Question Papers of Indirect Taxes – CA IPCC and PCC
Question Papers of PCC and IPCC/AT (Service Tax and Vat portion of 25 marks each only)
CA Integrated PCC and Accountant Technician
CA Inter (IPCC) May 2015
Portion relating to indirect taxes
Q 1(b) MCSS Tech Solutions is providing taxable Information Technology software services, and provide the following information related to the services rendered, invoice issued and payment received for these services, for the half year ended on 31st March 2016 – (i) Advance received on 31st March, 2016 for upgradation and enhancement of software service to be rendered in the month of April, 2016 – Rs 7,50,000 (ii) Service provided to United Nations in New Delhi for analysis, design and programming of latest information technology software – Rs 6,00,000 (iii) Service billed to various clients (including the services provided to United Nations) – Rs 56,00,000 (iv) Service tax has been charged separately in all the bills. – – Compute the value of total taxable services and the total service tax payable by MCSS Tech. Solutions @ 14% for the half year ended on 31st March, 2016. [4 marks]
Ans 1(b) – (i) taxable – Rs 7,50,000 (ii) exempt (iii) taxable – Rs 50,00,000. Hence, value of taxable service – Rs 57,50,000. Service tax @ 14% – Rs 8.05.000.
Q1(c) Mr. Devansh, a dealer of rice plant machinery in the State of Punjab, provide the following informations – Total inter-state sales during the F.Y. 2015-16 is Rs 95,00,000, CST included in this sales. This sales also include the following – (a) Dharmada – Rs 7,50,000 (b) Freight – Rs 4,50,000 (Rs 3,00,000 shown separately in the invoices). Cost of packing boxes for machinery are of Rs 68,500 and installation and commissioning charges shown separately are of Rs 65,000, Determine CST payable assuming that all transactions were covered by valid ‘C forms and the VAT rate within the state is 5%. [4 marks]
Ans 1(c) – Following deductions are allowable – Dharamda – Rs 7,50,000 [Only in Tamil Nadu it is not allowable in view of decision of Madras High Court], Freight shown separately Rs 3,00,000 and Installation and commissioning charges – Rs 65,000. Hence, ‘aggregate sale price’ = Rs 83,85,000 [95,00,000 – 7,50,000 – 3,00,000 – 65,000]. This is inclusive of CST @ 2% (as C form has been received). Turnover = 82,20,588.24 [(83,85,000 x 100)/102] CST @ 2% = Rs 1,64,411.76.
Q 2 (b) Rahul & Co. is a firm engaged in the business of recruitment and supply of Manpower. It furnishes the following details pertaining to the quarter ended 31-03-2016 – (i) Amount collected from clients for recruitment of Permanent Staff – Rs 5,00,000 and for recruitment of Temporary Staff – Rs 3,00,000 (ii) Amounts collected from clients for pre-recruitment screening – Rs 2,50,000 (iii) Domestic helps arranged for friends & relative (Value of similar services is Rs 45,000 to other customers) – Nil (iv) Amount collected from a warehouse of agricultural produce for labour provided for loading and unloading. – Rs 1,75,000 (v) Advances received from prospective employers for conducting campus interviews in colleges to be held in May 2016 – Rs 2,00,000 (Such campus interviews could not be conducted due to students strike in those colleges. Hence, the advances received was later on returned to the employers). – – None of the clients of Rahul & Co. was a body corporate during the relevant quarter. Compute the value of taxable services rendered and the total service tax payable @ 14% by the assessee for the relevant quarter assuming that Rahul & Co. is not eligible for the small service provider’s exemption in the financial year 2015-16. Alt above amounts are inclusive of service tax, where applicable [5 marks]
Ans – (i) taxable – Rs 8,00,000 [recruitment of permanent staff can come under the term ‘or otherwise’ in the definition of manpower supply service] (ii) taxable – Rs 2,50,000 (iii) No service tax as free service (iv) no service tax as in negative list (iv) taxable – Rs 2,00,000 [as service tax is payable on 31-3-2016. Later, if the assesse refunds the advance with service tax amount, he can adjust the service tax paid earlier, under rule 6(3) of Service Tax Rules]. – – Thus, total gross amount – Rs 12,50,000. The amount is inclusive of service tax. Hence, value of service tax = 10,96,491.23 [(12,50,000 x 100)/114]. Service tax payable @ 14% of value = 1,53,508.77.
Q2(c) Balaji enterprises, a registered dealer provide the following details of purchases, sales, etc. for the year ended 31s£ March, 2016 – (a) Purchase of raw materials within State (1,500 units) inclusive of VAT @ 12.5% – Rs 4,05,000 (b) Inter-State purchases of raw materials, inclusive of CST @ 2% – Rs 3,06,000 (c) Import of raw materials, inclusive of custom duty of Rs 50,000 – Rs 4,50,000 (d) Capital goods purchased on 15-6-2015, inclusive of VAT levy @ 10% (input credit to be spread over 3 financial years) – Rs 3,30,000 (e) Manufacturing expenses – Rs 1,75,000 (f) Sales of taxable goods within state, inclusive of VAT @ 4% – Rs 10,92,000 (g) Sale of exempted goods within state (manufactured from Inter-State purchase of raw materials) – Rs 2,25,000 (h) Closing Stock of 200 units of raw material purchased within State as on 31st March, 2016 (i) input tax credit is allowed only on raw materials used in manufacturing of taxable goods. Compute the net VAT liability of Balaji enterprises, for the year ended on 31st March, 2016. [3 marks]
Answer – (a) Vat paid on 1,500 units of raw material = Rs 45,000 [(4,05,000 x 12.50)/112.50]. However, as per clause (i) in the question, the dealer can take input tax credit only of material used in manufacture of taxable goods. Since 200 units are in closing stock, dealer has consumed only 1,300 units. Hence, input tax credit available = Rs 39,000 [(45,000 x 1,300)/1,500] (b) No input tax credit of CST (c) No input tax credit of customs duty (d) Vat paid on capital goods = 30,000 [(3,30,000 x 10)/110]. Since credit is to be spread over three financial years, input tax credit of Rs 10,000 will be available during current financial year (e) Manufacturing expenses not relevant to determine tax payable (f) Vat payable on sale of taxable goods = Rs 42,000 [(10,92,000 x 4)/104] (g) Vat payable on exempted goods – Nil.
It is stated that exempted goods are manufactured out of inter-state purchase of raw material. Thus, the taxable goods are manufactured out of raw material on which Vat has been paid and hence its entire input tax credit is available. In respect of capital goods, entire input tax credit is available, even if these are only partially used for manufacture of taxable goods. Thus, total Vat credit available = 49,000 [39,000 + 10,000].
Total Vat payable on sales = Rs 42,000. Hence, the dealer is not required to pay any Vat in cash. The excess Vat credit of Rs 7,000 can be carried forward and used in future for payment of Vat.
Q3(b) BC Pvt Ltd., a manufacturer, has furnished the following information : (i) Input ‘A’- Invoice dated 23-03-2015- Excise duty paid –Rs 1,56,000 (ii) Input ‘B’-Invoice dated 10-4-2016 – Excise duty paid Rs 1,35,000 (iii) Input ‘C’ – Invoice missing – excise duty paid – Rs 89,460 (iv) Input Service ‘X’-Invoice dated 12-11-2015 – service tax paid Rs 45,340 (v) Input Service ‘Y’-Invoice dated 20-2-2015 – service tax paid Rs 68,240 (vi) Machinery (being eligible capital goods under Chapter 82) -Invoice dated 12-9-2014 – excise duty paid Rs 3,54,670 (vii) GTA service for bringing raw materials to the factory (Payment has not been made to GTA but service tax has been paid under reverse charge) – Invoice dated 14-1-2016, value of services Rs 3,00,000 – service tax paid under reverse charge as applicable on 6-3-2016 (viii) BC Pvt. Ltd. is not entitled to SSI exemption. – – You are required to determine the total CENVAT credit that can be availed by BC Pvt. Ltd. during the month of April, 2016 (5 marks)
Answer 3(b) (i) Not eligible ad invoice date is beyond one year (ii) Cenvat credit of Rs 1,35,000 available (iii) No cenvat credit as duty paying document is not available (iv) Cenvat credit of Rs 45,340 is available (v) Cenvat credit not available as invoice beyond one year (vi) Cenvat credit on GTA is payable on 30% of value by service receiver under reverse charge i.e. on Rs 90,000. Hence, service tax payable is Rs 12,600 [14% of Rs 90,000]. Cenvat credit of Rs 12,600 available, even if payment of bill amount is not made to service provider.
Thus, total Cenvat credit available = Rs 1,92,940 [1,35,000 + 45,340 + 12,600]
Q3(c) Rajeshwari Industries imported a machinery from Germany in an aircraft. The bill of entry was presented on 12-07-2015 and the aircraft arrived in India on 25-07-2015. The rate of import duty are: (a) Bill of entry on 12-07-2014 – rate of customs duty 12% (b) Arrival of aircraft on 25-07-2014 – rate of customs duty 15%. In the above case, determine the applicable rate of import duty [3 marks]
Answer – Even if Bill of Entry is submitted earlier, relevant date for purpose of assessment (valuation and rate of customs duty) will be (a) date of grant of ‘entry inward’ to vessel or (b) date of submission of Bill of Entry whichever is later. – proviso to section 15 of the Customs Act. Hence, rate of customs duty is 15%,
Q4 (b) With reference to the service tax laws-as contained in the Finance Act, 1994, kindly explain toe foliowings – (i) What will be the point of taxation in case of continuous supply of services ? (ii) Mohan, a service provider had received Rs 2,50,000 in advance, from Rakesh. Mohan had deposited service tax on such amount in the relevant half year. He finally rendered services valuing to Rs 2,20,000 only and refunded balance amount to Rakesh. Mohan wants to adjust service tax on Rs 30,000 refunded by him, from his current dues of Service tax. Advise him. [2+2 = 4 marks]
Answer – 4(b) (i) In case of continuous supply of service, where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the service receiver to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service – proviso (i) to rule 3(b) of Point of Taxation Rules.
Ans 4(b)(ii) If he refunds the amount with service tax, he can adjust the excess service tax paid earlier, from future payment of service tax as per rule 6(3) of Service Tax Rules.
Q4(c) A manufacturer of machinery sold his machine on which excise duty is payable under Section 4 of Central Excise Act, 1944 – (a) Total Invoice price – Rs 7,50,000 (b) Erection Charges (erection to be done at customer’s factory) – Rs 50,000 (c) Packng Charges – Rs 12,000 (d) Design Charges – Rs 20,000 (e) Insurance Charges (for dispatch to customer’s factory) – Rs 8,.000 (f) Outward freight (from-place of removal to customer’s factory – Rs 17,000 (g) State VAT – 12.5% (g) Gash discount @ 2% was allowed as the customer had made full advance payment. (h) Excise duty rate is 12.5% . Calculate Assessable Value of the machine and excise duty payable [4 marks]
Answer 4(c) Excise duty and Vat is not payable on (i) erection charges – Rs 50,000 (ii) Insurance for dispatch of final product – Rs 17,000 and (iii) Cash discount – Rs 15,000 [2% of Rs 7,50,000]. It is assumed that design charges are pre-manufacturing charges and hence are includible in the assessable value. Packing charges are not allowed as deduction from the assessable value.
Thus, aggregate sale price in respect of which Vat and excise duty payable is Rs 6,68,000. [7,50,000 – 50,000 – 17,000 – 15,000]. This is inclusive of Vat.
