CA Final Indirect Tax Laws Notes for January 2027 Exam

GST questions in CA Final require you to apply tax provisions to business transactions, from valuing supplies through consignment agents and determining GST liability to assessing exemptions and calculating refunds under an inverted duty structure. Understanding these concepts helps you solve practical and theoretical questions.

PW’s CA Final Indirect Tax Laws Notes help you practise supply valuation, GST liability, place of supply, educational service exemptions and refund calculations. They also cover compulsory registration, ITC penalties, recovery proceedings, agent records and exceptions to unjust enrichment.

CA Final Indirect Tax Laws Questions

Practising different mark-based questions can help you become familiar with the level of explanation required in the exam. Here are some important questions based on the concepts.

Question 1

Jupiter Chemicals Ltd. (JC) is a manufacturer of industrial chemicals. It has its factory at Haridwar, Uttarakhand and is registered under GST. It has its subsidiary company, Angel Traders Pvt. Ltd. (AT), with holding of 75% of its share capital. AT is engaged in trading of chemicals manufactured by JC in North India and is registered under GST in Delhi at warehouse address. JC has also appointed a consignment agent - Popular Distributors (PD) - in Chennai which is catering the Southern India market. JC has also setup a state of art research and development centre along with laboratory near the Haridwar factory and undertakes testing and development services for chemicals from outside customers across the country. Following information is available for the month of April 2021 of JC Haridwar:

(i) JC supplies the chemicals to PD Chennai during the month. (PD sold the above said goods to the unrelated wholesalers in the States of Tamil Nadu and Andhra Pradesh for Rs. 60,00,000 during the same month). Open market value is Rs. 55,00,000. Amount: Rs. 45,00,000.

(ii) JC supplied chemicals to AT during the month. (AT further sold the said chemicals to unrelated retailers in Delhi for Rs. 42,00,000 and AT is not eligible for full input tax credit). Open Market value is Rs. 38,00,000. Amount: Rs. 30,00,000.

(iii) JC exports chemicals to South Africa with payment of IGST and consideration for the same was received in convertible foreign exchange. Amount: Rs. 28,00,000.

(iv) JC provided inter-State supply of testing services to various customers during the month. Amount: Rs. 8,50,000.

(v) Supply of chemical to one of its customers in Mumbai who required the chemical to be tested before dispatch and subject to test report coming according to his parameters. Testing was successful and testing charges of Rs. 50,000 were charged extra. Amount: Rs. 6,50,000 (excluding testing charges).

(vi) Supply of chemical at subsidized rate for research and development activity not related to the business of JC to an unrelated charitable association in Haridwar, Uttarakhand. Open market value of the chemical is Rs. 6,50,000. Amount: Rs. 5,00,000.

Assume that the rates of GST on chemicals are IGST-12%, CGST-6% and SGST-6%, and on testing and development services are IGST-18% and SGST-9%.

You are required to determine the taxable value (most beneficial) and GST liability (IGST, CGST and SGST separately) of Jupiter Chemicals (JC) Haridwar for the month of April 2021.

Answer:

Determination of taxable value and GST liability of Jupiter Chemicals (JC) Haridwar for the month of April 2021

(i) Inter-State supply of chemicals to consignment agent – PD, Chennai
[Value, at the option of supplier, is: (i) Open market value (OMV) [55,00,000] or (ii) 90% of price charged for goods of like kind and quality to unrelated customers who further supply such goods (90% of Rs. 60,00,000).]
Taxable value: Rs. 54,00,000
IGST: Rs. 6,48,000 [54,00,000 × 12%]

(ii) Inter-State supply of chemicals to related person - AT
[Value of supply of goods to a related person who further supplies such goods as such, at the option of supplier, is: (i) OMV, if OMV is available [Rs. 38,00,000] or (ii) 90% of price charged for goods of like kind and quality to unrelated customers (90% of Rs. 42,00,000)]
Taxable value: Rs. 37,80,000*
IGST: Rs. 4,53,600 [37,80,000 × 12%]

