payable incash Nil Nil Nil

ITC balance to be carriedforward next month - 18,000 -
Working Note:

Computation of ITC available

Particulars CGST (Rs.) SGST (Rs.) IGST (Rs.)

Intra-State inward supply of services used in the 85,500 85,500 -

course of business. (9,50,000 (9,50,000
[ITC cannot be availed by a registered person in x 9%) x 9%)
respect of invoices, the details of which have not
been furnished by thesupplier in GSTR-1.]
Training course organized by IIM, Gujarat. - - 90,000
[Not exempt. Short duration programmes offered by (5,00,000
IIMs for which participation certificate is awarded are x 18%)
not ‘qualification recognized by law’. ITC is available
in respect of supply of services which are used in the
course or furtherance of his business. Further, the
place of supply of services in relation to training and
performance appraisal to a registered person, shall be
the location of such person. Thus, place of supply is
Patna (Bihar). Further, where the location of the
supplier and the place of supply are in two different
States, it shall be treated as inter-State supply of
services.
Air tickets from Patna to Guwahati.
[Transport of passengers by air terminating in an
airport located in Assam is exempt from GST as said
transportation is in economy class.]
Cars taken on rental basis from Mr. Rahuketu. -- -- --
[Tax on renting of motor car services wherein cost of
fuel is included in consideration provided by a non-
body corporate to a body corporate and CGST/SGST is
charged @ 2.5% each, is payable under reverse
charge.
Time of supply of such services is 1st February being
earlier of date of payment, or date immediately
following 60 days since issue of invoice by the
supplier. Since the time of supply of renting of motor

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 car services in the given case does not fall in January,
2024, tax liability on the same does not arise in said
month.
Further, ITC on renting of motor car services received
is blocked since the recipient - Craftmodel Ltd. is not
in the same line of business]
Total ITC available 85,500 85,500 90,000
(15 MARKS)

QUESTION : 2 (A)
As per section 12(4) of the CGST Act, 2017, the time of supply of vouchers exchangeable for goods
is-
 Date of issue of the voucher, if the supply that it covers is identifiable at that point, or
 Date of redemption of the voucher in other cases.
(i) In the given case, supply can be identified at the time of purchase of the coupons.
Therefore, the time of supply of the coupons is the date of their issue i.e. 20.06.2023.
(ii) In the given case, supply cannot be identified at the time of purchase of the coupons.
Therefore, the time of supply of the coupons is the date of their redemption i.e.
18.08.2023.
(iii) Section 12(6) of the CGST Act, 2017 prescribes that time of supply in case of addition in
value on account of interest/ late fee/penalty for delayed payment of consideration for
goods is the date on which the supplier receives such addition in value. Therefore, time
of supply in the given case is 11.11.2023.
(5 MARKS)
ANSWER : 2(B)

(B) (i) Section 12(12) of the IGST Act, 2017 provides that the place of supply of banking and
other financial services, including stock broking services to any person is the location of the
recipient of services in the records of the supplier of services. However, if the location of
recipient of services is not available in the records of the supplier, the place of supply is the
location of the supplier of services.
Therefore, since the location of recipient is not available in the records of the supplier, the
place of supply is the location of the supplier of services, i.e. Rajasthan (or Jodhpur).

(ii) Section 10(1)(d) of the IGST Act, 2017 provides that if the supply involves goods
which are to be installed or assembled at site, the place of supply is the place of
such installation or assembly. Thus, the place of supply is the site of assembly of
machine, i.e. Tamilnadu.
(5 MARKS)
ANSWER : 3(A)
The validity period of e-way bill under rule 138(10) of the CGST Rules, 2017 for transport of cargo
by road between two cities situated at a distance of 372 km is as under:
(i) If it is over dimensional cargo: the validity period of the e-way bill is one day from relevant
date upto 20 km and one additional day for every 20 km or part thereof thereafter.

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 Thus, validity period in given case:
= 1 day + 18 days
= 19 days
(ii) If it is a cargo other than over dimensional cargo: the validity period of the e-way bill is one
day from relevant date upto 200 km and one additional day for every 200 km or part
thereof thereafter.
Thus, validity period in given case:
= 1 day + 1 day
= 2 days

(5 MARKS)
ANSWER : 3(B)
The procedure to be followed by Apex Cinemas, a registered person engaged in making supply of
services by way of admission to exhibition of cinematograph films in multiplex screens, is as
under:-
The option to issue consolidated tax invoice is not available to a supplier engaged in making supply
of services by way of admission to exhibition of cinematograph films in multiplex screens. Thus,
Apex Cinemas cannot issue consolidated tax invoice for supplies made by it at the close of each
day.
Apex Cinemas is required to issue an electronic ticket.
The said electronic ticket shall be deemed to be a tax invoice, even if such ticket does not contain
the details of the recipient of service but contains the other information as prescribed to be
mentioned.
(5 MARKS)
ANSWER : 4(A)
There are cases where an unregistered person purchases goods over the counter (OTC) in one
State and thereafter, transports the goods to another State (generally, the State where he resides).
For instance, migrant workers, tourists, etc. who come to a State for work, tourism, etc. and
purchase goods in that State to take it to their respective State. Similarly, in automobile sector, the
residents of a State may travel to another State to purchase vehicle from that State to take
advantage of lower registration charges and road tax, which vary from State to State and
thereafter, take the vehicle to their State.
Where the supply of goods is made to a person other than a registered person, the place of supply
shall be the location as per the address of the said person recorded in the invoice issued in
respect of the said supply and the location of the supplier where the address of the said person is
not recorded in the invoice.

For this purpose, recording of the name of the State of the said person in the invoice shall be
deemed to be the recording of the address of the said person.
(5 MARKS)
OR
ANSWER : 4(A)
In case of an event, if the recipient of service is registered, the place of supply of services for
organizing the event is the location of such person. However, if the recipient is not registered, the

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place of supply is the place where event is held.
Since the event is being held in multiple states and a consolidated amount is charged for such
services, the place of supply will be deemed to be in each State in proportion to the value for
services determined in terms of the contract or agreement entered into in this regard.
In the absence of a contract or agreement between the supplier and recipient of services, the
proportionate value of services made in each State (where the event is held) will be computed by
the application of generally accepted accounting principles.
(5 MARKS)
ANSWER : 4(B)
The amount available in the electronic credit ledger may be used for making any payment towards
output tax under the CGST Act or the IGST Act, subject to the provisions relating to the order of
utilisation of ITC.
Further, output tax in relation to a taxable person is defined as the tax chargeable on taxable supply
of goods or services or both but excludes tax payable on reverse charge mechanism.
Accordingly, it is clarified that any payment towards output tax, whether self-assessed in the return
or payable as a consequence of any proceeding instituted under the provisions of GST laws, can be
made by utilization of the amount available in the electronic credit ledger of a registered person.
It is further reiterated that as output tax does not include tax payable under reverse charge
mechanism, implying thereby that the electronic credit ledger cannot be used for making payment
of any tax which is payable under reverse charge mechanism.
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