Turnover for purpose of Vat = Rs 5,93,777.78 [(6,68,000 x 100)/112.50]. Vat payable @ 12.5% = 74,222.22 [(6,68,000 x 12.50)/112.50]. [check that turnover plus Vat = Aggregate sales price]
Excise duty is not payable on Vat, Hence, total price for purpose of excise duty = Rs 5,93,777.78. Thus, assessable value = Rs 5,27,802.47 [(5,93,777.78 x 100)/112.5]. Excise duty payable @ 12.5% of Rs 5,27,802.47 = Rs 65,975.31 [check that assessable value plus excise duty = total price].
Q5 (b) State whether the following services are covered under negative list of services under Section 66 D. Need not assign any reason – (i) Service provided by the Department of Post by way of speed post, express parcel post, Life Insurance and agency services provided to a person other than Government (ii) Service provided by way of supply of farm labour relating to agriculture (iii) Services by way of renting of residential dwellings for use as residence (iv) Services for funeral, burial, crematorium or mortuary and transportation of the deceased (v) Services relating to education as a part of an approved vocational education course (vi) Service of transportation of passengers with or without accompanied belongings, by Railways in an air conditioned coach (vii) Services by way of transportation of goods by road by a goods transportation agency (viii) Selling of space or time slots for advertisement broadcast by FM Radio[4 marks]
Q5(c) Define the term “Transaction value” as per Central Excise Act, 1944 [4 marks]
Q6(b) Ms. Vasundhara, a service provider, who pays service tax regularly, was of the opinion that a particular service rendered by her was not liable to service tax. She therefore, did not charge service tax in her bill. She received the payment for the bill amount without service tax. However, it was later confirmed that service tax is payable on said service. How will service tax liability of Ms. Vasundhara be determined in such a case? [4 marks]
Q6(c) Explain the term “Price cum Duty “as per Central Excise Act, 1944 [4 marks]
Q7(b) Ashok, a taxable service provider outsourced a part of work by engaging Suresh, a subcontractor. Service tax is charged and paid by Ashok for the total work. Whether Suresh, the sub contractor is liable to charge and pay any service tax ? [4 marks]
Q7(c) RSL Pvt. Ltd. purchased a pollution control equipment on 20-6-2010 for Rs 15,00,000 (including excise duty of Rs 1,85,400); and took the CENVAT credit of 50% of the excise duty paid in the financial year 2010-11 and balance credit of 50% in the financial year 2011-12. After using such equipment, sold it as scrap for Rs 50,000 excluding excise duty, on 31st Dec., 2014. Examine whether : (i) RSL Pvt. Ltd. was correct in availing the CENVAT credit on the said equipment in financial years 2010-11 and 2011-12 ? (ii) On selling of above equipment in the financial year 2014-15, it needs to pay the amount of excise duty earlier availed as CENVAT Credit ? (4 marks)
Answer 7(c)(i) Yes (ii) Excise duty is not payable but ‘amount’ is payable on basis of depreciated value,
CA IPCC Nov 2014
Question No. 1 is compulsory. Attempt any five questions from remaining six questions.
Q1(b) Compute the Service Tax liability of Mr. Saksham. an Air Travel Agent for the quarter ended September 30, 2013 using the following details : (i) Basic Air fare collected for Domestic booking of tickets – Rs 45,00,000 (ii) Basic Air fare collected for International booking of tickets – Rs 90,00,000 (iii) Commission received from the airlines towards the sale of above tickets – Rs 12,00,000 – – In the above case, would the Service Tax liability of Mr. Saksham be reduced if he opts for special provision for payment of Service Tax as provided under Rule 6 of the Service Tax Rules, 1994 instead of paying Service Tax @12%. Mr. Saksham is not eligible for Small Service Providers exemption, also Service Tax has been charged separately (6 marks)
Ans 1(b) Service tax payable @ 12% (ignoring education cess) on commission of Rs 12,00,000 is Rs 1,44,000. Mr. Saksham can opt to pay service tax under composition scheme as follows – (i) @ 0.6% on Rs 45,00,000 – Rs 27,000 (ii) @ 1.2% on Rs 90,00,000 – 1,08,000. Total – Rs 1,35,000 (ignoring education cess). Thus, if Mr. Saksham opts for composition scheme, service tax payable will be Rs 1,35,000 against Rs 1,44,000 which he is paying at present.
Q1(c) The following data relating to an importer for the previous year 2013-14 is available : (i) Customs Value (Assessable Value of imported goods) is Rs 4,00,000 (ii) Basic Customs Duty payable – 10% (iii) If the goods were produced in India, Central Excise Duty would have been 16%. – – Education cess and secondary higher education cess are as applicable. Special CVD at appropriate rate is applicable. Find the customs duty payable. How much Cenvat credit can be availed by importer if the importer is a manufacturer ? (4 marks)
|Ans 1(c) Calculation of customs duty payable is as follows –|
|Seq.||Duty Description||Duty %||Amount||Total Duty|
|(A)||Assessable Value Rs||4,00,000|
|(B)||Basic Customs Duty||10||40,000.00||40,000.00|
|(C)||Sub-Total for calculating CVD ‘(A+B)’||4,40,000.00|
|(D)||CVD ‘C’ x excise duty rate||16||70,400.00||70,400.00|
|(E)||Sub-total for edu cess on customs ‘B+D||1,10,400.00|
|(F)||Edu Cess of Customs – 2% of ‘E’||2||2,208.00||2,208.00|
|(G)||SAH Education Cess of Customs – 1% of ‘E’||1||1,104.00||1,104.00|
|(H)||Sub-total for Spl CVD ‘C+D+F+G||5,13,712.00|
|(I)||Special CVD u/s 3(5) – 4% of ‘H’||4||20,548.48||20,548.48|
|(M)||Total duty rounded to||Rs.||1,34,260|
|–||Notes – Buyer who is manufacturer, is eligible to avail Cenvat Credit of D and I above.|
|A buyer, who is service provider, is eligible to avail Cenvat Credit of D above. .|
|A trader who sells imported goods in India after charging|
|Vat/sales tax can get refund of Special CVD of 4% i.e. ‘I’ above|
Q2(b) ABC private Ltd. is engaged in providing taxable Services. The aggregate value of taxable services provided and invoiced during January 2014 are Rs. 18,00,000. The invoices of Rs. 18,00,000 include the following – * Rs. 1,00,000 relating to betting * Rs. 1,25,000 for services rendered within the Indian territorial waters * Rs. 1,75,000 for services rendered to its associated enterprise * Rs. 1,50,000 for services rendered in State of Jammu & Kashmir. – – Note : All the invoices are inclusive of service tax. – – In the financial year 2012-13 ABC Private Ltd. had paid Rs. 2,06,000 as service tax @ 12.36%. Compute the Service Tax payable for the month of January 2014 (5 marks)
Ans 2(b) – (a) Betting is in negative list and hence Rs 1,00,000 not taxable (b) services rendered in Indian territorial waters taxable (c) Services rendered to associated enterprises taxable (d) Rs 1,50,000 Exempt if place of provision of service is J&K. Thus, Rs 2,50,000 are not taxable. Hence, total value of taxable service (including service tax) is Rs 15,50,000 [Rs 18,00,000 – 2,50,000]. ABC P Ltd. had paid service tax of Rs 2,06,000 in previous financial year. Thus, value of service in previous year was Rs 20 lakhs. Thus, ABC Pvt. Ltd. is not eligible to avail exemption available to small service provider. Since service provider is a company, it is required to pay service tax on billing basis. Hence, service tax payable on Rs 15,50,000 = (15,50,000 x 12.36)/112.36 = Rs 1,70,505.52 and value of taxable service is Rs 13,79,494.48.
Q2(c) Mr. Mani reported Interstate sales of Rs. 45,00,000 for the financial year 2013-14. In this regard following additional information is available : (i) Freight – Rs. 2,30,000 (Rs. 80,000 is not shown separately on Invoices) (ii) Goods Sold to Mr. X for Rs. 45,000 on 15-05-2013 were returned on 18-10-2013 (iii) Mr. Z a buyer to whom goods worth Rs. 30,000 were dispatched on 17-04-2013 rejected such goods. The said goods were received back on 18-11-2013. – – Determine the taxable turnover and CST payable, assuming that all the transactions were covered by valid “C” forms and Sales Tax rate within the slate is 5% (3 marks)
Ans 2(c) Many aspects are not clear in question and hence some assumptions have been made (i) Deduction of Rs 80,000 is not available as freight is not shown separately. However, deduction of Rs 1,50,000 is available (It is presumed that the value of Rs 45,00,000 is inclusive of freight (ii) Since goods were returned within six months, deduction of Rs 45,000 is available (iii) Though goods were returned after 6 months, there was no sale at all as the goods were rejected. Hence, deduction of Rs 30,000 is available. – -Thus, total deduction available is Rs 2,25,000. [1,50,000 + 45,000 + 30,000]. Thus, taxable turnover is Rs 42,75,000. It is assumed that this value is exclusive of Central Sales Tax. Since C form has been issued, CST rate is 2%. Hence, Central Sales Tax payable is Rs 85,500.
Q3(b) Mr. Shiven is providing service of Construction of Buildings. He purchased the following items in May, 2013. The items purchased and excise duty paid in Rs (including education cess) on each item is as follows – * Dumpers – 1,06,000 * Electric transformer falling under chapter 85 of Excise Tariff – 40,000 * Refrigerator fitted in office – 15,000 * Diesel for use in Dumper – 25,000 * Car for use of Employees for coming to site and going back – 1,50,000 * Trucks used for the transport of construction material falling under tariff sub-heading 8704 – 15,000. – – You are required to determine the amount of CENVAT Credit available with Mr. Shiven (4 marks)
Ans 3(b) – Eligibility of capital goods for Cenvat credit as per definition of capital goods in rule 2(a) of Cenvat Credit Rules as follows – * Dumper is eligible as capital goods. Hence, 50% i.e Rs 53,000 is eligible as Cenvat credit. Balance 50% Cenvat credit can be taken on 1-4-2014 * Electric Transformer falling in chapter 85 is eligible as capital goods. Hence, 50% i.e. Rs 20,000 is eligible as Cenvat credit. Balance 50% Cenvat credit can be taken on 1-4-2014 * Refrigerator is not used for providing output service. Hence, not eligible for Cenvat credit * Diesel oil has been specifically excluded from definition of ‘input’. Hence, it is not eligible for Cenvat credit * Motor vehicle (car) is not eligible for Cenvat credit * Truck used for transportation of inputs and capital goods for providing an output service is eligible for Cenvat credit. Hence, 50% i.e Rs 7,500 is eligible as Cenvat credit. Balance 50% Cenvat credit can be taken on 1-4-2014.
Q3(c) Calculate the Assessable Value and the Excise Duty payable from the following particulars – Total Invoice price (inclusive of taxes) – 55,000 * State VAT – 5,500 * Insurance charges for dispatch of final product – 275 * Packing charges – 1,200 * Outward Freight beyond the place of removal – 2,100. – – Excise duty rate is 12% and Education Cesses as applicable. An Exemption Notification grants Exemption of 50% of the duty payable on this product (4 marks)
Ans 3(c) – Following deductions are allowable – State Vat – 5,500, Insurance for dispatch of final product – Rs 275, outward freight beyond place of removal – Rs 2,100. Total deduction – Rs 7,875. Hence, total invoice price for purpose of excise duty = Rs 47,125 [55,000 – 7,875]. This is inclusive of excised duty of 6.18% [as 50% of duty is exempted]. Hence, assessable value = (47,125 x 100)/106.18 = Rs 44,382.18. Excise duty @ 6.18% on assessable value = 2,742.82. [Check that 44,382.18 + 2,742.82 = 47,125].