(iii) Export of chemicals to South Africa
Taxable value: Rs. 28,00,000
IGST: Rs. 3,36,000 [28,00,000 × 12%]

(iv) Inter-State supply of testing services
Taxable value: Rs. 8,50,000
IGST: Rs. 1,53,000 [8,50,000 × 18%]

(v) Inter-State supply of chemical to customer in Mumbai
[Any amount charged for anything done by supplier in respect of supply of goods at the time of/before delivery of goods is includible in the value of supply.]
Taxable value: Rs. 7,00,000
IGST: Rs. 84,000 [7,00,000 × 12%]

(vi) Intra-State supply of chemical to an unrelated charitable association in Haridwar
[In case of supply made to unrelated recipient where price is the sole consideration for supply, value of the supply is the transaction value which is price actually paid for the supply.]
Taxable value: Rs. 5,00,000
CGST: Rs. 30,000 [5,00,000 × 6%]
SGST: Rs. 30,000 [5,00,000 × 6%]

Total
Taxable value: Rs. 1,40,30,000
CGST: Rs. 30,000
SGST: Rs. 30,000
IGST: Rs. 16,74,600

*Note: Since the question requires to compute the most beneficial taxable value of supply, lower of the two values has been taken as value of supply.

Question 2

(a) A2X Services Limited, registered under GST, is engaged in providing various services to various educational institutions. The company provides the following information in respect of services provided during the month of April 2021:

(i) Transportation of students & staff of ‘Love All’, a deemed University

(ii) Catering services provided to ‘Rank CBSE School’

(iii) Security services provided to ‘Win CBSE School’, for its annual sports day held at SAI Sports Complex owned by Government of India

(iv) Supply of online periodical science journal to ‘Merit CBSE School’ for its higher secondary students

(v) Services, in relation to placement of students, to ‘SKILL’, a Government recognized vocational training college

Comment on the taxability or otherwise of the above transactions under GST law. Also state the correct legal provisions for the same.

Answer:

(i) Transportation of students and staff of deemed University
[Taxable since transportation services provided to an educational institution are exempt only if such institution provides pre-school education or education up to higher secondary school or equivalent.]
Taxability: Taxable

(ii) Catering services provided to “Rank CBSE School”
[Catering services provided to an educational institution providing pre-school education or education up to higher secondary school or equivalent are exempt.]
Taxability: Exempt

(iii) Security services to “Win CBSE School” for its annual sports day held at SAI Sports complex
[Security services provided to an educational institution providing pre-school education or education up to higher secondary school are exempt provided such services are performed in the premises of such institution. However, in this case, security services are being provided outside the school campus, and hence the same are taxable.]
Taxability: Taxable

(iv) Supply of online periodical science journal to school for its higher secondary students
[Taxable since educational institutions providing service by way of pre-school education and education upto higher secondary school or equivalent are not eligible for exemption in respect of supply of online educational journals.]
Taxability: Taxable

(v) Services in relation to placement of students, to Government recognized vocational training college
[Taxable since only services related to admission and conducting exams are exempt for vocational educational institutions.]
Taxability: Taxable

(b) Determine the place of supply in respect of the following independent instances under the provisions of IGST Act, 2017:

(i) Miss Poorva, an interior design consultant, having office at Chennai (Tamil Nadu), provided professional services to Mr. Nihil who resides in Dubai, for his two immovable properties under single contract, one property is outside India at Singapore and another at Surat (Gujarat).

(ii) United Traders, having a registered place of business at Bengaluru (Karnataka), imported instruments used in COVID treatment from London (UK) through Vizag (Andhra Pradesh) Port.

Note: Your answer should also include relevant provisions of law.

Answer:

(i) In a case where location of supplier or recipient of service is outside India, the place of supply of services of interior decorators provided directly in relation to an immovable property is the location of immovable property. Further, where such services are supplied at more than one location, including a location in the taxable territory, the place of supply of said services is the location of immovable property in the taxable territory.

