Zaveri Automobiles Pvt Ltd (referred as ZAPL) is a registered person in Rajkot (Gujarat). It has authorized dealership of VTZ Motors Ltd. registered…

CA Final · Indirect Tax Laws · PYQS · May 2026
Zaveri Automobiles Pvt Ltd (referred as ZAPL) is a registered person in Rajkot (Gujarat). It has authorized dealership of VTZ Motors Ltd. registered in Gwalior (Madhya Pradesh), an original equipment manufacturer. ZAPL is dealing in cars under all segments of Sedan, SUV, Hatchback etc. Different variants like petrol, diesel and electric are available for all segments and it is also dealing in buying and selling in second-hand cars and financing cars too. ZAPL provides following details regarding outward and inward activities during the month of October 2025: Sr. No. Particulars Amount (in ₹) Outward transactions: (i) Sale proceeds received from sale of cars with option of one year of extended warranty during the month of October 2025: Type of car Quantity Rate per car (in ₹) Petrol cars Hatchback upto 1200 cc (Inter-State) 10 6,50,000 Electric cars (Intra-State) 8 8,50,000 Diesel SUV cars above 1500 cc (Intra-State) 5 11,00,000 As given inside the table. Extended warranty is taken only by purchasers of electric car amounting to 50,000 per car at the time of purchase. (This 50,000 is not included in above car rates.) (ii) Received - 12,00,000 from Maharshi Automobiles registered in Udaipur (Rajasthan) for sale of used demo cars being diesel car below 1500 cc, these cars are originally purchased as used cars from registered person on 01/04/2025 and ZAPL used these cars only for display in the showroom and for test drive for prospective customers, other details are as below: As given inside the table. Originally purchased for:11,70,000 Minor refurbishment expenses made in relation to this by ZAPL - 50,000 to registered suppliers during the month of October 2025. (iii) ZAPL issued taxable debit note to VTZ Motors Ltd. for repair services in addition to replacement of parts to customers without any consideration as part of the warranty on behalf of the VTZ Motors Ltd. 2,20,000 (iv) Sale of electric car on 15.10.2025, which was repossessed from defaulter of loan Mr. Shikhar, an unregistered person, who purchased the car on 01.01.2024 for 7,00,000. 5,00,000 (v) ZAPL replaced the goods and parts on 15th October 2025 to the customer without any consideration under warranty on behalf of the VTZ Motors Ltd., out of the supply already received from VTZ Motors Ltd. during the month of August 2025. VTZ Motors Ltd. issued taxable credit note on 25th October, 2025 of 2,50,000 in respect of goods and parts so replaced. Inward transactions: (i) Cars being petrol variant above 1200 cc purchased from VTZ Motors Ltd. for 10,00,000 each. 50,00,000 Out of these cars, 2 cars were used exclusively for transportation of staff and remaining cars were used exclusively for trial run and to demonstrate features of vehicle to prospective buyers. (ii) VTZ Motors Ltd. supplied 5 electric cars on ex-works contract basis to ZAPL, billed and handed over on behalf of ZAPL to transporter at VTZ Motor's factory gate on 29th October 2025. The cars reached the location of ZAPL on 2nd November 2025. 60,00,000 Additional information: (a) Personal guarantee provided without consideration by Mr. Mahesh Kumar, director of ZAPL, to the ASR Bank Ltd for sanctioning of cash credit facility of 12 crore to ZAPL. (b) During the month, ZAPL gave shares of its holding company Graymord Co. Inc, located in New Zealand, to employees as Restricted Stock Units (RSU) on meeting performance standards as per the terms of the employment. Cost of these shares is 45,00,000 which ZAPL paid to holding company against the issue of shares. Holding company also charged commission of 12,00,000 on this transaction. (c) Extended warranty amounting to 3,00,000 has been taken by the few customers in the month of October 2025 for petrol cars of 1400 cc which were purchased by them in the previous month. (d) In respect of above points at Sr. No (ii) and (iv) of outward transactions, no ITC has been claimed on cars purchased and also no depreciation has been claimed. (e) All conditions necessary for availing Input Tax Credit (ITC) has been complied with except mentioned otherwise. (f) All the figures given are exclusive of GST. (g) Place of supply to be taken as intra-State supply, wherever a detail for determination of same is not provided with. (h) Assume the applicable GST rates (for new as well as for old items) as follows and ignore the effect of any notification/clarification of reduction or restriction of GST rates: Cars Engine capacity GST rates Petrol Upto 1200 cc 9% CGST, 9% SGST and 18% IGST Diesel Upto 1500 cc Petrol Above 1200 cc 20% CGST, 20% SGST and 40% IGST Diesel Above 1500 cc Electric cars - 2.5% CGST, 2.5% SGST and 5% IGST Extended warranty service - 9% CGST, 9% SGST and 18% IGST (i) Assume that all other inward and outward supplies are taxable at 9% CGST, 9% SGST and 18% IGST. (j) All motor vehicles mentioned here are for transportation of persons having approved seating capacity of not more than 13 persons (including the driver). (k) There is no opening balance of any ITC but ZAPL wants to pay minimum amount of CGST as far as possible as per norms. Compute the net minimum GST liability to be paid in cash by ZAPL for the month of October 2025. Note: Computation of tax to be calculated separately for each transaction and treatment to each transaction should be accompanied by the relevant legal provisions of the GST law, except for the provision of the place of supply.