Q4(b) Mr. Vineet a Service Provider received an advance of Rs. 1,00,000 from Mr. X on 05-04-2013 as part payment for a service. The Service was completed on 10-04-2013 and the date of invoice was 16-05-2013. He received the remaining amount of Rs. 1,50,000 on 14-06-2013. Determine the Point of Taxation in the above case. Would your answer be different if the above Service becomes taxable for the first time with effect from 01-06-2013? (4 marks)
Ans 4(b) – It is assumed that value of services provided by Mr Vineet in preceding financial year was Rs 50 lakhs and hence, he is required to pay service tax on accrual basis i.e. billing basis. – – In respect of advance of Rs 1,00,000, the Point of Taxation is 5-4-2013, as per rule 3(b) of Point of Taxation Rules. – – In respect of remaining amount of Rs 1,50,000, as per proviso to rule 3(a) of Point of Taxation Rules, point of taxation is date of completion of service i.e. 10-4-2013 as Mr Vineet did not issue invoice within 30 days from date of completion of service. – – If the service became taxable w.e.f. 1-6-2013, Mr. Vineet was not required to issue any invoice under rule 4A of Service Tax Rules. Hence, there is no question of ‘point of taxation’. However, as per rule 5 of Point of Taxation Rules and section 67A of Finance Act, 1994, Mr. Vineet is not required to pay any service tax.
Q4(c) Vivitha & Co., a registered dealer in Ludhiana. furnishes the following details of purchases and sales pertaining to the month of March. 2014 : * Opening balance in VAT Input Credit brought forward – Rs 0.20 lakhs * Purchases of raw materials within the State (final invoice value) from registered dealers – Rs 26.00 lakhs * Purchases of raw materials within the State (final invoice value) from dealers opting for Composition Scheme – Rs 5.20 lakhs * Purchases from outside the State (final invoice value) – Rs 10.20 lakhs * Sales within State of finished goods, excluding VAT – Rs 40.00 lakhs. The Input VAT rate for raw materials is 4%; Output rate is 10%. Determine the VAT liability of the dealer (4 marks)
Ans 4(c) (A) Tax payable of sales – Rs 4,00,000 [10% of Rs 40 lakhs] (B) Input tax Credit – 4% of Rs 26 lakhs – Rs 1,04,000. Vat Credit is not available in respect of purchase from dealers under composition scheme and purchases from outside the State (C) Opening Balance of Vat input credit – Rs 20,000 (D) Vat Liability = A-B-C = Rs 2,76,000.
Q5(b)(i) “Not All the Services provided by an Employee to the Employers are outside the ambit of Service”. Explain the statement with reference to Service Tax law (2 marks)
Ans 5(b)(i) – Section 65B(44) of Finance Act, 1994 states that ‘service’ shall not include a provision of service by an employee to the employer in the course of or in relation to his employment. Thus, the service provided by employee to employer is out of definition of ‘service’ only when (a) It is provided in course of employment or (b) It is provided in relation to employment. Thus, if employee provides some service to employer which is not provided in course of employment or it is not in relation to employment, the service will be a taxable service [e.g. if employee is doing business as agent in his spare time]
Q5(b)(ii)(1) Discuss whether the following services are liable to Tax : Services provided on contract basis by a person to another (1 mark)
Ans 5(b)(ii)(1) – Since all services are taxable except those in negative list, the service will be taxable.
Q5(b)(ii)(2) Discuss whether the following services are liable to Tax : Services provided by a casual worker to Employer who gives wages on daily basis to the workers (1 mark)
Ans 5(b)(ii)(2) – Service by an employee to the employer in the course of or in relation to his employment is excluded from definition of ‘service’. There is no requirement that employee must be permanent employee. Hence, even if the service provider is a casual worker, there is employer employee relation and hence it is excluded from definition of ‘service’ itself. Hence, the service is not taxable.
Q5(c) Discuss the validity of the following statement with reference to computation of liability- under CST Act: (i) Cost of freight, separately charged in the invoice, shall be deducted from sale price (ii) Subsidy given by Government to manufacturers (selling the product at controlled price) to compensate cost of production will form part of sale price, (in) Charity or dharmada collected by dealer will not form part of sale price (iv) Free of cost material supplied by the customer will be added to the sale price (4 marks)
Ans 5(c) – (i) Statement is correct (ii) In Neyveli Lignite v. CTO 124 STC 586 = (2001) 9 SCC 648 = 2001 AIR SCW 3917 (SC 3 member bench), it was held that Vat is not payable as it is not part of ‘price’. Thus, the statement is incorrect (iii) The statement is correct [However, there is contrary decision of Madras High Court] (iv) The statement is incorrect. In State of Tamil Nadu v. Sri Meenakshi Plastic Industries (2010) 4 GST 292 (Mad HC DB) * V S Engineering v. State of Andhra Pradesh (2014) 68 VST 87 (AP HC DB), it was held that value of such free of cost material is not includible.
Q6(b) Gupta Associates, a firm of lawyers rendered legal Advice to Mr. Das, an Architect and Surya Ltd. an Advertising agency during December, 2013. Both Mr. Das and Surya Ltd. are not entitled for Small Service Provider exemption in the year 2013-14. – – Who is Liable to pay Service Tax in this Case ? Will your answer be different if Mr. Das and Surya Ltd. sought Legal Advice from Mr. Dev a Lawyer (4 marks)
Ans 6(b) – Both Mr Das and Surya Ltd. are ‘business entity’, They are not eligible for small service provider exemption. This means that their turnover in more than Rs 10 lakhs per annum. Hence, in both the cases service tax is payable. The service tax is payable by service receiver i.e. Mr Das and Surya Ltd. respectively under reverse charge. The answer is same in case where service is provided by individual lawyer (advocate) Mr Dev and not by a firm of lawyers (Advocates is the correct nomenclature).
Q6(c) Mittal Brothers are the manufacturers of certain Non-Excisable Goods. They manufactured goods worth Rs. 2,00,000 on June 25, 2013. These goods were removed from the factory on September 20, 2013. On September 1, 2013 these goods were brought within the purview of the Tariff and chargeable to duty @ 12%. Discuss the leviability of Excise Duty in the hands of Mittal Brothers (3 marks)
Ans – If certain goods are brought within purview of excise for the first time, excise duty is not payable in respect of goods manufactured prior to date when the duty was imposed. However, if the goods were exempt earlier and made taxable w.e.f. 1-9-2013, excise duty will be payable if goods are cleared from factory on or after 1-9-2013.
Q7(b) Compute the interest payable on delayed payment of service tax by Service provider in following cases : (A) Name of the service provider – PQR Ltd.; Service Tax Liability – Rs. 1,23,600; Delay in payment of Service Tax – 20 Days; Aggregate value of taxable services rendered in previous financial year 2012-13 by PQR Ltd. was Rs. 40,00,000 (B) Name of the service provider – – Mr. Manik; Service Tax Liability – Rs. 2,16,000; Delay in payment of Service Tax – 25 Days; Aggregate value of taxable services rendered in previous financial year 2012-13 by Mr. Manik was Rs. 62,00,000. – – Assume that Service Tax liability and delay given above relates to financial year 2013-14 (4 marks)
Ans 7(b) – (A) Since value of taxable service of PQR Ltd. in preceding financial year was Rs 60 lakhs or less, interest rate is 15%. Hence, interest payable is [(1,23,600 x 15 x 20)/(365 x 100)] = 1,015.89 (B) Since value of taxable service of Mr. Manik in preceding financial year was exceeding Rs 60 lakhs, interest rate is 18%. Hence, interest payable is [(2,16,000 x 18 x 25)/(365 x 100)] = 2,663.01.
Q7(c) R. R Pharma Ltd. manufactures a particular drug, which is not covered by MRP. On 12-3-2014, 2,000 units of this drug were cleared from the factory for distribution as free samples to physicians. The MRP of a unit is Rs. 202, inclusive of VAT at 1% and excise duty at 12.36%. Cost of production per unit is Rs 160 per unit. The company has approached you with the following views : (i) Free samples given to the doctors cannot be sold by any one, as per the Drug Control Act; hence they are not marketable. As a logical corollary, Excise Duty is not leviable (ii) If this has to be valued, the company makes no profit and hence should be valued at cost. – – Advise the company suitably, as regards the value-to be adopted for the free samples (4 marks)
Ans 7(c) (i) Excise duty is payable, as was held in Medley Pharmaceuticals v. CCE (2011) 2 SCC 601 = 263 ELT 641 (SC) (ii) Since goods are not covered under MRP valuation provisions, value has to be on basis of price of similar goods. The assessable value is required to be calculated by making back calculations as follows – If x is the Assessable value, excise duty is 0.1236 x. Total value for purpose of Vat is 1.1236 x (inclusive of excise duty, as Vat is payable on excise duty amount also). Vat @ 1% of 1.1236 x is 0.011236 x. Hence, total price including excise duty and Vat = 1.134836 x. Now, 1.134836 x = 202. Hence, x = Rs 178.00. Excise duty @ 12.36% = 22.00. Value for purpose of calculating Vat is Rs 200 (178 + 22) (including excise duty). Vat @ 1% of Rs 200 is 2. Thus, total selling price including excise duty and Vat is Rs 202.
CA IPCC May, 2014
Question No.1 is compulsory.
Candidates are also required to answer any five questions from remaining six questions.
[Answers relating to question on indirect taxes only]
Q1(b) Farm Heroes is engaged in providing services for the last five years. The value of taxable services provided by Farm Heroes during the preceding financial year was Rs 45 lakhs. It has received the following sums (Exclusive of service tax) in the month of January 2014. Calculate the value of taxable services and tax payable thereon for the month of January 2014 : (1) Supply of farm labour : 55,000 (2) Testing of soil of farm land :1,65,000 (3) Value of Services provided free :50,500 (4) Processing of raw material to make it fit for production and this process is not liable to Excise duty : Rs 6,35,000 (5) Advance Received for such services (As mentioned in (4) above) to be provided in May 2014. :2,13,000
Answer 1(b) – Since the value of services provided by the assessee exceeded Rs 10 lakhs during the preceding financial year, the assessee is not entitled to any small service provider exemption during the current financial year.]
(1) Not taxable (2) Not taxable (3) Since no consideration, it is not ‘service’ (4) Taxable (as activity has not resulted in ‘manufacture’) – Rs 6,15,000 (5) Taxable (if service is taxable, advance received for that service is subject to service rax) – Rs 2,13,000.
Value of taxable services: Rs 8,48,000. Service tax @ 12.36% – Rs 1,04,813.
Q 1(c) Mr. Vijay, a registered dealer from Gujarat, submits the following information pertaining to the month of January 2014. (i) Purchase of Raw material A for Rs 3,50,000 which was exempt from levy of VAT and utilized for production of X (ii) Purchase of Raw material B for Rs 7,60,000 on which VAT is paid @ 1% and utilized for the production of product Y (iii) Purchase of Raw material C for Rs 10,00,000 on which VAT is paid @ 12.5% and utilized 50% each for production of product Z and product E. Particulars of Sales are : (a) Sold X for Rs 5,00,000 in Gujarat on which VAT is leviable at 4% (b) Sold Y for Rs 6,00,000 in Gujarat on which VAT is leviable at 0% (c) Sold Z for Rs 4,00,000 in Delhi @ CST 2% (d) Sold E for Rs 12,00,000 which is exempt from levy of VAT. – – Assuming there is no opening and closing inventory, calculate the amount of VAT payable for the relevant month. (5 marks)
Ans 1(c) The question states that Vat on Y is 0% while E is exempt from Vat. Thus, there is distinction between the two. Hence, it is assumed that Y is zero rated’ (i.e. input tax credit is available) while E is exempt i.e. input tax credit is not available.