In view of the above provisions, place of supply of Miss. Poorva’s (interior design consultant located in India) services provided to Mr. Nihil (recipient located outside India in Dubai) in respect of immovable properties, located in Surat (Gujarat) and in Singapore, is the location in taxable territory, i.e. Surat (Gujarat).

(ii) The place of supply of goods imported into India is the location of the importer. Thus, in the given case, place of supply of instruments imported by United Traders is Bengaluru (Karnataka).

Question 3

(a) Jai and Co, a registered supplier under GST, is engaged in weaving yarn into fabrics and has provided the following information:

Nature of various intra-State supplies during April 2021 and value of supply (excluding GST):

• Outward supply of fabrics (Tax rate of CGST and SGST is 2.5% each): Rs. 30,00,000

• Inward supply of rayon yarn (Tax rate of CGST and SGST is 6% each): Rs. 24,00,000

• Inward supply of services for processing the yarn (Tax rate of CGST and SGST is 2.5% each): Rs. 4,00,000

• Inward supply of machineries for weaving the processed yarn into fabrics (Tax rate of CGST and SGST is 9% each): Rs. 45,00,000

The concern has not provided any supply other than the outward supply referred above. ITC in respect of all types of inward supplies as given above was claimed in the relevant GSTR 3B as well reflected in GSTR 2A. Other applicable conditions for claiming the refund are duly complied with.

You are required to compute the ‘maximum refund amount’ eligible under rule 89(5) of CGST Rules, 2017 for inverted duty structure. Also provide working notes for your calculation.

Answer:

Maximum refund amount under rule 89(5) of the CGST Rules, 2017 on account of inverted duty structure, is computed as follows = {(Turnover of inverted rated supply of goods and services) × Net ITC ÷ Adjusted Total Turnover} – [{tax payable on such inverted rated supply of goods and services × (Net ITC ÷ ITC availed on inputs and input services)}]

In the given question,

Turnover of inverted rated supply of goods and services = Rs. 30,00,000

Adjusted Turnover = Rs. 30,00,000

Net ITC means ITC availed only on inputs = 24,00,000 × 6% = 1,44,000

Tax payable on such inverted rated supply of goods/services = 30,00,000 × 2.5% = 75,000

ITC on input & Input services = (24,00,000 × 6% + 4,00,000 × 2.5%) = 1,54,000

Applying the formula: Maximum refund (under CGST act) = Rs. [{30,00,000 × 1,44,000 ÷ 30,00,000}] – [{75,000 × (1,44,000 ÷ 1,54,000)}] = Rs. 73,870 (each for CGST and SGST)

Thus, maximum refund amount is Rs. 73,870 each for CGST and SGST.

Note: Refund of tax paid on input services and capital goods is not a part of refund of accumulated ITC on account of inverted duty structure.

(b) Comment on the liability to get registered under the GST law in the given independent situations for the financial year 2020-21. Your answer should also include relevant provisions of law, notifications or circulars.

(i) Miss Riddhima is exclusively engaged in the export of readymade garments from the State of Rajasthan and her export turnover during the year is Rs. 17 lakh. Apart from export turnover, she has earned interest on bank FDR for Rs. 2 lakh also.

(ii) Ajanta Enterprises is exclusively engaged in the trading of exempt goods under GST in the State of Haryana and has not taken the GST registration. During the year, its turnover from exempt supplies is Rs. 47 lakh and Ajanta Enterprises also sold old generator for Rs. 1.25 lakh during the year.

(iii) Mr. P has presence in two States, one in Haryana and other in Rajasthan. He is registered in the State of Rajasthan even without crossing the threshold limit. His turnover during the year in Rajasthan is Rs. 32 lakh and in Haryana is Rs. 5 lakh. Is he mandatorily required to get registered in the State of Haryana also?

(iv) Mr. John is engaged in the business of buying and selling of shares on his own account from the secondary market and his income from this activity is assessed as business income under the Income-tax Act 1961. During the year his total sales turnover from shares was Rs. 90 lakh.