Suggested Answer and Working Notes:

Computation of minimum net GST liability payable in cash for the month of October 2025 S. No. Particulars Value (₹) CGST (₹) SGST (₹) IGST (₹) GST payable under forward charge (i) Supply of Petrol cars (upto 1200cc) 65,00,000 - - 11,70,000 [65,00,000 x 18%] Supply of electric cars [68,00,000 + 4,00,000] [Since extended warranty was taken] 72,00,000 1,80,000 [72,00,000 x 2.5%] 1,80,000 [72,00,000 x 2.5%] - at the time of purchase of electric car, it is a composite supply with supply of electric car being principal supply; thus, rate of electric car (2.5% CGST/SGST) will be applicable.] Supply of Diesel SUV cars (above 1500cc) 55,00,000 11,00,000 [55,00,000 x 20%] 11,00,000 [55,00,000 x 20%] - (ii) Sale of used demo car [Tax is payable on the margin¹. Margin² = Sale Price - Purchase Price [12,00,000 -11,70,000 = 30,000]. Further, it is an inter-State supply.] 30,000 - - 5,400 [30,000 x 18%] (iii) Debit note for repair services provided to VTZ Motors Ltd. [Taxable, being repair services provided to VTZ Motors Ltd. It is an inter-State supply.] 2,20,000 - - 39,600 [2,20,000 x 18%] (iv) Sale of repossessed electric car [Value of supply = Sale price - (Purchase price reduced by 5% per quarter or part thereof) i.e. 5,00,000 - 4,20,000 (7,00,000 × 5% × 8 quarters)³.] 80,000 2,000 [80,000 x 2.5%] 2,000 [80,000 x 2.5%] - (v) Extended warranty on petrol cars [Since extended warranty was taken after purchase of car/was not taken at the time of purchase of car, it is a separate supply of services, taxable at the applicable rate for extended warranty⁴.] 3,00,000 27,000 [3,00,000 x 9%] 27,000 [3,00,000 x 9%] - Total output tax 13,09,000 13,09,000 12,15,000 Less: ITC available for set off [Refer working note below.] (12,15,000) IGST credit is being first utilized for payment of IGST liability and then for payment of CGST liability. (4,56,000) CGST and SGST credit is being utilized for payment of CGST and SGST liability respectively. (4,500) (4,500) Net tax payable 8,48,500 13,04,500 Nil GST payable under reverse charge Add: Commission charged by Graymord Co. [Tax on import of services is payable under reverse charge. Since it is not an output tax, it has to be paid in cash and not by utilizing ITC.] - - - 2,16,000 [12,00,000 x 18%] Minimum net GST payable in cash 8,48,500 13,04,500 2,16,000 Working note - Computation of eligible ITC available for set off Particulars Amount (₹) CGST (₹) SGST (₹) IGST (₹) Purchase of Petrol Cars above 1200cc [Since demo vehicles promote sales, they are considered as being used for further supply of such motor vehicles and thus, ITC on 3 cars used for demo is allowed. ITC on 2 motor vehicles used for transportation of staff is blocked. Further, it is an inter-State supply.] 30,00,000 - - 12,00,000 [30,00,000 x 40%] Purchase of 5 Electric Cars [ITC is admissible on the cars purchased for further supply⁵. In an ex-factory transaction, cars are deemed to be received when handed over to transporter at supplier's factory gate; hence, ITC can be claimed in October. Further, it is an inter-State supply.] 60,00,000 - - 3,00,000 [60,00,000 x 5%] Personal guarantee by director [No tax is payable since open market value of personal guarantee provided without consideration by the director being a related person is nil⁶. Thus, no ITC is available.] - - - - Commission charged by Graymord Co. [RSUs issued by an overseas holding company to employees of an Indian subsidiary as part of employment, reimbursed on cost-to-cost basis, are not a supply as these are transactions in securities, and thus, are not liable to GST. However, commission charged by the holding company is liable to GST being consideration for facilitating transaction in securities. Further, it is an inter-State supply.] 12,00,000 - - 2,16,000 [12,00,000 x 18%] Minor refurbishment expenses [ITC in respect services used in used in the course or furtherance of business is available⁷.] 50,000 4,500 [50,000 x 9%] 4,500 [50,000 x 9%] - Less: Credit note issued by VTZ Motors Ltd. [ITC is to be reversed.] 2,50,000 - - (45,000) [2,50,000 x 18%] Total ITC available 4,500 4,500 16,71,000

Topics: Input Tax Credit

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