Principally, Vat provisions do not require one to one relation. However, since the question has given one to one relation of input and output, the question is answered on the basis that one to one relation is required. Hence, Vat (Sales tax) payable and input tax credit available in respect of each product is as follows –
Product X – Vat payable – Rs 20,000 (4% of Rs 5,00,000). Input tax credit available (of A) – Nil. Hence, net Vat payable – Rs 20,000
Product Y – Vat payable – Nil. Input Tax credit Available on ‘B’ Rs 7,600 (1% of Rs 7,60,000) – Excess Input tax credit available – Rs 7,600 [Note – the product Y is actually sold at price below the purchase price. However, in Vat provisions, there is no restriction on Vat credit even if product is sold below the cost].
Product Z – CST payable Rs 8,000 [2% of Rs 4,00,000] Input tax credit available on 50% on input C – Rs 62,500 [12.5% of Rs 5,00,000]. Excess Input Tax Credit available – Rs 54,500 [62,500 – 8,000].
Product E – Vat payable of sales – Nil. Input tax credit available on 50% of C – Nil [as product is exempt]
Thus, Vat payable on X – Rs 20,000. Excess Input Credit available – Rs 62,100. Hence, Net Vat credit which can be carried forward = Rs 42,100 [62,100 – 20,000]
Q 2(b) Raj Associates is a consultancy firm. During the financial year 2013-14, it received Rs 18 lakh as professional fee on which tax has been deducted under section 194J. You are required to compute the value of taxable service and service tax liability of Raj Associates for the year 2013-14 assuming that the receipt is inclusive of Service Tax. (4 Marks)
Answer 2(b) – TDS under section 194J of Income Tax Act is on net value excluding service tax. If Net Assessable Value = X, service tax on net value = 0.1236X. TDS on X is 0.1X. Thus, the amount received by Raj Associates will be 0.9 X + 0.1236 X = 1.0236X.
1.0236 X = Rs 18,00,000. Hence, X = Net Assessable Value = Rs 17,58.499.41
Check that service tax on Rs 17,58,499.41 is Rs 2,17,350.53. Total Gross Bill (including service tax) = Rs 19,75,849.94. TDS (10% of Rs 17,58,499.41) = 1,75,849.94.
Thus, actual amount received as professional fees = Rs 19,75,849.94 – 1,75,849.94 = Rs 18,00,000.00
Q2(c) Mr. Javed, a manufacturer sells goods to Mr. Kabir for Rs 5,000 who sells it to Mr. Hakim a wholesaler for Rs 5,500. The wholesaler sells goods to a retailer Mr. Mohan for Rs 6,000 who in turn sells it to end user for Rs 7,000. Compute the VAT liability, input credit availed and tax payable by the manufacturer, wholesaler and retailer under invoice method assuming – (i) VAT Rate is 12.5% (ii) Above prices are excluding VAT component. (4 Marks)
Ans 2(c) Under invoice method, buyer is entitled to credit of VAT paid by seller.
|Sale by||Sale to||Sale Price (given in question that price is before VAT)||Output VAT @ 12.5% on sale||Input VAT Credit||VAT payable in cash|
|4. Mohan||End User||7,000||875||750||125.00|
|Total Vat paid to the Government||875.00|
It may be noted that total Vat paid on the goods is Rs 875, which is paid in four stages i.e. 625.00 + 62.50 + 62.50 + 125.00
Q 3(b) Explain the provisions regarding adjustment of Excess amount of Service Tax paid in case of renting of Immovable Property Service, owing to Property Tax payment. (4 Marks)
Ans 3(b) – Service tax is payable on gross amount charged for renting of such immovable property less property tax payable to local authorities on such property.
Notification No. 29/2012-ST dated 20-6-2012 (effective from 1-7-2012) [Earlier Notification No. 24/2007-ST dated 22-5-2007] provides for reduction from gross amount to the extent of property tax on such property paid to local authorities (like Municipal Corporation, Municipality, Gram Panchayat etc.). The reduction is only to the extent of property tax paid and not in respect of interest for delayed payment of tax or penalty paid to local authority for any reason.
Deduction of property tax will be only in respect of tax actually paid (and not on payable basis). Deduction will be on pro rata basis.
For example, if rent received for April 2008 is ` 1,00,000 and property tax paid for April 2008 to September 2008 is ` 12,000, service tax for April 2008 will be payable on ` 98,000 (` 1,00,000 less property tax of ` 2,000 for April 2008 on pro rata basis).
Deduction when property tax is paid by property owner at a later date – Since deduction in respect of property tax is allowed only on actual payment basis, it is possible than when rent is actually received from service receiver, payment in respect of property tax for that period has not been made. In such case, the service provider will be liable to pay service tax on the entire value of rent. If, at a later date, he pays the property tax in respect of the immovable property, he can adjust the excess tax paid earlier while making payment of service tax for the subsequent period. Such adjustment can be made anytime within one year from date of payment of property tax. The details of such adjustment should be informed to jurisdictional Superintendent of Central Excise within period of 15 days from date of adjustment [Rule 6(4C) of Service Tax Rules].
Q 3(c) State the circumstances under which VAT registration can be cancelled. (4 Marks)
Ans 3(c) The provisions vary from State to State, but broadly, registration under Vat can be cancelled for any of following reasons
- If dealer is company – he dies, if dealer is partnership firm – the firm is dissolved and if dealer is company – it is would up
- a dealer discontinues his business (the dealer should apply for cancellation) or
- a dealer disposes of his business (e.g., by way of sale, etc.) ; or
- a dealer transfers his business to a new location; or
- annual turnover of a manufacturer/trader dealing in designated goods or services falls below the amount specified in the VAT Act/rules [The dealer may continue his registration or apply for cancellation]; or
- a dealer fails to furnish security required to be submitted by him ; or
- a dealer commits fraud or misrepresentation of facts. Cancellation can be only after issuing notice and granting personal hearing; or
- a dealer does not pay Vat due or other violates the provisions of the VAT laws. Cancellation can be only after issuing notice and granting personal hearing.
Q 4(b) What do you mean by Bundled Service ? Explain by giving an example of the same. (4 Marks)
Answer 4(b) “Bundled service” means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services.
Thus, bundled service means two or more services are provided as one composite service.
One example of naturally bundled service is ‘package tour’, where service provider offers to provide service right from pickup, travel, hotel accommodation, sight-seeing etc.
A CA may offer income tax consultancy in addition to auditing services.
A contractor may offer services right from design, getting necessary approvals, actual construction, finishing, arranging electrical and water connections and getting completion certificate of a building.
A ‘turnkey project’ is another example of bundled service.
In such cases, the service is required to be classified as per essential character.
Q 4(c) How VAT can be said to be non beneficial as compared to single last point system ? Also explain any other three deficiencies of VAT system in India. (May 2014, 4 Marks)
Answer 4(c) : Under single last point taxation system, tax is levied on last sale price while in VAT, tax is levied on each sale price with credit of tax paid at earlier stage. Thus, in Vat coverage of Vat is very wide. Under VAT, there is lot of record-keeping. Checks and controls are required to avoid misuse of input tax credit. On the other hand, single last point taxation system is very easy and simple to operate.
Deficiencies in present State Vat system are as follows –
- Each State has separate Act, separate Rules and Forms. Thus, there is no uniformity in legal provisions and procedures which creates problems for dealers having multi-state operations.
- Vat Rates are not uniform in respect of all States. Even classification of goods is not uniform.
- There is no uniformity in definition of capital goods and allowability of credit. In some States, it is spread over three years while in some States, it is in first year itself.
- States have deviated from various provisions as contained in White Paper.
- Vat is only on goods and not services. Distinction between goods and service is not clear due to which there is overlapping and double taxation between State Vat and Central Sales Tax
- Due to political and other reasons, there are many exemptions e.g. textile sector, agricultural sector, due to which coverage of Vat is narrow.
- Duty on inputs and capital goods has been kept low at 5% (initially it was 4%). If Vat is payable on final product at 12.5%, there is no reason for keeping Vat rate on inputs and capital goods low, as Vat credit will be available. Effect is that at final output stages, the scope of evasion become high and lucrative.
- Inter-State transactions are taxable at 2%. Vat credit (set off) of this tax is not available. Similarly, in case of interstate stock transfer, 2% input credit is disallowed. Thus, present Vat is a compromise Vat as Vat chain is not complete and intermediate products do not become fully tax free.
- Check posts at State border increase delays and detention of vehicles and increases corruption
- Dealers purchasing locally and making inter-state sales or exports have to apply for refund of Vat credit. This is a lengthy procedure and very corruption prone.
- State in which goods are produced but not sold do not get any tax revenue. ‘Consuming state’ gets all taxes while ‘producing state’ does not get any tax revenue. Hence, ‘producing States’ are reluctant to implement full Vat.
Q 5(b) State with reasons, whether the following statements are True or False (i) Mr. Vikas, an individual, has not provided any service in the half year period of April to September. He need not file any return for this period (ii) Mr. Sumeet has filed his Service Tax return belatedly. He wants to revise the same. He can file a revised return. (4 Marks)
Ans 5(b) – (i) It is false. So long as service tax registration is in force, filing half yearly return is mandatory (ii) It is true. He can file revised return within 90 days from filing original return, even if it was filed belatedly.
Q 5(c) State with reasons whether the following statements are true of false with regards to input tax credit of VAT : (i) It is always mandatory to issue a tax invoice under VAT provisions. (ii) VAT usually increases the price as the tax is payable on the first sales price. (iii) VAT Rate on sale of Lottery tickets is 4% (iv) It is permitted to issue ‘Tax Invoice’ inclusive of VAT. (4 marks)
Answer 5(c) (i) partly true. Only registered dealer has to issue invoice. In some States, in case of small value sales (say Rs 50), invoice is not required. (ii) False, as Vat is payable at each stage where input tax credit of Vat paid at earlier stages is available (iii) There is no Vat on sale of lottery ticket, as it is actionable claim (iv) False, Vat is required to be shown separately in invoice.
Q 6(c) Mr. X provides some taxable services to Mr. Y. In the course of providing such services, Mr. X. incurs some expenditure such as travelling. Telephone, etc. and includes these amounts in the value of taxable services. Discuss whether Service Tax has to be charged on these items of expenditures. Will your answer be different if Mr. X indicates these items separately in the invoice ? (4 Marks)
Ans 6(c) : Yes, these amounts are includible in value of taxable services whether or not these are shown in the invoice separately. These are part of value of service.
Q 6(d) “Invoices are crucial documents for Administering VAT.” Discuss. (May 2014, 4 Marks)
Ans 6(d) Tax invoice, sale and purchase statements, debit and credit notes, details of input tax credit, Vat return, balance sheet and Vat audit are crucial documents for administering Vat.
Q 7(b) Ajit who entered into a roll over contract, approached ABC Bank Ltd. for selling US $ 46,000 at the rate of Rs 60 per US dollar. RBI Reference rate at that time was Rs 60.50 per US Dollar. However, the rate of exchange declared by CBEC for the day is Rs 61.50 per US dollar. Calculate the value of taxable service with reference to rule 2B of the service tax (Determination of value) Rules, 2006 and Service Tax payable thereon. (4 Marks)
Solution : As per Rule 2B of the Service Tax (Determination of Value) Rules, 2006, value of taxable services = (RBI Reference Rate – Buying Rate) × No. of units of currency = (Rs 60.5 per $ – Rs 60 per $) × $ 46,000 = Rs 23,000. Service Tax @ 12.36% on Rs 23,000 = Rs 2,842.80. [CBEC rate has no relevance under Rule 2B of the Service Tax (Determination of Value) Rules, 2006].