Answer:

(i) Export of goods is treated as inter-State supply. Miss Riddhima is liable to obtain registration compulsorily irrespective of the quantum of her aggregate turnover since she is engaged in making inter-State supply (exports) of goods.

(ii) Any person engaged exclusively in making exempt supplies is not liable to registration. However, Ajanta Enterprises is liable to get registered as it has also made a taxable supply along with exempt supplies during the year and its aggregate turnover (Rs. 48.25 lakh) exceeds the threshold limit for registration.

(iii) Since registration in GST is PAN based, once a supplier is liable to register, he has to obtain registration in each of the States/UTs in which he operates under the same PAN. Therefore, Mr. P is liable to get registered in Haryana also, provided he is not engaged exclusively in making exempt supplies from Haryana.

However, it is also possible to take a view that a person who is voluntarily registered in one State needs to obtain registration in other States from where he makes a taxable supply only if his aggregate turnover exceeds applicable threshold limit for registration. In that case, Mr P is not liable to obtain registration from Haryana since the aggregate turnover does not exceed the threshold limit for registration.

(iv) A supplier is liable to obtain registration in a State/UT from where he makes a taxable supply of goods and/or services. Shares are excluded from the definition of goods as well as services. Hence, buying and selling of shares is not a supply of goods and/or services under GST law. Thus, Mr. John is not liable to obtain registration since he is not engaged in making a taxable supply of goods and/or services.

Question 4

(a) M/s Fly-by-Night Traders, a taxable person, issued an invoice on 15th April 2021 involving input tax credit (ITC) of Rs. 25 lakh to M/s Runaway Traders who utilised the same. No supply of goods was involved in this transaction between the two traders. M/s Fly-by-Night Traders conducted this transaction at the instance of its tax consultant who was not a qualified professional. Explain the relevant provision in brief and determine the amount of penalty leviable under CGST Act, 2017, if any, on the persons involved in respect of the above referred transaction.

Answer:

Where a taxable person:

(a) issues any invoice without supply of goods, or

(b) takes/utilises ITC without actual receipt of goods, either fully or partially,

in contravention/violation of the provisions of the GST law or the rules made thereunder, such person shall be liable to pay a penalty of

(i) Rs. 10,000 or

(ii) an amount equivalent to the ITC availed of or passed on (Rs. 25 lakh), whichever is higher.

Thus, M/s Fly-by-Night Traders and M/s Runaway Traders, both are liable to pay a penalty of Rs. 25 lakh each.

Further, any person at whose instance above transactions are conducted, shall be liable to a penalty of an amount equivalent to ITC availed of/passed on. Thus, the tax consultant will be liable to pay a penalty of Rs. 25 lakh.

(b) In the month of March 2021, during the course of Departmental GST audit under section 65 of the CGST Act, 2017 of Always Right Private Limited, audit team observed that input tax credit claimed by the company was blocked under section 17(5) of the CGST Act, 2017. Audit memo was given to the company for submission of reply on the audit observations mentioned in the memo. Company submitted its reply contending that the said credit was not blocked under section 17(5) and had been rightly claimed. Department was not satisfied with the reply submitted by the company. Audit team served a show cause notice under section 74 of the CGST Act, 2017 and transferred the matter to adjudicating officer and also started recovery process under sections 78 and 79 of the CGST Act, 2017 for recovery of the input tax credit wrongly availed.

You are required to comment whether action of the Department to recover the amount is justified with the reference to the legal provisions of the GST law.

Answer:

The action of the Department to initiate the recovery proceedings without adjudication order being passed is not valid.

Recovery proceedings can be initiated under GST law if a taxable person fails to pay any amount payable in pursuance of an order passed under this law within a period of 3 months (or reduced period by proper officer) from the date of service of such order.

However, in the given case, the recovery proceedings have been initiated only after serving the show cause notice and transferring the matter to the adjudicating officer. The adjudication order has not yet been passed in the given case.

Question 5

Candidates are required to attempt either part (i) or part (ii).

