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CMA Final · Indirect Tax Laws and Practice · Zero Rated Supplies and Deemed Exports

A manufacturer exports goods under LUT during a quarter. The FOB value in the shipping bills is ₹60 lakh and the value in the tax invoices is ₹56 lakh. The value of like goods supplied domestically by it is ₹36 lakh and 1.5 times that value would apply for the same quantity. Under Rule 89(4), what is the 'turnover of zero-rated supply of goods'?

The turnover is ₹54 lakh. The export value is first taken as the lower of FOB value and invoice value, which is ₹56 lakh. This is then compared with 1.5 times the domestic value of like goods, ₹54 lakh, and the lesser amount applies.

  1. A₹60 lakh
  2. B₹56 lakh
  3. C₹54 lakhCorrect
  4. D₹36 lakh

Explanation

The turnover of zero-rated goods is the value of zero-rated supply without payment of tax or 1.5 times the value of like goods domestically supplied, whichever is less. The export value is the lower of FOB (60) and invoice value (56), i.e. ₹56 lakh. 1.5 x 36 = ₹54 lakh. The lesser is ₹54 lakh. Choosing ₹56 lakh ignores the 1.5 times cap.

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