Q 7(c) Mr. X furnishes the following particulars for the month of December 2013. Compute the VAT payable and input tax carried forward to Next period, if any – (i) Inputs purchased during the month (from within state) (inclusive of VAT 12.5%) 2,25,000 (ii) Raw Material purchased inter state (including CST 2%) 51,000 (iii) Transportation charges – Rs 35,000 (iv) Balance of VAT Credit as on 01-12-2013 – Rs 6,700. – – 90% of the stock was sold during the month at the profit of 20% on cost. Assume there was no opening stock of goods. The VAT Rate on sale is 4%. (4 Marks)
Answer 7(c) – Calculation of cost – (i) Inputs Rs 2,00,000 (Vat of Rs 25,000 is not part of cost ans its Input Tax Credit is available (ii) Inter-State purchases – Rs 51,000 [including CST as its input Tax credit is not available] (iii) Transportation charges (presumed to be of inputs and part of cost) – Rs 35,000 – Total cost of production = 2,86,000.
90% of stock was sold. Hence cost of goods sold – Rs 2,57,400 [90% of Rs 2,86,000]. Profit is 20% of cost. Hence, selling price = Rs 3,08,880. Vat of sales @ 4% = Rs 12,355,20
Input Tax Credit available (a) On purchases – Rs 25,000 (b) Opening balance of input tax credit – Rs 6,700 = 31,700.
Thus, Vat actually payable is Nil as input tax credit available is more than Vat payable. The dealer has excess Input Tax Credit of Rs 19,344.80 [Rs 31,700.00 – 12,355.20].
IPCC Inter May 2013
Question No. 1 is compulsory. Attempt any five questions from the remaining six questions.
Q1(b) Q Ltd. is engaged in providing the taxable services. Ascertain the amount of service tax payable by it in the month of September, 2012 from the information given below – (i) Supply of farm labour for agriculture purpose. – 1,00,000 (ii) Service to people free of cost – 60,000 (iii) Advance received in September, 2012 from clients for which no service has been rendered till date – 85,000 (iv) Amount received for the services rendered in June, 2012 (bills for the same were issued on 25th June, 2012) – 90,000 (v) Bill raised for the services rendered in the month of September, 2012 against which no amount is received so far. – 75,000. The above amounts are exclusive of service tax. Q. Ltd is not eligible for small service provider’s exemption in the financial year 2012-13. The rate of Service Tax is 12%, Education Cess is 2% and Higher Education cess is 1% (5 marks)
Q1(c) Mr. Bansilal of Punjab is a manufacturer, registered under VAT. He provides the following particulars for the financial year 2012-13. (1) Purchases from local registered dealer (excluding VAT 4%) – 1,15,000 (2) Purchases from a dealer having opted composition scheme (includes VAT 4%) – 2,20,000 (3) Purchases of machinery eligible for input credit on 1-10-2012 (excluding VAT 4%) Depreciation rate 15% p.a. – 5,00,000 (4) Other direct & indirect expenses – 30% of total purchases (excluding depreciation) (5) Profit margin – 20% of the total cost. (6) Unutilized balance of VAT input credit as on 1-4-2012. – 7,500 (7) 90% of the production is sold during the year. (8) VAT rate for sales is 12.5%. Find the taxable turnover, net VAT payable and input credit for the year 2012-13 (5 marks)
Q 2(b) What is “Negative list of services”? Which services by Government or a local authority are not included in the negative list of services? (4 marks)
Q 2(c) One of the merits of VAT is ‘Neutrality’. Explain. (4 marks)
Q3(b) What is meant by EASIEST scheme? Enlist the benefits of EASIEST scheme to an assessee under the Service Tax Provisions (4 marks)
Q3(c) Seth Traders, a registered dealer of Bihar having stock of goods worth Rs 60,000 purchased from West Bengal wishes to opt for composite scheme. Advise the dealer whether it is possible? (4 marks)
Q4(b) State with reasons whether the following statements are correct or incorrect under the Service Tax provisions : (1) Mr. P provides the service in March, 2012. He receives the payment by cheque on 30-3-2012 and the cheque is cleared on 15-4-2012. The point of taxation of this service will be 30-3-2012 and the rate of service tax will be 10%.(2) Postal services for registered post are liable to service tax (3) M/s SR Brothers having office in Jammu, provide the services to M/s QR Ltd. in Patna. These services are not liable to service tax (4) Jaipur Branch of ABC Ltd. provides services to Baroda Branch of ABC Ltd. These services are not liable to service tax (4 marks)
Q4(c) Discuss the provisions of VAT for ‘stock transfer’. (4 marks)
Q5(b) ABC & Co. is a partnership firm engaged in the business of recruitment and supply of labourers. The firms, which had rendered taxable services to the tune of Rs 30 lacs in the financial year 2011-12, furnishes the following details pertaining to the half year ended on 30-9-2012 (1). Amounts collected from companies for pre-recruitment screening.- Rs 3,00,000 (2) Amounts collected from companies for recruitment of Permanent staff – Rs 1,80,000 (3) Amounts collected from companies for recruitment of Temporary staff – Rs 4,50,000 (3) Advances received from prospective employers for conducting campus interviews in colleges – Rs 80,000. Wherever applicable, service tax has been charged separately and received from clients. Compute the value of taxable services rendered and the service tax payable by the assessee for the relevant half year. The rate of service tax is 12%, education cess is 2% and higher education cess is 1%.
Q5(c) Manufacturer A sold product X to B of Delhi @ Rs 1,000 per unit. He has charged CST @ 4% on the said product and paid Rs 60 as freight. B of Delhi sold goods to C of Delhi @ Rs 1,250 per unit and charged VAT @ 12.5%. C of Delhi sold goods to D, a consumer @ Rs 1,500 per unit and charged VAT @ 12.5%. Compute VAT Liability of B & C (4 marks)
Q6(b) Mr. Rajesh, a proprietor of Z enterprise provides taxable services. He received the following amount during the financial year 2012-13 :(i) Rs 1,25,000 as advance while signing a contract.(ii) Rs 6,00,000 by pay order during process of providing service.(iii) Rs 5,25,000 by credit card after completion of service as on 31st Dec, 2012. Compute the value of taxable service and amount of service tax payable by him. Assume service tax has been charged separately. Z enterprise is not eligible for small service provider’s exemption in the financial year 2012-13. The rate of service tax is 12%, education cess is 2% and higher education cess is 1% (4 marks)
Q6(c) Distinguish between Gross Variant and Consumption Variant of VAT. (4 marks)
Q7(b) How is the value of the service under service tax provisions determined where such value is not ascertainable ? (4 marks)
Q7(c) What are the procedural requirements under VAT Act for claiming set off of input tax on capital goods ? (4 marks)
CA IPCC November 2012
Q1 (b) Mr. Ghosh is a practising Chartered Accountant. He has furnished the following information for the month of January 2012. (i) A bill for annual professional service was raised on Amco Ltd., for Rs. 7,20,000 on 22nd December 2011. However he received Rs. 7,00,000 in full and final settlement of the above bill on 23rd January 2012. (ii) An advance of Rs. 3,00,000 was received from Atul Ltd., for services to be provided in the month of April and May. (iii) Services were provided to a friend free of cost in January 2012 for which Ghosh normally charges Rs. 1,20,000 from other clients. (iv) Rs.1,00,000 was received on January 20, 2012 from client ‘C’ whom Ghosh represented in the Income-tax Appellate Tribunal which sent a notice to Mr. C. (v) Rs. 1,00,000 was received on 18th January 2012 for services rendered as a part time lecturer in a local college. – – Mr. Ghosh provides the following additional informations : (i) In all the aforesaid cases the service tax has not been charged separately (ii) He is not eligible for the exemption available to the small service provider. – – Compute the service tax, education cess and higher education cess payable by Mr. Ghosh for the month of January 2012. The rate of service tax is 12 per cent education cess is 2 per cent and higher education cess is 1 per cent (5 marks)
Q1(c) The following are details of purchases, sales, etc. effected by Varadan & Co., a registered dealer, for the year ended March 31, 2012 – (figures in Rupees) (a) Purchase of raw materials within State (500 units, inclusive of VAT levy at 12.5%) – 11,25,000 (b) Inter-State purchases of raw materials, inclusive of CST at 4% – 4,08,000 (c) Import of packing material, inclusive of customs duty of Rs. 10,000 – 2,10,000 (d) Capital goods purchased on April 1, 2011 of VAT levy at 10% (input credit to be spread over 2 financial years) – 5,50,000 (e) Sales of taxable goods within State, inclusive of VAT levy at 4% – 40,24,000. (f) Sales of goods within State, exempt from levy of VAT (Goods were manufactured from the Inter-State purchase of raw materials) – 1,20,000. – – Compute the VAT liability of the dealer for the year ended March 31, 2012 (5 marks)
Q2(b) D & Co. has been providing taxable services for the past few years. Its gross value of taxable services provided during the financial year 2009-10 and 2010-11 is Rs.12 lakhs and Rs. 8.75 lakhs respectively. During the financial year 2011-12 it provided service for Rs. 13 lakhs. Calculate the service tax liability of D & Co. for the financial year 2011-12 Rate of service tax 10 per cent, education cess 2 per cent and higher education cess @ 1 per cent (4 marks)
Q2(c) How is VAT computed under the subtraction method ? (4 marks)
Q3 (b) State whether the following are true or false giving reasons to substantiate
your answer – (i) A multiple service provider should file multiple service tax returns, one for each service provided (ii) A Ltd., a foreign company incorporated in the U.K. provides taxable services in India to B Ltd., an Indian company incorporated in Mumbai. In the instant case, the service recipient and not the service provider is liable to service tax (iii) Even if no service has been provided during a half year and no service tax is payable; the assessee has to file a nil return within the prescribed time limit (iv) The assessee cannot file a revised return under Service Tax Law (4 marks)
Q3(c) Enlist any six purchases eligible for availing input tax credit (4 marks)
Q4 (b) Pranav Private Ltd. is engaged in providing a taxable service and furnishes you the following information of Services billed and received (In `) – (a) December 2011 (includes `. 2,00,000 for the services rendered to the United Nations Organisation) – 5,00,000 (b) January 2012 (includes `. 1,50,000 for the services rendered within the Indian territorial waters) – 4,00,000 (c) February 2012 (includes Rs. 1,75,000 for services rendered to the RBI)-5,00,000 (d) March 2012 Advance receipt for services to be rendered in April 2012 (includes Rs. 1,60,000 for services rendered in the State of Jammu & Kashmiri)-5,00,000. Compute the taxable services for the year ended March 31, 2012 (4 marks)
Q4(c) What are the conditions to be fulfilled by the dealer accepting the composition scheme under the value added tax ? (4 marks)
Q5 (b) What are the consequences of non-payment or delayed payment of service tax ? (4 marks)
Q5(c) What is meant by input tax credit in the context of VAT provisions ? How does input tax credit help in achieving the essence of VAT ? (4 marks)
Q6 (b) Briefly explain the provision relating to advance payment of service tax. (4 marks)
Q6(c) Discuss the compulsory and voluntary registration under VAT (4 marks)
Q7 (b) Explain the treatment for excess amount of service tax collected from the Recipient under Service Tax (4 marks)
Q7(c) Since the VAT system emphasizes on self assessment the need for a system of cross-checking has arisen. Elaborate (4 marks)
CA IPCC May 2012
Q1 (b) Infotech software systems is an information technology software company. The receipts during financial year 2011-12 are as under – (i) Receipts for the analysis of information technology software – ` 1,80,000 (ii) Receipts for providing advice consultancy and assistance on matter related to specifications to secure a database – ` 4,10,000 (iii) Receipts for providing the right to use the canned software on which the amount of excise duty has been paid and the benefit under Notification (No. 31/2010 Cus Dated 27-02-2010 has not been availed) – ` 5,10,000 (iv) Receipts for the upgradation of the information technology software – 2,65,000 (v) Infotech software systems in the financial year 2010-11 has provided the taxable services valuing of ` 15,00,000. – – Determine the value of taxable service and the amount of service tax, education cess and secondary and higher education cess payable by Infotech software systems for the financial year 2011-2012. The amount of service tax has been charged separately.