(i) List any four records required to be maintained by an agent under the CGST Rules, 2017.

OR

(ii) List any four exceptions when theory of unjust enrichment is not applicable under the provisions of CGST Act, 2017.

Answer:

(i) Every agent shall maintain accounts depicting the-

• (a) particulars of authorisation received by him from each principal to receive or supply goods or services on behalf of such principal separately;

• (b) particulars including description, value and quantity (wherever applicable) of goods or services received on behalf of every principal;

• (c) particulars including description, value and quantity (wherever applicable) of goods or services supplied on behalf of every principal;

• (d) details of accounts furnished to every principal; and

• (e) tax paid on receipts or on supply of goods or services effected on behalf of every principal.

(ii) Unjust enrichment is not applicable in the following cases:

• (a) refund of tax paid on exports or on inputs/input services used in making such exports;

• (b) refund of unutilized ITC in case of zero-rated supplies made without payment of tax or accumulated ITC on account of inverted duty structure;

• (c) refund of tax paid on a supply which is not provided, either wholly or partially, and for which invoice has not been issued, or where a refund voucher has been issued;

• (d) refund of tax paid on a transaction treated to be an intra-State supply, but which is subsequently held to be an inter-State supply or vice-versa;

• (e) the tax and interest, if any, or any other amount paid by the applicant, if he had not passed on the incidence of such tax and interest to any other person;

• (f) the tax or interest borne by such other class of applicants as the Government may, on the recommendations of the Council, by notification, specify.

CA Final Indirect Tax Laws Notes PDF

Download the CA Final Indirect Tax Laws Notes PDF by PW to keep your examination preparation material handy. Use the questions and solutions to practise GST calculations, revise important legal provisions and understand how to approach practical and theoretical questions for the CA Final January 2027 examination.

Why Use CA Final Indirect Tax Laws Notes by PW?

Use the CA Final Indirect Tax Laws Notes PDF to practise applying GST provisions, solving calculations and understanding legal reasoning. The PDF helps you:

1. Practise Valuation of Supply and GST Liability

Learn to calculate taxable value and CGST, SGST or IGST. Practise questions on related persons, consignment agents, OMV, exports, inter-State supplies and additional charges.

2. Understand GST Exemptions for Educational Services

Revise exemptions for educational services, including student transportation, catering, security, online journals and placement services. Understand how institutions and service locations affect GST treatment.

3. Determine the Place of Supply Under GST

Apply IGST Act, 2017 provisions to interior design services, cross-border services and imported goods to determine the correct place of supply.

4. Calculate Refunds Under the Inverted Duty Structure

Practise refund calculations under Rule 89(5) of the CGST Rules, 2017. Identify eligible Net ITC and calculate maximum refunds while distinguishing inputs, input services and capital goods.

5. Revise Compulsory Registration Under GST

Understand registration requirements based on aggregate turnover and supply type. Practise cases involving exports, exempt goods, multiple states and share transactions.

6. Understand Penalties for Wrongful ITC Transactions

Revise penalties for issuing invoices without supply or claiming ITC without receiving goods. Practise calculating penalties for the parties involved.

7. Learn the Rules for Recovery Proceedings

Revise Sections 78 and 79 of the CGST Act, 2017. Understand the role of adjudication orders, show-cause notices and recovery proceedings.

8. Prepare Important GST Theory Questions

Practise questions on agents’ records and exceptions to the doctrine of unjust enrichment, including specified export refunds and accumulated ITC refunds.

9. Practise Application-Based and Examination Questions

Solve practical and theoretical questions on GST calculations, exemptions, registration, penalties and refunds. Use detailed solutions to understand legal reasoning and improve answer accuracy.

Revise important Indirect Tax Laws concepts with the CA Final Indirect Tax Laws Notes PDF by PW. Practise numerical and theoretical questions, understand the legal reasoning behind each solution and focus on applying the correct provisions to different situations. Pay attention to the steps involved in GST calculations and the conditions governing different transactions to improve your approach to examination questions.

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