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

Meghna Textiles exports goods without payment of tax under a letter of undertaking. For the relevant period: turnover of zero-rated supply of goods (as per rule 89(4)) Rs 30,00,000; no zero-rated or other services; total turnover in the State excluding services Rs 100,00,000, which includes no exempt supplies; Net ITC Rs 5,00,000. What is the maximum refund under the formula?

The maximum refund is Rs 1,50,000. Multiply the zero-rated turnover of Rs 30 lakh by Net ITC of Rs 5 lakh and divide by the adjusted total turnover of Rs 100 lakh, giving 30 percent of the ITC.

  1. ARs 1,50,000Correct
  2. BRs 5,00,000
  3. CRs 1,00,000
  4. DRs 3,00,000

Explanation

Refund = Zero-rated turnover x Net ITC / Adjusted Total Turnover = 30,00,000 x 5,00,000 / 1,00,00,000 = Rs 1,50,000. Option B claims the whole ITC, ignoring the ratio. Option C wrongly uses a ratio of 20 percent.

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