Q1(c) R. Ltd of Mumbai made a total purchases of input and capital goods of Rs. 60,00,000 during the month of February, 2012. The following further information is available, (i) Goods worth Rs. 15,00,000 were purchased from Assam on which C.S.T 2% was paid, (ii) The purchases made in February, 2012 include goods purchased from unregistered dealers amounting to `. 18,50,000. (iii) It purchased capital goods (not eligible for input credit) worth `. 6,50,000 and those eligible for input credit for ` 9,00,000. (iv) Sales made in Mumbai during the month of February, 2012 is ` 10,00,000 on which VAT at 12.5% is payable. – – Assuming that all purchases given are exclusive of tax and VAT 4% is paid on them calculate – (a) the amount of purchases eligible for input credit (b) the amount of input credit available for the month of February, 2012 (c) the VAT payable for the month of February, 2012. – – The input VAT credit on eligible capital goods is available in 36 equal monthly instalments.
Q2 (b) A Partnership Firm, gives the following particulars relating to the services provided to various clients by them for the half-year ended on 30-09-2011 – (i) Total Bills raised for Rs. 8,75,000 out of which bill for Rs. 75,000 was raised on an approved International Organization and payments of bills for Rs. 1,00,000 were not received till 30-09-2011 (ii) Amount of Rs. 50,000 was received as an advance from XYZ Ltd. on 25-09-2011 to whom the services were to be provided in October, 2011. You are required to find out the – (a) Taxable value of services (b) Amount of service tax and education cess and secondary and higher education cess payable.
Q2(c) Explain the consumption variant of VAT. Mention the reasons for the preference of this variant of VAT.
Q3(b) Test the veracity of the following assertions with reference to the statutory provisions relating to service tax. Do not assign any reason for them – (a) Services provided by consulting engineers in computer hardware engineering and computer software engineering are not includible in their taxable services (b) Services provided to any person by a mandap keeper for the use of the precincts of a religious place as a mandap are not exempt from service tax (c) The following are the person(s) who provides scientific or technical consultancy service – (i) a scientist (ii) a technocrat (iii) any engineering organisation (d) Pre-school coaching institutions services are taxable (e) X-took certificate of practice with effect from 25-1-2012. He has to make an application for registration before 24-3-2012 (f) Small scale service provider who is claiming exemption of Rs. 10 lakh shall have to apply for registration where the aggregate value of taxable services exceeds ` 9 lakhs (g) Gross amount charged for taxable services includes only that amount received towards the taxable service which is received after the provision of such services (h) Service tax for the month of March or quarter ending March should be deposited by 5th April.
Q3(c) Test the veracity of the following assertions with reference to the statutory provisions relating to value added tax. Do not assign any reason for them – (a) Input credit under VAT is available in respect of Central Sales Tax paid on purchases (b) VAT is leviable at the first stage of sale (c) Input credit is available in respect of customs duty paid on goods imported from a country outside India (d) Input credit is available only if the purchaser has obtained proper tax invoice (e) No registration is required under any VAT regime (f) A trader can take credit of the inputs purchased by him only if he has obtained proper tax invoice from the valuer (g) VAT is inflationary in nature (h) White paper on Slate level VAT provides a framework for drafting various Stale VAT legislations.
Q4(b) Punjabi Banquets is engaged in providing ‘mandap keeper services’. For the month of January, 2012, it provided the following information – (1) Banquet hall let out for marriage function – The gross amount charged for banquet hall including catering charges (Catering charges have been separately indicated in the invoice) – 6,00,000 (2) Amount received for rooms let out for stay of guests attending the marriage – 40,000 (3) Amount collected for letting out the hall for All India Dance Competition. No food was supplied alongwith it – 5,00,000 (4) Mandap for shooting of marriage sequence of a Daily Soap Opera – 2,40,000. Compute the amount of service tax, education cess and secondary and higher education cess payable by Punjabi Banquets for the month of January, 2012. Additional Information: (1) Point of taxation in all the aforesaid case is January, 2012 (2) All the amounts stated above arc exclusive of service tax (3) Punjabi Banquets is not eligible for small service providers exemption under notification. No.6/2005-ST dated 01-03-2005 for the financial year 2011-12.
Q4(c) Determine the liability of VAT of X for the month of December 2011 using invoice method of computation from the following data: * Purchase price of goods acquired from local market (including VAT) – `. 52 lakhs * VAT rate on input – 4 % * Transportation, insurance, warehousing and handling cost incurred by X – ` 20,000 Goods sold at a profit margin – 14 % * VAT rate on sales – 12.50%.
Q5(b) What are the documents to be attached by a service provider along with an application for registration under service tax ?
Q5(c)(i) What arc the different variants of VAT and how is deduction available for tax paid on inputs including capital inputs ?
Q5(c)(ii) What arc the different stages of VAT ? Can it be said that the entire burden falls on the final consumer ?
Q6(b) Avinash is a qualified Chartered Accountant. He acquired the certificate of practice from the 1CA1 in May, 2010. For the financial year 2011-12 his receipts (including service tax) are as follows (figures in Rupees) : * Services received in tax planning – 50,000 * Representation of client before CESTAT – 40,000 * Preparation of financial statements of XYZ Ltd. – 4,00,000 * Certification of documents under Export and Import policy of Government of India – 1,50,000 *Receipts for the legal advice given to clients in the month of December, 2011.-50,000. – – In the financial year 2010-11 he has provided the value of taxable service of value. of Rs. 11,00,000. Using the above information, calculate the value of taxable services for the financial year 2011-2012.
Q6(c) Ms. Pragya, a dealer submits the following information. Compute the net VAT liability from the following information (figures in Rupees) * Import of raw material (including 10% import duty) – 1,10,000 * Raw material purchased from Kerala, (including excise duty @ 12%) VAT @ 4 % on the above purchase – 2,24,000 * Raw material purchased from Karnataka – 85,000 * Transportation and manufacturing expenses – 47,000. – – Pragya sold entire stock to Nishu at a profit of 10 % on the cost of production. VAT rate on such sale is 4%.
Q7(b) Mention the due dates for filing of service tax returns. Can an assessee submit a revised return?
Q7(c) Briefly explain the system of cross checking under VAT Act.
CA IPCC November 2011
Q1(c) Vikas Coaching Centre engaged in commercial training and coaching service furnishes you the following information and the amounts received by it for the half-year ended 31-3-2011 – (i) Coaching fee for civil service examinations – ` 3,50,000 (ii) Postal coaching fees for University examinations – ` 2,40,000 (iii) Sports coaching fee from a local college ` 1,10,000 (iv) Fee for management diploma of a foreign university (not recognised by law in force in India) – ` 4,40,000 (v) Coaching and training provided by sending staff to the residence of service receivers – ` 6,40,000. – – Determine the value of taxable service. Your answer must be with reasons (5 marks).
Q1(d) Laxman, a registered dealer submits the following information for the month of February, 2011 (Amount in Rupees) – (A) Details of purchase – (i) Raw material purchased from another State (CST @ 2%) – 10,00,000 (ii) Raw material X purchased within the State – 15,00,000 Vat rate 1% (iii) Raw material Y imported from Singapore (includes customs duty paid @ 10%) – 11,00,000 (iv) Raw material Z purchased within the State – 6,00,000 Vat rate 12.5% (B) Details of sales – (i) Sale of goods produced from raw material X – 27,00,000 Rate of Vat 4% (ii) Sale of goods produced from inter-state purchase and imported raw materials – 32,00,000 Rate of Vat 1% (iii) Sale of goods produced from raw material Z – 8,00,000 Rate of Vat 12.5%. – – Note – The purchase and sales figures given above do not include VAT/CST. – – Assume that there was no opening or closing inventory. Compute the amount of Value Added Tax (VAT) payable by Laxman for the month of February, 2011 (5 marks).
Q2(b) (i) When does e-payment of service tax become mandatory? (ii) State the ‘due date’ for e-payment of service tax by individuals and companies (4 marks)
Q2(c) Explain the role of Chartered Accountants in proper compliance of VAT (any 4 points) (4 marks)
Q 3(b) ABC Private Ltd. is engaged in providing a taxable service. For the month of January, 2011, its gross receipts were ` 18,00,000. The breakup of Month in which services are performed and the receipts in January, 2012 and are as follows – (i) March, 2010 (Includes ` 1,00,000 for the services rendered to an international organisation) – ` 4,00,000 (ii) April, 2010 (includes ` 1,25,000 for the services rendered within the Indian territorial waters) – ` 3,00,000 (iii) January, 2011 (includes ` 1,75,000 for services rendered to its associated enterprise) ` 5,00,000 (iv) February, 2011 (includes ` 1,50,000 for services rendered in the State of Jammu and Kashmir) – ` 6,00,000. – – In the financial year 2009-10, ABC Private Ltd. had paid ` 2,06,000 as service tax @ 10.30%. State the amount of service tax payable for the month of January, 2011 (4 marks)
Q3(c) State any two benefits and two drawbacks for a dealer who opts for composition scheme under VAT as per White paper (4 marks)
Q4(b) Explain optional composition scheme under service tax for distributor or selling agents of lotteries (4 marks)
Q4(c) State with reasons whether the following are true or false in the context of VAT as per White Paper – (i) No declaration form is prescribed under VAT system (ii) Taxpayer’s Identification Number (TIN) is a 10 digit alpha numerical (iii) Self assessment concept on deemed basis is one of the important features of VAT (iv) Set off of input tax credit on capital goods is available only to manufacturers and not to traders (4 marks)
Q5(b) State the contents of service tax return (any eight points) (4 marks)
Q5(c) Ashok purchased raw material ‘A’ for ` 30,00,000 plus VAT @ 4%. Out of such raw material 60% was used for manufacture of taxable goods and the remaining for manufacture of goods which are exempt from VAT. Another raw material ‘B’ was purchased for ` 15,00,000 on which VAT was paid @ 1%. Entire raw material ‘B’ was purchased for manufacture of taxable goods only. The entire taxable goods were sold for ` 50,00,000 plus VAT @ 12.5%. Compute VAT liability of Ashok on the assumption that there was no opening or closing inventory. Note – Ashok is not a dealer who opted for composition scheme (4 marks)
Q6(b) Write short notes on Service Tax Code Number and the objective sought to be achieved thereunder (4 marks)
Q6(c) Briefly explain the benefits of the system of cross-checking under VAT as per White Paper (4 marks)
Q7(b) Vaibhav Cargo Ltd. is engaged in providing Cargo Handling Service. In January, 2011, it received ` 150 lakhs for the service rendered. The breakup of the total receipts are given below (in Rupees lakhs) – (i) for export of cargo and handling of passenger baggage – 55 (ii) for storage and cleaning of empty containers of shipping lines – 13 (iii) For packing and transport of Cargo – 10 (iv) For handling cargo of agriculture produce – 20 (v) Other receipts for providing cargo handling service – 52. Calculate the value of taxable service under ‘Cargo Handling Services’ for the month of January, 2011 (4 marks)
Q7(c) X Co. furnishes you the following information – (i) Raw material purchased ` 5,00,000 plus VAT @ 4% (ii) Manufacturing expenses (revenue nature) – ` 2,00,000 (iii) Sale price ` 8,00,000 plus VAT @ 4% (iv) Plant and machinery acquired ` 2,50,000 plus VAT @ 4% eligible for input tax credit in the year of acquisition itself. Compute VAT liability under (i) gross product variant (ii) consumption variant. State which variant is beneficial to the dealer? (4 marks)
CA IPCC, May 2011
Question 1(c) – Pareesh & Co., is a partnership firm engaged in the business of recruitment and supply of labourers. The firm, which had rendered taxable services to the tune of ` 20.2 lakh in the financial year 2009-10, furnishes the following details pertaining to the half year ending September 30, 2010 – (i) Amounts collected from companies for pre-recruitment screening – 2,50,000 (iia) Amounts collected from companies for recruitment of permanent staff – 3,00,000 (iib) Amounts collected from companies for recruitment of temporary staff – 4,00,000 (iv) Advances received from prospective employers for conducting campus interviews in colleges – 1,00,000. Wherever applicable, service tax has been charged separately and received from clients. Compute the value of taxable services rendered and the service tax payable by the assessee for the relevant half year.
