M/s Consultease Services Private Limited, a company registered under GST in Mumbai, Maharashtra, offers business consultancy, digital marketing and…

CA Intermediate · Taxation · RTP · January 2025
M/s Consultease Services Private Limited, a company registered under GST in Mumbai, Maharashtra, offers business consultancy, digital marketing and project management services across India. The company recorded the following transactions in October: 1. Consultancy services for market analysis: Provided consultancy services for market analysis to XYZ Ltd., a registered client in Chennai, Tamil Nadu (Inter-State), for 4,50,000. Additionally, the company paid an amount of 4,500 as professional tax applicable in the State of Maharashtra as per requirement of local state legislation. The amount of professional tax was recovered separately from XYZ Ltd. 2. Digital Marketing Services for Launch Event: Conducted digital marketing for an upcoming product launch for Mr. A based in Rajasthan, who is an unregistered person under GST. The agreed fee for the said services is 3,00,000. Out of the agreed fee, an amount of 25,000 is incurred by Mr. A. The company was liable to pay the same in relation to the supply and the net payment received by the company was - 2,75,000 (exclusive of any tax). 3. Travelling payment for the team: The employees incurred an amount of 50,000 on travel to Kolkata for client project and claimed a reimbursement of the same from the company. As a policy, company charged such expenses from the clients on actual basis. 4. Discount passed on to customer: Post supply discount was offered to a customer amounting to 50,000 against a supply for which invoice was issued in September. The customer has not reversed the input tax credit relating to such discount. 5. Recovery of late payment charges: The company received an amount of 1,00,000 as late payment charges for delay in payment for consideration from a client whose service contract was completed in June. 6. Purchase of car: A car was purchased in the name of company for use by the director. The total cost of car was - 10,50,000 (inclusive of IGST amounting to 1,50,000). 7. Insurance services: The company paid for insurance of the above new car amounting to 25,000 which includes IGST amounting to 2,300. 8. Procurement of services: The company received inter-State supply of services used for business purpose on which GST paid was - 45,000. Said credit was not restricted under any provision of GST laws. 9. Sponsorship: The company sponsored a sports event wherein it paid an amount of 2,00,000 to the event organizers. You are required to compute the following for the month of October: (a) Total value of supply (b) output tax payable by the Company. (c) net GST payable in cash. Note (i) Rates of CGST, SGST and IGST are 9%, 9% and 18% respectively. (ii) All the amounts given above are exclusive of taxes. (iii) There was no opening balance of input tax credit. (iv) The turnover of the company was 10 crores in the previous financial year. (v) All the transactions are inter-State, unless otherwise specified.

Suggested Answer and Working Notes:

(a) Computation of total value of supply Particulars IGST (₹) Consultancy services provided to XYZ Ltd. (As per section 15 of the CGST Act, 2017, the value of supply includes the amount of any tax paid under any law other than GST. Accordingly, the amount of professional tax is includible in the value of services.) 4,54,500 Digital marketing services provided to Mr. A (The amount incurred by the recipient on behalf of the supplier is includible in the value of supply.) 3,00,000 Travelling expenses recovered from the client (Incidental expenses like travelling expenses incurred in course of supply is includible in value of supply.) 50,000 Post supply discount (No adjustment of post supply discount is allowed as the customer has not reversed the input tax credit.) - Late payment charges (The late payment charges recovered are includible in GST and liable to tax at the time of receipt of amount.) 1,00,000 Total value of supply for October 9,04,500 (b) Computation of output tax payable Particulars IGST (₹) Total value of outward supply 9,04,500 Total output tax payable @ 18% 1,62,810 (Company is liable to pay GST on sponsorship services under reverse charge, but the tax payable under reverse charge is not included in the value of output tax.) (c) Computation of net GST payable in cash Particulars IGST (₹) Total output tax 1,62,810 Less: Input Tax Credit [Refer Working Note below] (81,000) Net GST payable (A) 81,810 Add: GST payable under reverse charge for receipt of sponsorship services (B) 36,000 [Tax on sponsorship services availed by a body corporate from any person is payable under reverse charge. Since the tax payable under reverse charge is not an output tax, ITC cannot be utilized to pay GST payable under reverse charge. Thus, it has to be paid in cash.] Total GST payable in cash (A) +(B) 1,17,810 Working Note: Computation of ITC available Particulars IGST (₹) Purchase of car for use by director (ITC on motor vehicles for transportation of persons with seating capacity ≤ 13 persons (including the driver) is blocked except when the same are used for (i) making further taxable supply of such motor vehicles (ii) making taxable supply of transportation of passengers (iii) making taxable supply of imparting training on driving such motor vehicles. Purchase of car for use by director is not a specified purpose.) - Insurance of car (ITC is not allowed on services of insurance relating to the motor vehicles on which ITC is blocked. Since, the car is not used for any of the eligible purposes, ITC thereon is blocked and thus, ITC on insurance taken on such car is also blocked) - ITC on receipt of services (ITC is available on services used in the course or furtherance of business.) 45,000 ITC on sponsorship services (ITC is available on services used in the course or furtherance of business.) 36,000 Total ITC available 81,000

Topics: Paper 3A: Income Tax Laws, Paper 3B: Goods and Services Tax

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