Description
Taxation- Direct and Indirect
Sep 2025 Examination
Q1. A manufacturing company located in Maharashtra has the following financial data for the financial year 2022-23:
| Particulars | Amount (Rs.) |
| Gross Sales (excluding GST) | 2,50,00,000 |
| Raw Material Purchases (intra-state, GST @18%) | 80,00,000 |
| Other Input Services (inter-state, IGST @18%) | 20,00,000 |
| Capital Goods Purchased (intra-state, GST @18%) | 10,00,000 |
| Exempted Sales (included in Gross Sales) | 30,00,000 |
| Salary Paid to Employees | 40,00,000 |
| Depreciation on Capital Goods (as per Income Tax Act) | 1,50,000 |
The company charges GST @18% on taxable sales. During the year, it failed to pay GST on Rs.10,00,000 of taxable sales, which was detected and paid with interest @18% p.a. after 6 months. Calculate: (a) The net GST payable after adjusting eligible input tax credit (ITC), considering proportionate reversal for exempted sales as per GST law; (b) The total interest liability for delayed payment; (c) The allowable depreciation on capital goods for income tax purposes, considering the ITC availed. Show all steps, assumptions, and justifications. (10 Marks)
Ans 1.
Introduction
Goods and Services Tax (GST) in India is a comprehensive, destination-based indirect tax levied on the manufacture, sale, and consumption of goods and services. GST aims to eliminate cascading effects and ensures seamless credit throughout the value chain. Input Tax Credit (ITC) plays a critical role in reducing the tax burden by allowing businesses to claim credit for taxes paid on inputs, input services, and capital goods. However, when a taxpayer deals with both exempt and taxable supplies, proportionate reversal of ITC is required under Rule 42 and 43 of CGST Rules. Furthermore, delayed tax payments attract interest under Section 50 of the CGST Act. In this case, we analyze the net GST liability, interest on
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Q2. GlobalTech India Pvt. Ltd. makes regular royalty and technical service payments to its parent company in a country with which India does not have a DTAA. The finance team is unsure about the applicable TDS rates, the process for claiming unilateral relief under section 91, and the risk of double taxation. The CFO seeks a comprehensive evaluation of the company’s exposure and compliance strategy. Assess the strategic considerations a multinational company must address when dealing with TDS obligations on cross-border payments, especially in the absence of a Double Taxation Avoidance Agreement (DTAA). Critique the available relief mechanisms and recommend best practices for compliance.
Ans 2.
Introduction
In an increasingly globalized business environment, cross-border payments such as royalties and fees for technical services (FTS) are common transactions, particularly among multinational corporations and their parent or group entities. These payments are subject to withholding tax (TDS) under Indian tax laws. The complexity intensifies when such payments are made to countries with which India does not have a Double Taxation Avoidance Agreement (DTAA), as this increases the risk of double taxation—once in India as source income and again in the recipient’s country of residence. Section 91 of the Income Tax Act provides for unilateral relief, but its application is limited and complex. GlobalTech India Pvt. Ltd. must therefore understand the regulatory, operational, and compliance
Q3 (A). A business entity has the following GST-related transactions in a tax period:
| Particulars | Amount (Rs.) | GST Rate |
| Output supply (taxable goods) | 15,00,000 | 18% |
| Purchase of raw materials (from registered dealer) | 3,00,000 | 18% |
| Purchase of capital goods (eligible for ITC) | 2,00,000 | 18% |
| Purchase of office supplies (from unregistered dealer): | Rs. 1,00,000 | Nil GST |
The entity also made an exempt supply of Rs. 2,00,000 during the period.
Compute:
(a) The total input tax credit available,
(b) The proportion of ITC to be reversed due to exempt supply,
(c) The net GST payable.
Show all steps, including the formula for ITC reversal. (5 Marks)
Ans 3a.
Introduction
The Goods and Services Tax (GST) system allows input tax credit (ITC) on the purchase of goods and services used in the course of business. However, if a registered taxpayer supplies both taxable and exempt goods or services, they must proportionately reverse the ITC attributable to exempt supplies under Rule 42 of the CGST Rules. This ensures that ITC is claimed only to the extent it is used for taxable supplies. Below is a step-by-step calculation
Q3 (B) A registered dealer in Maharashtra makes the following intra-state and inter-state sales during a month:
| Type of Sale | Value (Rs.) | GST Rate |
| Intra-state sale of goods A | 5,00,000 | 12% |
| Intra-state sale of goods B | 3,00,000 | 18% |
| Inter-state sale of goods C | 2,00,000 | 5% |
The dealer purchased inputs as follows:
| Type of Purchase | Value (Rs.) | GST Rate |
| Intra-state purchase of raw material X | 2,00,000 | 12% |
| Inter-state purchase of raw material Y | 1,00,000 | 18% |
Compute: (a) Output GST liability (CGST, SGST, IGST), (b) Input tax credit available, (c) Net GST payable (with set-off rules applied). Show all steps, including allocation of ITC. (5 Marks)
Ans 3b.
Introduction
GST in India is destination-based and classified into CGST, SGST for intra-state sales and IGST for inter-state transactions. Input Tax Credit (ITC) can be utilized based on set-off rules, prioritizing the order of IGST, CGST, and SGST liabilities. This problem involves computing output tax liability, ITC availability, and net GST payable for a registered dealer in Maharashtra. The transaction includes both intra- and inter-state sales and purchases,