Question 1(d) – The following are details of purchases, sales, etc. effected by Vasudha & Co., a registered dealer, for the year ending March 31, 2011 – (a) Purchase of raw materials within State, 1,000 units, inclusive of VAT levy at 6 per cent – 5,30,000 (b) Inter-State purchases of raw materials, inclusive of CST at 2 per cent – 2,04,000 (c) Import of raw materials, inclusive of customs duty of ` 35,000 – 4,35,000 (d) Capital goods purchased on May 1, 2010, inclusive of VAT levy at 10 per cent (input credit to be spread over 2 financial years) – 3,30,000 (e) Other manufacturing expenses – 1,50,000 (f) Sale of taxable goods within State, inclusive of VAT levy at 4 per cent – 7,28,000 (g) Sale of goods within State, exempt from levy of VAT (goods were manufactured from the Inter-State purchase of raw materials) – 1,20,000 (h) Closing stock as on March 31, 2011 was 100 units of raw materials purchased within the State. Input credit is allowed only on raw materials used in manufacture of the taxable goods. Compute the VAT liability of the dealer for the year ending March 31, 2011.
Question 2(b) – During the year ending March 31, 2010, Kohli & Co., running a coaching centre, has collected a sum of ` 10.20 lakh as service tax. ` 70,000 was met through Cenvat credit and the balance was paid by cheque on various dates. The details pertaining to the quarter ending June 30, 2010 are as under – (a) Value of free coaching rendered – 20,000 (b) Coaching fees collected from students (service tax collected separately) – 14,50,000 (c) Advance received from a college for coaching their students, on June 30, 2010. However, no coaching was conducted and the money was returned on April 12, 2011 – 3,00,000. Determine the service tax liability for the quarter and indicate the date by which service tax has to be remitted by the assessee.
Question 2(c) – Which variant of VAT is most widely used in the World and why ? Are some services also included in the VAT net by such countries?.
Question 3(b)(i) – Where any transaction of taxable service is entered into with an associated enterprise, receipt of service tax is not material for levy of service tax. Explain with reasons, where you agree or disagree with this statement .
Question 3(b)(ii) Briefly discuss about the adjustment of excess amount of service tax paid in case of renting of immovable property service, owing to property tax payment.
Question 3(c) – Staruss & Co., a registered dealer under the local VAT law, having stock of goods purchased from outside the State, wishes to opt for the Composition Scheme. Advise him whether the same is possible. Will the VAT chain be broken if the dealer opts for the said scheme ?.
Question 4(b) – State the provisions which enable the Central Government to make rules for administering service tax. For what purposes are such rules made ? Name any four such rules issued by the Central Government so far.
Question 4(c) – What is meant by input tax credit in the context of VAT provisions ? How does input tax credit help in achieving the essence of VAT ?
Question 5(b) – Briefly explain the provisions relating to advance payment of service tax.
Question 5(c) – What are the major deficiencies of VAT system in India?
Question 6(b) – Nigamnath Cargo Handlers (P.) Ltd. is a cargo handling agency, in existence since 2003. For the quarter ending March 31, 2011, total collections for handling cargo (excluding service tax) was ` 32,00,000. The same included the following receipts also : (a) Handling of cargo containing life saving drugs 2,00,000 (b) Handling of export cargo – 3,00,000 (c) Handling of cargo for storage in cold storage – 1,00,000 (d) Towards providing service of packing together with transportation of cargo – 4,00,000. Ascertain the quantum of taxable cargo handling services for the quarter ended March 31, 2011. Wherever applicable, service tax was charged separately and received in full.
Question 6(c) – How can a chartered accountant help a client in the handling of VAT audit called for by the Department and in conducting external audit of VAT records?
Question 7(b) – State the due dates for filing service tax returns. Will the delayed filing of service tax return result in payment of any late fee? If so, how much?
Question 7(c) – Briefly list out the contents of VAT Invoice.
IPCC November 2010
(Only questions on service tax and Vat covered)
Q 1(c) Smart & Express Co. is providing taxable information technology software services. The firm furnishes the following information relating to the services rendered, bills raised, amount received pertaining to this service, for the financial year ended on 31st March, 2010 as under – (i) Amount received being 10% of the assignment fees on 31st March, 2010 for the upgradation and enhancement of software services to be rendered during the financial year 2010-11- Rs 6,00,000 (ii) Services provided to UNICEF, an International Organisation in Gandhinagar, for analysis, design and programming of latest information technology software – Rs 5,00,000 (iii) Services billed to client – Rs 3,00,00,000 (In one of the bill amounting to Rs. 3,00,000, service tax was not charged due to conflicting nature and in another bill, the firm failed to recover the service tax from the client, which was charged separately, due to insolvency of the client, the bill details are us under – Being the charges for right to use IT software – Rs 8,00,000 plus Service tax @10% Rs 80,000 plus Education cess @ 2% Rs 1,600 plus Secondary & Higher education cess @1% Rs 800 – Total Rs 8,82,400) (iv) Amount received for services rendered during current financial year (excluding payment for 2 bills in item (iii) above for which payment received during current financial year) – Rs 1,04,78,500. – – Service tax and education cess have been charged separately in all the bills except wherever mentioned when it is not so charged separately. – – Compute the value of total taxable services and service tax payable theron for the year ended 31-03-2010, assigning reason in brief to the treatment of all items (5 marks)
Q 1(d) Mr. Rajesh is a registered dealer and gives the following information. You are required to compute the net tax liability and total sales value under Value Added Tax. Rajesh sells his products to dealers in his State and in other States. The profit margin is 15% of cost production and VAT rate is 12.5% of sales (i) Intra State purchases of raw material Rs. 2,50,000 (excluding VAT @ 4%) (ii) Purchases of raw material from an unregistered dealer – Rs. 80,000 (including VAT @ 12.5%) (iii) High seas purchases of raw material are Rs. 1,85,000 (excluding custom duty @ 10% of Rs. 18,500) (iv) Purchases of raw materials from other States (excluding CST @ 2%) – Rs. 50,000 (v) Transportation charges, wages and other manufacturing expenses excluding tax – Rs. 1,45,000 (vi) Interest paid on bank loan Rs. 70,000 (5 marks)
Q2 (b) How can an assessee adjust the excess payment of service tax against his liability of service tax for subsequent periods? What is the basic condition for it? (4 marks)
Q2(c) What record should be maintained under VAT system by a registered dealer? (4 marks)
Q.3(b) Write a note in brief on provisional payment of service tax (4 marks)
Q3(c) State the Variants of VAT. Present them in schematic diagram and explain each one briefly (4 marks).
Q. 4(b) How will a taxable service be valued when the consideration thereof is not wholly or partly in terms of money? (4 marks)
Q4(c) State with reasons in brief whether the following statements are correct or incorrect with reference to the provision of Value Added Tax. (i) It is permitted to issue ‘tax invoice’ inclusive of VAT i.e. aggregate of sales price & VAT. (ii) A registered dealer is compulsorily required to get its books of accounts audited under VAT Laws of different states irrespective of limit of turnover (4 marks)
Q5(b) What do you mean by e-filing of returns? Is there any facility of e-filing of service tax returns? If yes, then which of the services are eligible for this facility? (4 marks)
Q5(c) What are the conditions to be fulfilled by the dealer accepting the composition scheme under the Value Added Tax? (4 marks)
Q6(b) State with reasons in brief whether the following statements are correct or incorrect with reference to the provisions of Service Tax – (i) The scope of taxable service shall include any service provided or to be provided to business entity, by any other business entity, in relation to advice, consultancy or assistance in any branch of law including service provided by way of appearance before any court, tribunal or authority (ii) Service tax provisions are not applicable in Jammu and Kashmir because State Government concurrence was not obtained in respect of Finance Act, 1994
Q6(c) Mention the purchases which are not eligible for input tax credit (any eight items) under Value Added Tax (4 marks)
Q7(b) Shashwat Hotels Pvt. Ltd. has given the following information for F.Y.2009-10. You are required to compute the taxable services under Service Tax Act and the tax thereon for FY 2009-10 without assigning any reason for the treatment – (i) Reception room and vehicle parking space were let out for a film shooting for 3 months. The charges received for this Rs. 5 Lacs (ii) The conference hall was let out to a Gujarati Samaj Trust for a week for a music competition for Rs. 50,000 (iii) The hotel was booked by a customer for 3 days for a marriage function. The room booking charges were received in advance (excluding service tax) in the same year of Rs. 50,000. The electricity charges separately billed Rs. 20,000, hire charges including catering charges for 3 days billed of Rs. 3,25,000 after deducting the advance (iv) During the year, the conference hall was let out to MNO Ltd. The charges received were as under – Hall rent Rs. 4 Lacs, computer & projector systems charges Rs. 25,000, electricity charges Rs. 30,000. Hall rent includes charges for snacks and cold drinks Rs. 50,000 (v) The hotel garden was let out to a political party for 2 days for a meeting. The charges received Rs. 25,000. – – The hotel charges 10% service charges which are later distributed as tips to employees. – – The above charges are excluding service tax. All the charges have been received in FY 2009-2010. The hotel has already been registered under Service Tax Act in F.Y. 2008-09 (4 marks)
Q7(c) Compute the VAT amount payable by Mr. Shyam, who purchased goods from a manufacturer on payment of Rs. 4,16,000 (including VAT) and earned 20% profit on purchase price. VAT rate on both purchases and sales is 4% (4 marks)
CA-IPCC May 2010 and AT
(Only questions on service tax and Vat covered)
Q 5 Provide brief answer to the following questions on Service tax: (a) Is Service tax payable in respect of services provided in the Indian territorial waters? (b) Is Service tax leviable on fee collected by Public authorities while performing statutory functions under the provisions of law? (c) Can an assessee file a revised Service tax return? (d) Explain the term “Commercial training or Coaching centre” (Marks 4 x 2 =8)
Q 6(a) X & Co., a partnership firm, is providing taxable legal consultancy services, for the second consecutive assessment year. The firm furnishes the following information relating to the services rendered, bills raised, amount received relating to this service, for the year ended 31.03.2010: I -Free Service rendered to poor people (Value of the services computed on comparative basis – Rs 40,000. II – Advances received from clients for which no taxable service has been rendered so far – Rs 5,00,000 III – Services billed to clients Gross amount (service tax has been charged separately in all the bills; the firm follows mercantile system of accounting – Rs 12,00,000 IV – The firm has received the following amounts during the year: Relating to taxable services rendered in March, 2009 (excluding service tax at applicable rates and TDS under section 194-J of the IT Act, 1961 to the Tune of Rs.45,320) – Rs 5,44,680 V – Relating to taxable services rendered in current year 2009 (excluding Service tax at applicable rates and TDS under section 194-J of the IT Act, 9161 to the tune of Rs.1,20,000) – Rs 9,80,000 (includes Rs.50,000 for appearance fee before Labour Court received from another firm). Service tax has been separately received for applicable items in (IV) above. You are required to compute the value of taxable services for the year ended 31.3.2010 and the Service tax payable, briefly explaining the treatment of each item above (Marks 8)
Q 6(b) Answer the following questions on Service Tax: (i) What is the scope of taxable service in respect of membership of Clubs or Associations? State the exception to the same. (ii) Does a service provider have an option to pay Service tax at a rate different from the general rate applicable on gross value of taxable services, in the case of purchase and sale of foreign currency? (iii) What is the late fee payable for delay in furnishing the Service tax return? Can the same be waived? (Marks 3 x 3 =9)
Q 7 Answer the following questions on VAT: (a) What are the items aggregated in the Addition method to calculate the VAT payable? When is this method mainly used? (b) Is any threshold exemption limit fixed for dealers to obtain VAT registration, as per the White Paper? If yes, why is the same provided? (c) Is the VAT chain continued when a purchasing dealer opts for VAT composition scheme? What is the loss to the seller and buyer opting for the composition scheme, and the subsequent buyers? (d) Can it be said that VAT brings about certainty to a great extent in the matter of interpretational issues? If so, how (Marks 4 x 2 =8)
Q8(a) Mr.X, a dealer in Mumbai dealing in consumer goods, submits the following information pertaining to the Month of March, 2010: (i) Exempt goods ‘A’ purchased for Rs.2,00,000 and sold for Rs.2,50,000. (ii) Goods ‘B’ purchased for Rs.2,25,000 (including VAT) and sold at a margin of 10% profit on purchases (VAT rate 12.5%); (ii) Goods ‘C’ purchased for Rs.1,00,000 (excluding VAT and sold for Rs.1,50,000 (VAT rate 4%) (iii) His unutilized balance in VAT input credit on 01.03.2010 was Rs.1,500. Compute the turnover, Input VAT, Output VAT and Net VAT payable by Mr. X (Marks 8).
