Vijender Aggarwal
IDT Test (CST & VAT) - Solutions
1
INDIRECT TAX TEST SERIES (CST & VAT) - Solutions
ANSWER 1
Computation of Taxable Turnover & Central Sales Tax Payable:
Particulars
Total inter-state sales (including CST)
Amount (Rs)
16,00,000
Less: Deposits for returnable containers (Deposits for returnable containers have been
deducted because they do not form a part of sale price)
(25,000)
Less: Freight charges recovered separately in the invoice (It is assumed that freight charges
relate to movement of goods beyond the point of sale. Since freight charges have
been recovered separately, they have been deducted as they do not form a part of
sale price)
(60,000)
Less: Sales returns within 6 months (Sales returns within 6 months are allowed to be
deducted)
(40,000)
Taxable Turnover (including CST)
Less: CST @ 1% [Rs 14,75,000 x 1/101] (rounded off)
Taxable Turnover (excluding CST)
14,75,000
(14,604)
14,60,396
Note 1: Weighment dues & excise duty are includible in sale price and therefore, they have not deducted in
the present problem.
Note 2: CST on transactions covered by valid ‘C’ forms is 2% or sales-tax rate within the state, whichever is
lower. Since, in this case, the state sales-tax rate is lower than 2%, the rate of CST is taken as 1%.
ANSWER 2
Computation of Taxable Turnover & CST Payable:
-Particulars
Total inter-state sales (including CST)
Amount (Rs)
45,00,000
Less: Freight charges (Since the contract is on ‘FOR’ basis, freight charges are includible in
sale price even if they are charged separately. Therefore, they are not deductible)
-
Less: Goods returned by Mr X within 6 months (Sales returns within 6 months are allowed to
be deducted)
Less: Goods rejected by Mr Y received after 6 months (Time limit of 6 months does not apply
in case of rejection of goods)
(70,000)
(1,20,000)
-
Less: Goods returned by Mr Z after 6 months (Sales returns after 6 months are not allowed
to be deducted)
Less: Subsidy (Since subsidy is given by government to control the price of the product,
such subsidy is not includible in sale price and therefore, it has been deducted)
(1,75,000)
Taxable Turnover (including CST)
Less: CST @ 2% [Rs 41,35,000 x 2/102] (rounded off)
41,35,000
(81,078)
Taxable Turnover (excluding CST)
40,53,922
Note: CST on transactions covered by valid ‘C’ forms is 2% or sales-tax rate within the state, whichever is
lower. Since, in this case, the state sales-tax rate is 5%, the rate of CST is taken as 2%.
For Classes & Information: Contact: I.G.P. Ph. 41572757, 22432757, 27352757, 41576333
Vijender Aggarwal
IDT Test (CST & VAT) - Solutions
2
ANSWER 3
Computation of Cost of Production:
Particulars
Intra-state purchases of raw material (excluding VAT of Rs 1,25,000)
Amount (Rs)
10,00,000
Purchases of raw materials from unregistered dealers (VAT paid not available as credit,
therefore added to cost)
80,000
High sea purchases of raw materials (customs duty not available as credit, therefore taken as
part of cost of production)
2,03,500
Purchase of raw materials from other states (input CST not available as credit, therefore
taken as part of cost of production)
51,000
Transportation charges, wages and manufacturing expenses
1,45,000
Interest paid on bank loan (interest is an expense of financial nature; therefore, it has not
been included in cost of production)
Not Includible
Cost of Production
14,79,500
Computation of Sale Price & Output VAT & CST Liability:
Particulars
80% Goods Sold to
Mr S in Delhi (Rs)
Cost of Production
Add: Profit margin
Sale Price (before VAT/CST)
Output VAT/CST
10% Goods Sold to
4% Goods Sold to
Mr T of Mumbai (Rs) Mr U of Germany (Rs)
11,83,600.00
2,36,720.00
(20% of Cost)
1,47,950.00
36,987.50
(25% of Cost)
59,180.00
5,918.00
(10% of Cost)
14,20,320.00
1,77,540 (VAT of 12.50%)
1,84,937.50
3,699 (CST of 2%)
65,098.00
No tax on exports
Computation of Net VAT & CST Payable:
Particulars
Amount (Rs)
Output VAT
1,77,540
Less: ITC on RM used in manufacture of FG that are sold [Rs 10,00,000 x 94% x 12.5%]
(1,17,500)
Less: ITC on RM used in manufacture of FG that are stock transferred to Ludhiana (In case of
stock transfer of finished goods, input tax paid on inputs used in manufacture of such finished
goods in excess of 2% is available as ITC) [Rs 10,00,000 x 6% x (12.5% - 2%)]
(6,300)
Net VAT Payable
53,740
Net CST Payable
3,699
For Classes & Information: Contact: I.G.P. Ph. 41572757, 22432757, 27352757, 41576333
Vijender Aggarwal
IDT Test (CST & VAT) - Solutions
3
ANSWER 4
Computation of Turnover, Input VAT and Output VAT:
Goods
Purchases
Input VAT Input VAT Credit Sales (Turnover) Output VAT Output VAT [F]
[A]
Rate [B]
[C] = [A] x [B]
[D]
Rate [E]
= [D] x [E]
P
Rs 1,75,000
-
-
Rs 3,50,000
-
-
Q
Rs 2,00,000
12.5%
Rs 25,000
Rs 2,40,000
12.5%
Rs 30,000
R
Rs 2,00,000
4%
Rs 8,000
Rs 2,50,000
4%
Rs 10,000
Total
Rs 5,75,000
Rs 33,000
Rs 8,40,000
Computation of Net VAT payable by Sparsh Enterprises:
Particulars
Amount (Rs)
Opening balance of input VAT credit
Add: Input VAT credit for December, 2014
3,000
33,000
Total Input VAT credit available
Less: Output VAT payable on taxable turnover
36,000
40,000
Net VAT payable
40,000
4,000
_
ANSWER 5
Part (a)
The given statement is invalid. Newspapers are excluded from the definition of ‘goods’ but old newspapers
sold as waste paper are included in the definition of goods. Therefore, sale of old newspapers as waste
paper is liable to sales tax.
Part (b)
The given statement is invalid. A unit located in SEZ can obtain goods from outside SEZ for specified
purposes without payment of CST by furnishing ‘Form I’.
Part (c)
The given statement is invalid. Government is deemed to be a dealer if it buys, sells or supplies goods for
any valuable consideration. However, government shall not be deemed to be a dealer for sale of surplus,
unserviceable or old stores or obsolete machinery or waste products.
Part (d)
The given statement is invalid. If at the time of stock transfer, the recipient dealer has an order for any
purchase in hand, then such transfer shall be deemed to be an inter-state sale u/s 6A of the CST Act, 1956
and thus liable to CST.
For Classes & Information: Contact: I.G.P. Ph. 41572757, 22432757, 27352757, 41576333
Vijender Aggarwal
IDT Test (CST & VAT) - Solutions
4
ANSWER 6
Part (a)
The given statement is invalid. VAT does not require bill to bill co-relation between input and output. ITC
can be utilized for payment of VAT on any output without waiting for input to be actually consumed/sold.
Part (b)
The given statement is valid. Under leasing, tax is imposed on transfer of right to use goods even though
ownership of goods is not transferred to the lessee. In other words, transfer of ownership is not a
precondition to attract sales tax in case of lease.
Part (c)
The given statement is invalid. Although repossession of goods under hire purchase is treated as sales
returns, the value of sales returns is equal to the amount of unpaid instalments.
Part (d)
The given statement is not completely valid. Refund of tax can be claimed for goods returned in hire
purchase transactions only if such goods are returned within the period prescribed under the respective
VAT law (generally 6 months).
Part (e)
The given statement is invalid. A dealer stock-transferring the goods outside the state cannot opt for
composition scheme even if his turnover for previous financial year does not exceed Rs 50,00,000.
Part (f)
The given statement is invalid. A dealer whose turnover is more than Rs 10 lakhs is compulsorily required
to get himself registered. However, a dealer whose turnover does not exceed Rs 10 lakhs can also get
himself registered voluntarily.
For Classes & Information: Contact: I.G.P. Ph. 41572757, 22432757, 27352757, 41576333