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CA Final · Indirect Tax Laws · Registration

Anand Steels, a registered manufacturer, applies for cancellation of registration as the business is discontinued. On the day immediately preceding cancellation, the input tax credit on inputs held in stock is Rs 3,20,000 and the output tax payable on those inputs is Rs 3,50,000. Capital goods have ITC taken of Rs 2,00,000 and, after the prescribed percentage point reduction, the figure is Rs 1,40,000; the tax on the transaction value of the capital goods is Rs 1,10,000. What total amount must Anand Steels pay under section 29(5)?

Anand Steels must pay Rs 4,90,000. For inputs, the higher of ITC Rs 3,20,000 and output tax Rs 3,50,000 applies, giving Rs 3,50,000. For capital goods, the higher of reduced ITC Rs 1,40,000 and tax on transaction value Rs 1,10,000 applies, giving Rs 1,40,000.

  1. ARs 4,90,000Correct
  2. BRs 4,60,000
  3. CRs 5,50,000
  4. DRs 4,30,000

Explanation

For inputs, the higher of ITC (3,20,000) and output tax (3,50,000) is payable, i.e. Rs 3,50,000. For capital goods, the higher of reduced ITC (1,40,000) and tax on transaction value (1,10,000) is Rs 1,40,000. Total is 3,50,000 + 1,40,000 = Rs 4,90,000. Rs 4,60,000 wrongly takes the ITC of Rs 3,20,000 for inputs.

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