Q 8(b) Answer the following questions on VAT – (i) What are the merits of VAT in the context of tax evasion, neutrality and transparency? (ii) State the importance of VAT invoice/ tax invoice in administering VAT (iii) Discuss the tax consequences of Stock transfer under the VAT scheme (Marks 3×3=9
CA PCC May 2012
Q1(d) ABC & Co purchased raw material ‘A’ for ` 30,00,000 plus VAT at 12.5%. Out of such raw material 80% was used for manufacture of taxable goods and the balance for the manufacture of exempted goods. Another raw material ‘B’ was purchased for ` 20,00,000 on which VAT was paid @ 1%. Out of the raw material ‘B’, 50% was used for manufacture of taxable goods and the balance for the manufacture of exempt goods. The entire taxable goods were sold for ` 44,00,000 plus VAT at 12.5%. There was no opening or closing inventory of taxable goods or raw materials. Compute the VAT liability of ABC & Co.
Answer – Vat Credit – (a) Material A – Vat paid on purchases @ 12.5% of 30,00,000 is ` 3,75,000. Input credit available is 80% i.e. ` 3,00,000 (b) Material B – Vat paid on @ 1% of purchases of ` 20,00,000 is ` 20,000. Input credit available is 50% i.e. ` 10,000. Hence, total input credit available is ` 3,10,000.
Vat paid on taxable goods is 12.5% of 44,00,000 i.e. ` 5,50,000. Input tax credit available is ` 3,10,000. Hence net Vat payable is ` 2,40,000 [5,50,000 – 3,10,000].
Q2(b) (i) Can the service tax return be revised ‘.’ If so, state the relevant period before which it can be done ? (ii) Mr. Amarnath, a registered service provider did not render any taxable services during the financial year 2011-12. Whether he is required lo file service lax return? Is he liable for penalty for non-filing ? If so, how much?
Q3 (c) Lee Traders a registered dealer having stock of goods cost Rs. 30,000 purchased from outside the State, wishes to opt for the Composition Scheme Advise the dealer whether it is possible ? State the conditions to be satisfied by a dealer before opting for composition scheme.
Q4(c) Amin & Co. Ltd., is engaged in providing taxable service. For the month of October 2011, its gross receipts were Rs. 15,00,000. The break up of the receipts is given below – (i) Services rendered to associate enterprise during the month Rs. 3,00,000 and amount received during the month Rs. 1,00,000 (ii) Services rendered in Jammu & Kashmir Rs. 3.00,000 (iii) The balance amount received represents services rendered during the month and realized in full. Compute the amount of service tax. Education Cess and Secondary & Higher Education Cess payable and the due date for payment.
Q5 (b) What are the different rates under VAT system ?
Q6 (d) What is EASIEST scheme and state the benefits in the context of service tax ?
Q7(c) What records should be maintained under VAT system by a registered dealer ? OR State briefly the contents of service tax return.
CA PCC November, 2011
Q1(d) The following particulars are provided by Mr. Prohit of Calcutta, who has purchased Raw materials for manufacturing PVC Cans and PVC pipes from Mr. Arvind. The State Vat for raw materials and other materials was 12.5%. (in `) (i) Cost of raw materials purchased – 1,00,000 (ii) Vat paid by Mr. Arvind – 12,500 (iii) Cost of other materials (local) – 20,000, (iiia) Cost of other materials (inter-state purchases) – 40,000 (iv) VAT paid on local material purchased 12.5% – 2,500 (v) CST paid 2% – 800 (vi) Manufacturing Expenses 39,200 (vii) Profit margin (on sale value) 20%. – – Mr. Prohit utilised and manufactured 75% of production as PVC Cans and 25% of production as PVC pipes. While PVC Cans are subject to 12.5% VAT, PVC pipes are exempt. All materials were used in production and there was no closing stock of raw materials and other materials. What would be the invoice value of Sales charged by Mr. Prohit if all the manufactured goods were sold within the State? What would be his liability to VAT? (5 marks)
Q2(b) Chandra Ltd. was started to provide taxable services. The services became taxable from 1-10-2010. Chandra Ltd. for the month of March, 2011 received following receipts (in `) (inclusive of service tax) – (i) Amount received in respect of services rendered in July and August, 2010 – 10,30,000 (ii) Services provided to the Branch of World Health Organisation – a unit of UN – 1,03,000 (iii) Services rendered to its Auditors against Audit Fee Payable 5,15,000 (iv) Advance received for services to be rendered in May, 2011 – 6,18,000 (v) Services provided to office staff and their relatives free of cost – 20,000. Out of advance received, 50% was returned on 15-4-2011 to the party, as they have closed their operations from 31-3-2011. Compute the taxable services and service tax payable for March, 2011 by Chandra Ltd. (4 marks)
Q3(c)(i) Whether service tax is payable by independent directors who are part of the Board of Directors under management consultancy service (ii) S Ltd. paid service tax of ` 8 lakhs during the preceding financial year and utilised CENVAT credit of ` 3 lacs. Whether he is required to deposit service tax electronically for the financial year 2010-11 (4 marks)
Q4(c) Briefly explain the following in reference to service tax – (i) Applicability of service tax liability in case of job work (ii) Exemption available to small scale service providers (iii) Liability of service tax in case of sponsorship services (iv) Liability of service tax in case of export of services (4 marks)
Q5(c) Briefly explain the consumption variant of VAT and reasons for its preference over other variants (4 marks)
Q6(c) State the liability of service tax in respect of the following services – (i) Services provided for personal use or use by the family members of a foreign diplomatic agent in a foreign diplomatic mission (ii) Services provided for issuing fitness certificate of vehicles by Regional Transport Office (iii) Services received from outside India and consumed in India (iv) Services rendered to a friend free of cost (4 marks)
Q 7(b) State the service tax provisions regarding adjustment of service tax paid when service was not provided either wholly or partly (4 marks)
Q7(b) (Alternate question) Briefly explain the important points to be kept in mind while paying service tax (4 marks)
CA PCC, May 2011
Question 1(d) – ABC & Co. furnishes the following information for the half-year ending March 31, 2012 : (i) Amount received for services provided to UNICEF (an international organization): ` 2,00,000. (ii) Advance money received from customers ` 4,00,600 in respect of which services were not rendered till March 31, 2012 (iii) Services billed during the half-year excluding items (i) and (ii) above, was ` 15,00,000 [+ service tax and cess @ 10.3 per cent]. It consists of the following : (a) One customer ‘X’ to whom a bill of ` 2,20,600 [+ service tax and cess @ 10.3 per cent] raised, did not pay service tax and cess (b) Customer ‘Y’ to whom a bill was raised for ` 1,00,000 [+ service tax and cess] has not paid the amount till March 31, 2012 (c) The balance amounts billed during the year were realized fully. Compute the value of taxable service on which service tax is payable (CA PCC May, 2011 adopted)
Question 2(b) – Ahmed & Co. of Srinagar rendered taxable services both within and outside the State of Jammu and Kashmir. It received ` 26,12,000 for the services rendered inside the State of Jammu and Kashmir and ` 18,00,000 for the services rendered outside the State of Jammu and Kashmir. Compute its taxable service value and service tax liability. In case, Ahmed & Co. was situated in Mumbai what would be value of its taxable service and service tax liability ? (CA PCC May 2011)
Answer – Service provided within the State of Jammu and Kashmir is not subject to service tax. Hence, ` 26,12,000 (for services rendered in the State of Jammu and Kashmir) is not chargeable to service tax. Services rendered outside J&K are ` 18,00,000. These will be subject service tax. Hence, value of taxable service is ` 18,00,000 (assuming that A and Co. have charged service tax separately on value of taxable service). Service tax @ 10.3% on this amount is ` 1,85,400. The liability would be same even if Ahmed & Co. were located in Mumbai. Since service ax is destination based, service provided within J&K will be exempt, even if service provider is from outside J&K.
Question 3(c)(i) – State with reasons whether the following are liable for service tax – Services rendered to Reserve Bank of India (CA PCC May 2011)
Question 3(c)(ii) – State with reasons whether the following are liable for service tax – Services rendered by a sub-contractor (CA PCC May 2011)
Question 3(c)(iii) – State with reasons whether the following are liable for service tax – Services provided to developer of special economic zone (CA PCC May 2011)
Question 3(c)(iv) – State with reasons whether the following are liable for service tax – Services rendered to associated enterprise (CA PCC May 2011)
Question 4(c) – A manufacturer sold goods to distributor for ` 20,000. The distributor sold the goods to the wholesaler for ` 24,000. The wholesaler sold the goods to the retailer for ` 30,000. The retailer sold the goods to the final consumer for ` 40,000. The VAT rate is 12.5 per cent which is charged separately. Compute VAT liability under invoice method. State why this method is preferable ? (CA PCC May 2011)
Turnover (Net Sale Price)
Vat @ 12.5%
Less – Input Tax Credit
Net Tax paid
Thus, total tax paid is 2,500 + 500 + 750 + 1,250 = ` 5,000. You will find that if entire tax was paid by retail, it would have been still ` 5,000. Thus, Vat is paid on destination basis on final price, but in stages.
Question 5(c) – When does e-payment and e-filing of service tax return become mandatory? Explain (CA PCC May 2011)
Question 6(d) – How excess payment of service tax would be adjusted against service tax liability of subsequent periods? State the applicable conditions (CA PCC May 2011).
Question 7(b) – Briefly state the contents of VAT Invoice (any eight items) (CA PCC May 2011)