Skip to content

CA Final · Indirect Tax Laws · Payment of Tax

Nilgiri Tea Co. files its return after the due date, declaring supplies of the period. It deposited Rs 1,00,000 in the electronic cash ledger before the due date, and the amount stayed there until debited for tax at the time of filing the late return. Tax of Rs 4,00,000 was paid in the return: Rs 1,00,000 from that earlier deposit and Rs 1,50,000 from cash deposited after the due date, with the balance Rs 1,50,000 from the credit ledger. No proceedings were pending. Under Rule 88B(1) and its proviso, on what amount is interest computed?

Interest is computed on Rs 1,50,000. Rule 88B(1) limits the base to tax paid through the cash ledger, Rs 2,50,000, but its proviso excludes the Rs 1,00,000 credited on or before the due date and lying in the ledger until debited, leaving only the later deposit.

  1. ARs 1,50,000Correct
  2. BRs 2,50,000
  3. CRs 4,00,000
  4. DRs 2,50,000 plus interest on the Rs 1,00,000 from the due date

Explanation

Interest is on the cash-ledger-paid portion: Rs 1,00,000 + Rs 1,50,000 = Rs 2,50,000. The proviso excludes cash credited on or before the due date and lying there until debited, which removes Rs 1,00,000. The base is therefore Rs 1,50,000. Rs 2,50,000 ignores the proviso.

Did you get it right without looking?

One question tells you little. A timed set on Payment of Tax shows your real accuracy, how long you take and where you lose marks.

Practise Payment of TaxFree diagnostic mock

More Payment of Tax questions