CMA Intermediate · Direct and Indirect Taxation · Introduction to GST Law
A foreign firm provided consulting services to an Indian company under an arrangement begun before the appointed day. The foreign firm's invoice was received before the appointed day, and under the existing law service tax of ₹40,000 had been paid on this import against a total tax liability of ₹1,00,000 had the service been taxed fully. Under Section 21 of the IGST Act, 2017, what is the position on the appointed day?
₹60,000 is payable. Section 21 of the IGST Act taxes imports of services made on or after the appointed day even if initiated earlier, but where tax was paid in part under the existing law only the balance is payable, being 1,00,000 less 40,000.
- A₹60,000 of tax is payable under the IGST Act, since tax paid in part under the existing law leaves the balance payableCorrect
- BNo tax is payable because the invoice was received before the appointed day
- CThe full ₹1,00,000 is payable, and the ₹40,000 paid earlier is ignored
- D₹40,000 more is payable, being equal to the tax already paid
Explanation
Section 21 makes imports on or after the appointed day liable to tax even if initiated earlier; a transaction is deemed initiated earlier if the invoice was received or payment made before the day. Where tax was paid in part under the existing law, the balance is payable. Balance = 1,00,000 − 40,000 = ₹60,000. Exemption applies only if tax was paid in full.
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