Page 40 - Chap24Computation of GST

Advance received for the technical services to be provided 1,00,000 - 9,000 9,000

to Mr. K [Tax on the services to be provided is payable at the (1,00,000 (1,00,000
time of receipt of advance.] *9%) *9%)
Goods supplied to SEZ unit of V Ltd. (Note-7) 10,00,000 Nil
- -
[Supply to SEZ unit is a zero- rated supply.]

Supply of goods to V Ltd., Gujarat 40,00,000 Nil 3,60,000 3,60,000
(40,00,000 (40,00,000
*9%) *9%)
Total output tax Nil 3,69,000 3,69,000

Less: ITC (Note-8)
IGST: 1,08,700 (54,350) (54,350)
CGST: 3,21,500 (3,14,650) x
SGST: 3,21,500 x (3,14,650)

Net GST payable Nil Nil Nil

Notes & Assumptions :
1) In the absence of the value of supply of goods purchased as a merchant exporter, FOB value of export of
such goods has been taken as their purchase price for computing the ITC amount.
2) Since the transaction was undertaken in convertible foreign exchange, it is logical to infer that Mrs. T is

located outside India.
3) It has been assumed that the contract for import of goods from China is on CIF basis.
4) Insurance amount received is an actionable claim. Thus, it is treated neither as supply of goods nor as
supply of services.

5) It has been assumed that purchase of three-wheeler is an intra-State supply. Alternatively, it is also
possible to assume that purchase of three-wheeler is an inter-State supply. In that case, IGST of `
45,000 will be available as ITC.
6) It has been assumed that the depreciation has not been claimed on GST paid on said capital goods, under

the Income-tax Act, 1961.
7)It has been assumed that goods have been supplied to SEZ without payment of tax.
8) Credit of IGST can be utilized towards payment of CGST and SGST liability in any order and in any
proportion. Credit of CGST and SGST can be utilized only after IGST credit has been fully utilized.
Thereafter, credit of CGST and SGST is utilised for payment of CGST & SGST liability respectively.

CGST credit cannot be utilized for payment of SGST and vice versa.

Author’s note:- ITC of raw material ` 6,00,000 imported from China is an input tax & hence ITC can be
availed under GST. However, this transaction is not covered under RCM because RCM is applicable only in
case of import of services and not for goods. Also, Ocean freight ` 1,00,000 is not covered under RCM
because the corresponding reverse charge entry is omitted. Further, ACD on import of raw material from
China will be payable under customs & not under GST.

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