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Solved answers of Indirect Taxes for Nov 16 CA Final Exam

SPRao 
Updated on 29 November 2016

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Q1.(a) AB Engineers are manufacturers of a product which is subject to Excise Duty. They are also eligible for exemption in terms of notification 8/2003 dt.01.03.2003 for the current financial year 2016-17. The following are the details of clearance of goods effected during the year 2016-17. (Marks -5)

Item No.

Particulars

Amount

(Rs. in lakh)

1.

Value of clearance of their goods "AB" (own brand)

500

2.

Value of clearance of goods produced with other brand names

200

3.

Clearance for captive consumption

150

4.

Export clearance

200

5.

Clearance of goods exempted under other notification other than 8/2003

100


Other information in respect of the above

(i) Item No.2 value of clearance with other brand names includes goods manufactured in rural area 100 lakh.

(ii) Item No. 3 value of clearance for captive consumption, final products are eligible for SSI Exemption.

(iii) Rate of excise duty - 12.5%.

(iv) Excise duty paid amounting 3 lakh on inputs consumed in exempted clearance. (Item No.5)

(v)  Excise duty paid amounting 5 lakh on inputs consumed in exempted clearance. (Item No.1 No opening or closing stock of inputs).

(vi) Excise duty paid amounting 7.5 lakh on capital goods purchased in the current financial year. (Exclusively for own brand Item No.1)

Exports made by AB Engineers are exempt from duty. (Item No.4)

Calculate the total duty payable and duty payable in cash if any, by AB Engineers for the current financial year 2016-17. Make assumptions if required and show the working notes separately.

Solution (a):

AB Engineers
Computation of Eligibility

S.No.

Particulars

Rs. In Lakhs

1.

Local Clearance of own branded goods

500

2.

Others brand goods produced in rural area

100

3.

Clearance for captive consumption (Not includible)

.....

4.

Export Clearance (Not includible)

......

5.

Clearance of Exempted goods (Not includible)

......

 

Total turnover

600

 

Dutiable Turnover  600-150

450

 

Duty Payable  on goods of others brand

100

 

Total Dutiable Turnover 

550

 

Duty payable 12.5%

Rs.68,75,000


Less cenvat credit on capital goods (full credit)  Rs. 7,50,000
cenvat credit on inputs      (proportionate)               3,50,000

                               Net duty payable                     57,75,000

Notes: the drafting of the question is confusing. Language should have been better used

  1. Duty paid under item (v) is not eligible as it was used for exempted goods
  2. Duty paid on  exempted clearance in item No.1 is taken as used for clearance of goods eligible for exemption. Hence proportionate credit has been taken.
  3. Captively consumed goods turnover not included as their final product is eligible for exemption
Q1.(b) New  Bank of India Ltd. provides the following information for the month of April, 2016. Compute the value of taxable services and service tax payable. (Rate of service tax including cess 14.5%) (Marks-5)

Item No.

Particulars

Amount

(Rs. in lakh)

1.

Interest received on various loans including home loan

2,000

2.

Administrative charges and folio charges collected

120

3.

Value of sale and purchase of forward contract

100

4.

Charges for credit card and debit card facilities extended

200

5.

Charges for ATM card transaction

200

6.

Commission received for DD, transfer and cheque collection

200

7.

Margin earned on reverse repo transactions

400


Solution (b): Computation of Service Tax for the Month of April  2016

S.No.

Particulars

Rs.Lakhs

1.

Interest received (non taxable)

......

2.

Administrative Charges

120

3.

Forward contract (non taxable)

.....

4.

Charges for Debit /Cr.Cards

200

5.

Charges for ATM and transaction

200

6.

Commission for DD, Cheque Collection

200

7.

Reverse repo margin (non taxable)

......

 

Total

720

 

Service Tax @ 14.5% = 720,00,000x14.5/100

 


Note: Charges have been taken as value excluding service tax.

Q1.(c)  You are required to compute the value of taxable services and service tax payable thereon from the gross amount charged in respect of the following transactions made available by A. Ltd. dealing in agriculture related services in the month of December 2015:  (Marks-5)

Item No.

Particulars

Amount

(Rs. in lakh)

(i)

Renting of Agro-machinery

5.0

(ii)

Cultivation of Ornamental flowers

2.5

(iii)

Processing of Tomato Ketchup

3.0

(iv)

Plantation of Rubber

3.5

(v)

Processing of Potato chips

1.5


This company is not entitled for small scale exemption in 2015-16. Assume the rate of service tax as 14.5% (Including Swachh Bharat Cess @ 0.5%) Explanation is to be given along with the working.

Solution (c): Computation of Service Tax for the Month of April  2016

S.No.

Particulars

Rs. In Lakhs

1.

Renting  of Agro Machinery (non taxable)

......

2.

Cultivation of ornamental flowers (agricultural- produce, non taxable )

.....

3.

Processing of tomato ketch up

3.0

4.

Plantation of Rubber (non taxable)

.......

5.

Processing of Potato Chips

1.5

 

Value including Service Tax

Rs. 4,50,000

 

Service tax payable @14.5%

Rs. 56,987


Note: Values have been taken as inclusive of service tax.

Plantation  of rubber is cultivation of plants which is a part of agriculture, non taxable

Q1.(d) F. Ltd imported a machine from UK in May,15. The details in this regard are as under:

(i) FOB value of the machine : 10000 UK Pound

(ii) Freight (AIR) : 3000 UK Pound

(iii) Licence fee, the buyer was required to pay in UK: 400 UK Pound

(iv) Buying commission paid in India 20,000.

(v)  Date of bill of entry 20.05.2015 and the rate of exchange notified by CBEC on this date was Rs. 99.00 per one pound. Rate of BCD was 7.5%.

(vi) Date of arrival of aircraft was 25.05.2015 and the rate of exchange notified by CBEC on this date was 98.50 per pound and rate of BCD was 10%.

Rate of additional customs duty was 12.5% and there was no special additional duty of customs.

Insurance premium details were not available.

You are required to compute the assessable value of the machine for valuation of customs duty and the total duty payable. You may make suitable assumptions wherever required. (Marks - 5)

Solution (d) :

Rate of exchange as on the date of B/E Rs. 99/-
Applicable BCD as per S15 of Customs Act - 10%

Computation of Assessable Value

Value in Rs.

 

FOB Value

10,000.00

 

Add. Air freight @ 20%

2,000.00

 

Add. Insurance @ 1.125%

112.5

 

Add. License fee

400.00

 

CIF

12,512,500

 

Add Landing

 

 

Charges @1%

125.125

 

 

12,637.625

 

Value in INR taken at Rs.99

12,51,124.87

 

Assemble Rs.

12,51,125

(Rounded off)

Computation of Duties

 

 


Add Education Cess @ 3%                                                                  8,9148,914
Total                                                                                                15,57,181        3,06,056

Note:  

1) License fee is includible as payable for import of goods.
2) Buying commission is not includible.

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To view the question paper: Click here
To enrol Indirect Tax Laws (CA Final) subject of the author : Click here


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